9911796707
TMI Blog2022 (12) TMI 572X X X X Extracts X X X X X X X X Extracts X X X X ..... l Estate development at Sri Ganganagar, Rajasthan. The return of income was filed declaring income of Rs. 3,13,890/-. The case was selected for limited scrutiny under the CASS guidelines to examine the following issues:- 1. High interest expenditure and low turnover (Part A - P&L of ITR) whether deduction claimed on account of interest expenses is admissible. 2. High Interest expenses relatable to exempt income (u/s 14A) (Investment in Balance sheet, Interest Expense in P&L Account and Exempt income in Schedule EI of ITR. 3. Low income in comparison to very high investments appearing in/balance sheet (Part A-BS, Income in part B-TI and Schedule EI of ITR) 4. Large current liability in comparison to total asset in Balance sheet (Part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal of the assessee by holding that the interest expenditure incurred by the assessee for acquiring the shares of the sister concern cannot be said to have been utilized for the purpose of business and that the AO had rightly disallowed the interest claimed by the assessee. 2.3. Aggrieved, the assessee has now approached this Tribunal challenging the order of the Ld. CIT(A) by raising the following grounds of appeal:- 1. That the Ld. CIT(A) has erred in confirming the addition of Rs. 27,59,600/- in respect of disallowance of interest u/s. 36 (1)(iii). 2. That the disallowance have been made, though, it was explained to the Ld. CIT(A) that sufficient interest free funds were available with the assessee for investment and which h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t as at the end of 31.03.2015 1 Share Capital 4,95,05,000/- 4,95,05,000/- 2 Reserve & Surplus 43,87,535/- 43,87,525/- 3 Advances from Customers 13,97,09,330/- 1,40,56,400/ Total 19,36,01,855/- 19,42,04,229/- 3.1. Referring to the above chart, the Ld. AR submitted that the settled principle of law is that if there are interest free funds available, a presumption would arise that investment would be out of the interest free funds generated or available with the company if the interest free funds were sufficient to meet the investment. The Ld. AR placed reliance on numerous judicial precedents in support of this contention which have been compiled in the form of the paper book and have been taken on record. 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestment was made out of business expediency. The Ld. Sr. DR prayed that the assessee's appeal be dismissed. 5. I have heard the rival submissions and have also perused the material on record. The facts are not in dispute. In the present case, the AO has made a disallowance of Rs. 27,59,600/- pertaining to the interest credited to the account of M/s. A.B. Continental Commodities Pvt. Ltd. (presently known as M/s. Diamond Traexion Pvt. Ltd.). The assessee had taken an unsecured loan of Rs. 3,91,49,000/- in assessment year 2015-16 which has been undisputedly invested in purchasing the shares of group companies. The AO was of the view that in view of the amendment by way of insertion of proviso to section 36(1)(iii) of the Act, interest o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equity shares of group companies on the same day on which the loan amount is credited in the assessee's bank account. Thus, the basic contention of the Ld. AR that interest free funds were not utilised for the purpose of investing in shares of the sister concern does not stand proved. Taking the logic further, the inference that if the assessee has sufficient surplus funds, then it is to be assumed that the investments were made from surplus funds would also hold not true. 5.1. I also note that on one hand it is the assessee's contention that the borrowings were made for the purpose of investing in shares coupled with the arguments that these investments were strategic in nature and on the other hand, it has been contended that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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