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TMI Blog2022 (6) TMI 405X X X X Extracts X X X X X X X X Extracts X X X X ..... ances of the case and in law, the learned CIT(A) erred in directing the A.O. to delete the disallowance of interest of Rs.8,08,01,969, made u/s 36(1)(iii) of the Act towards interest expenditure without appreciating the fact that even though the assessee company has shown losses and loss of the assessee of the year under consideration was increased to Rs.10.91 crore as against Rs.5.12 crore shown in earlier year, assessee continued to divert its "interest bearing funds" for giving "interest free advances / loans" for unknown purpose." 3. The only issue arising in present appeal is with regard to deletion of disallowance of interest under section 36(1)(iii) of the Act. 4. The brief facts of the case pertaining to this issue, as emanating f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt for the year under consideration. The Assessing Officer vide order dated 26/03/2014 passed under section 143(3) of the Act did not agree with the submission of the assessee and held that interest payment form substantial part of the expenses as per the profit and loss account and the assessee has failed to prove that the interest-bearing funds borrowed were used for business purpose. Further, the Assessing Officer noted that interest-bearing funds form 54.48% of the total funds of the assessee. Accordingly, the Assessing Officer worked out the disallowance of Rs. 8,08,01,969 under section 36(1)(iii) of the Act, as under: Loans and advances given interest-free Rs. 98,87,66,137 Amount considered for charging interest (being 54.48% of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Joijode, learned Authorised Representative relied upon the submissions filed by the assessee before the lower authorities. 9. We have considered the rival submission and perused the material available on record. In order to decide the issue at hand, it is relevant to note the following data from the schedules to balance-sheet as on 31/03/2011, which is forming part of the paper book at page nos. 7 - 9: Particulars Balance as on 31.03.2011 (Amount in Rs.) Balance as on 31.03.2010 (Amount in Rs.) Schedule 2 Term Loan from Bank of India 41.89 crore 50.09 crore Export Packing credit from Central Bank of India 0 75.58 crore Cash credit facility from Central Bank of India 75.02 crore 0 Vehicle Loan 0.01 crore 0.08 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year under consideration. We further find that the Assessing Officer merely on an ad hoc basis made the additions under section 36(1)(iii) of the Act, without bringing anything on record to suggest that interest-bearing funds were actually utilised for the purpose of advancing funds on which no interest was charged by the assessee.
13. In view of the above, we find no infirmity in the impugned order passed by the learned CIT(A) deleting the disallowance made by the Assessing Officer under section 36(1)(iii) of the Act. Accordingly, the sole ground raised by the Revenue in present appeal is dismissed.
14. In the result, appeal by the Revenue is dismissed.
Order pronounced in the open court on 24/05/2022. X X X X Extracts X X X X X X X X Extracts X X X X
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