TMI Blog2022 (1) TMI 785X X X X Extracts X X X X X X X X Extracts X X X X ..... rom AY 2006-07 from out of any interest bearing funds or during the relevant year any further interest bearing funds have been diverted. Converting of debentures on 30.04.2011 out of debit balance with the said party cannot be treated as diversion of funds to the sister concern out of interest bearing funds for the year under consideration. As stated by the assessee, the long term borrowings were reduced to ₹ 6.12 crores during the year. Thus, we do not find any reason as to why disallowance can be made on such a premise. Without going into the merit, whether interest free funds were available or not, we hold no disallowance can be made. Accordingly, entire disallowance made by the AO is deleted - Decided in favour of assessee. - IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced at the disposal of the sister concern on interest-free basis and therefore, the ratio of the judgment in the case of CIT vs Abhishek Industries Ltd 286 ITR 1 was squarely attracted in terms of which there can be no separate identification of source of funds coming into the common kitty in such cases and the only thing sufficient to warrant the disallowance of interest paid would be that the assessee has some loans and other interest-bearing debts to be repaid. b) Without prejudice to the above, whether the Ld CJT(A) has erred in calculating the proportionate disallowance of interest at ₹ 49,75,1211- wrongly. Whereas the ground taken in cross objections is as under :- 1. That Restricting addition to ₹ 40, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not analyzed the balance sheet of the assessee and availability of interest free funds with the assessee nor has he seen, copy of account with the said company. The fact of the matter was that assessee converted its debit balance in M/s. Moderate Leasing Capital Services Limited into convertible debentures on 30.04.2011 when its debit balance with the company was about ₹ 29.13 crores; and out of this sum, a sum of ₹ 28 crores was converted into convertible debentures. It was not a case of any interest bearing funds being converted into non-interest bearing instrument. The convertible debentures were converted into equity shares on 25.03.2014. Thus, in this year, the amount is appearing as opening balance of shares of M/s. M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O that the interest bearing funds have been diverted by the appellant for purchasing these debentures is factually incorrect as Appellant Company has not subscribed to any debentures during the year. The Appellant has stated that during the year under consideration this amount is appearing as opening balance of shares of Moderate Leasing Capital Services Ltd and the facts is that the appellant company converted its debit balance with M/s Moderate Leasing Capital Services Ltd into convertible debentures on 30.04.2011 when its debit balance with the company was about ₹ 29.13 crores and out of this sum, a sum of ₹ 28 crores was converted into convertible debentures and it was not a case of interest bearing funds being converted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The total interest bearing funds are ₹ 1,89,18,92,662/- and non interest bearing funds are ₹ 1,00,65,22,625/- which comes to ₹ 2,90,55,68,565/-. The disallowance on this basis will amount to ₹ 28,00,00,000 X 4,22,87,658 = 40,75,121/- 2,90,55,68,565 The sub mission of the appellant has been considered. The addition on this ground is restricted to ₹ 40,75,121/-. 5. Before us, ld. counsel for the assessee drew our attention to the copy of profit loss account of M/s. Moderate Leasing Capital Services Limited, appearing on pages 1 to 6 of the paper book, and pointed out that the assessee has adva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd submitted that when assessee has mixed fund then it is difficult to point out that the loan and advances given to the sister concern are out of own funds because there cannot be any separate identification of source of fund coming into common kitty. Thus, ld. CIT (A) has erred in reducing the interest expenses of ₹ 3,36,00,000/- to ₹ 40,75,121/-. 7. We have heard the rival submissions, also perused the relevant finding given in the impugned order and documents placed on record. It is undisputed fact that the assessee has not given any loan or advances during the year. As can be seen from the copy of account of M/s. Moderate Leasing Capital Services Limited, assessee has been paying advances and loan to the said company ..... X X X X Extracts X X X X X X X X Extracts X X X X
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