9911796707
TMI Blog2019 (3) TMI 1921X X X X Extracts X X X X X X X X Extracts X X X X ..... 8,62,660/- for the AY 2012-13 on 30/09/2012. In scrutiny assessment u/s 143(3), dated 30/01/2015, the AO made the following disallowances: 1. Disallowance of interest u/s 36(i)(iii) - Rs. 7,38,83,333/- 2. Disallowance u/s 14A - Rs. 5,08,86,768/- 3. When the assessee preferred an appeal before the CIT(A), the CIT(A) deleted the disallowance u/s 14A and confirmed the disallowance of interest u/s 36(1)(iii) of the Act. 4. Aggrieved by the order of CIT(A), both the assessee and revenue are in appeal before us against the order of the CIT(A). 5. As regards disallowance of interest u/s 36(1)(iii), the ground of which is raised by the assessee in its appeal, the AO observed that on perusal of balance sheet of the assessee company as at 31/0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on its loans was at 13% per annum and, therefore, the interest at the rate of 13% on the funds diverted for investment in loans which worked out to Rs. 7,38,83,333/- and the same was disallowed. 5.2 When the assessee preferred an appeal before the CIT(A), the CIT(A) confirmed the disallowance by observing as under: "The appellant took interest bearing loan from ICICI bank, in turn passed on substantial amount to sister concerns interest free, these sister concerns interest free, these sister concerns did not carry out any work, again passed on the amounts to soma enterprises. In any case beta infra and SJRTPL did not carryout any activity, therefore the test of commercial expediency fails and therefore proportionate disallowance of inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has diverted the funds sanctioned by ICICI Bank to the step down subsidiaries i.e. Beta Infratech P. Ltd. and Soma Jabalpur Rewa Tollway Pvt. Ltd.(SPV). 5.6 We further notice that assessee is a company incorporated and active in providing consultancy services to its parent company i.e. Soma Enterprise Ltd. Assessee has no other business connection with the step down subsidiaries except related concern. The assessee was utilised by the parent company to source the funds from the bank after giving the required bank guarantee. The funds were utilized by the step down companies and we notice that assessee has advanced to M/s Beta Infratech as long term unsecured loan. The funds were utilized in the business for the purpose of making payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not fit into representing any share holder commitment. The actual share holders are the holding company, any holding company diverting its own funds to the subsidiaries will fit into business expediency as held in the case of SA Builders (supra). The assessee company was used as a source for funding the step down subsidiaries and the cost should also be transferred to the subsidiary who has utilized the funds and the burden of cost of funds on the assessee is unwarranted, may be beneficial to the overall group but not on the assessee. It clearly indicates that the transaction of funding the sister companies are not exclusively for the purpose of assessee's business. Therefore, the ground raised by the assessee is dismissed. 6. As Regards ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
