TMI Blog2023 (2) TMI 692X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer and the ld. CIT(A) that the advance was made by the assessee company to its sister concern, namely, Darode Jog and Associates for the business purposes i.e. procurement of lands in terms of agreement entered into by it with ASK Investment Managers Pvt. Ltd.. It is also an admitted fact that the said Darode Jog and Associates had not procured any land. Thus, the purpose of advance of loan only for business purpose is established beyond the doubt. In the present case, the assessee company had discharged the onus of proving the expenditure incurred for the purpose of business purpose. It is different matter that the beneficiary of loans i.e. Darode Jog and Associates had not utilized the funds for the business purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax (Appeals)- 1, Pune [ the CIT(A) ] dated 29.10.2019 for the assessment year 2013-14. 2. The appellant raised the following grounds of appeal :- 1. The Learned Assessing Officer ( Ld. AO) and Learned Commissioner of Income Tax (Appeals) ( Ld. CIT(A) ) have erred in disallowing a sum of Rs 3,27,68,625/- under section 36(1)(iii) of the Income Tax Act, 1961 ( IT Act). Prayer: The Appellant prays that the additions made under section 36(1)(iii) of the Act be deleted. 1(b) The Learned AO and Learned CIT(A) have erred in making an addition in respect of interest paid to directors on unsecured loans under section 40A(2)(b) of the Act of Rs 7,08,787/- considering it as unreasonable and excessive. Prayer: The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,00,00,000 Advance paid for acquisition for new project near at the same location The transaction is not yet finalized and the advance is shown as receivable from the group concern, 10-03-2011 20,53,00,000 -do- -do- 30-02-2012 4,30,25,000 -do- -do- Total 30,83,25,000 4. Based on the above information, he formed an opinion that the interest bearing funds had been diverted to its sister concern for non-business purpose and, therefore, the proporti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ggrieved, the appellant is in appeal before us in the present appeal. 7. It is submitted that the appellant had borrowed funds from ASK Investment Managers Pvt. Ltd. in the form allotment of debentures carrying interest at the rate of 10%, in terms of agreement entered into by the appellant company with ASK Investment Managers Pvt. Ltd. which is placed at page no.77 of the Paper Book. Vide column no.12, it is prescribed that the funds shall be utilized in the manner agreed therein which indicates that sum of Rs.20.53 crores shall be used by the appellant company to make advance to Darode Jog and Associates for aggregating the lands. He also submitted that ultimately the said company could not procure any land and part of the funds were u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f appeal no.2: The issue that arises for consideration is whether on the facts and circumstances of the case, the disallowance of interest u/s 36(1)(iii) made by the Assessing Officer is warranted or not. Admittedly, the appellant company advanced certain sums to its concern, Darode Jog and Associates during the earlier previous years. Admittedly, no fresh advance was made during the previous year relevant to the assessment year under consideration. The appellant company had borrowed the funds from ASK Investment Managers Pvt. Ltd. i.e. third party in the form of allotment of debentures at 10%. The interest on borrowed funds had been claimed as deduction while computing the income of the assessee company. The assessee company had asserted b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, the ratio of the Hon ble Karnataka High Court in the case of CIT vs. Sridev Enterprises, 59 Taxman 439 (Karnataka) and the Hon ble Delhi High Court in the case of CIT vs. Givo Limited (ITA No.941/2010), wherein, it was held that for the purpose of disallowance of interest u/s 36(1)(iii) in case where the disallowance was not made in the earlier years, the opening balance of loans and advances to sister concern should not be considered for the purpose of disallowance of interest. Thus, in the light of the above discussion, we are of the considered opinion that no disallowance of interest is warranted in the facts of the present. Thus, the ground of appeal no.2 filed by the assessee stands allowed. 12. In the result, the appeal filed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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