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TMI Blog2022 (12) TMI 629X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.29 crore on term loan, unsecured loan and car loan etc. During the course of assessment proceedings, the Assessing Officer (AO) noted that the assessee, inter alia, made security deposit of Rs.29.00 crore to Adlers Bio Energy Ltd. Pune (in short 'ABEL') on which no interest was charged. On being called upon to explain the reasons for not charging interest and simultaneously paying interest to banks etc., the assessee submitted that advance was given to ABEL for purchase of material. It was further explained that ABEL was going to set up a grain distillery in the backward district of Osmanabad, Maharashtra, which was to become the assessee's major source of raw material. The assessee further submitted that it mortgaged its own land and bui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee company to ABEL not for purchase of raw material but for its general facilitation of business. When the assessee charged interest from ABEL for earlier two years leading to the presumption that the advance was given for non-business purposes, we fail to appreciate as to how all of a sudden the same advance became for business purpose during the year under consideration, when there is no change of facts. It is crystal clear that the assessee advanced the money to its sister concern for enabling it to set up and carry on the business, which is alien to the assessee's purchase of raw material etc. from it. The ld. CIT(A) seems to have been swayed by the extraneous factors and deleted the disallowance. Restoring the AO's point of view, in pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2019) 410 ITR 466 (SC) has reiterated the same view. In view of the above enunciation of law by the Hon'ble Supreme Court and the other Hon'ble High Courts, it is clear that where interest free funds are available with the assessee and there is net availability of funds, a presumption has to be drawn that the advance made for non-business purposes were advanced by such interest free funds available at the disposal of the assessee. We, therefore, setaside the impugned order and remit the matter to the file of the AO for examining the availability of interest free funds and then compute the disallowance of interest u/s.36(1)(iii) accordingly. Needless to say, the assessee will be allowed reasonable opportunity of hearing. 7. In the result, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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