TMI Blog2023 (8) TMI 956X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the entire loan to subsidiary, is brought forward from preceding years and is financed from Interest Free Funds after considering Application of Funds for Fixed Assets and Working Capital. Thus, no part of Loan to subsidiary is attributable to Interest Free loans which were taken for specific purposes. The Assessee Company had advanced loan to its wholly owned subsidiary Company, M/s Synergy Films Pvt Ltd, as a 100% stake Holder Company is required to provide quasi capital and margin for working capital as mandated by the Banker of the subsidiary Company who has sanctioned the bank facilities with the stipulation that Company to maintain the level of Unsecured loans from Holding Company at the projected level and same is sub- ordinated to the bank dues till the currency of the facilities. Appeal of assessee allowed. - SHRI PAWAN SINGH, JM DR. A. L. SAINI, AM For the Appellant : Shri Sapnesh Sheth, CA For the Respondent : Shri Vinod Kumar, Sr. DR ORDER PER DR. A. L. SAINI, AM: Captioned appeal filed by the assessee, pertaining to Assessment Year (AY) 2016-17, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- and short term borrowing of Rs. 7,12,87,334/- and paying interest expenses of Rs. 1,33,54,616/-. Thus, the assessee is paying interest on the borrowing and the same is claimed as revenue expenditure under Financial Account and it was observed by AO that average rate of interest paid for the purpose is 12.85% on loan taken. 4. Since the assessee has lent out interest free loan, where as it is paying interest at rate i.e. 12.85% on interest bearing loan. Thus, the assessee ought to have shown income attributable to the amount lent as advances/loans at the rate of 12.85%. Therefore, vide notice u/s 142(1) of the IT Act dated 26/11/2018, the assessee was asked to explain as to why the proportionate interest should not be disallowed. 5. In response to the same, the assessee company filed its reply on 01/12/2018 in which it claimed that the loan advanced to subsidiary company is financed from Interest Free Funds accumulated by the company. The assessee has also claimed that the loan was advanced out of commercial expediency to expand the business of the subsidiary company. Further, assessee company has also relied on many case laws including S. A. Builders Ltd. vs CIT (A), Chand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or specific purposes only. Therefore, addition made by the assessing officer may be deleted. 9. On the other hand, the Learned Departmental Representative (Ld. DR) for the Revenue submitted that assessee s issue in present appeal under consideration is squarely covered against the assessee by the judgment of the Hon'ble Tribunal which was considered by the Assessing Officer. The Ld. DR also pointed out that here is no change in the facts, so far the previous assessment year is concerned, that is, assessment year 2012-13 and the current assessment year under consideration 2016-17. The only differential fact is that the percent holding which is at 100% today in the subsidiary company, was 75% in earlier years. As on today the holding is 100% in the subsidiary therefore, it is a hundred percent subsidiary company but the other facts remain same which were there in the assessment year 2012-13, therefore the order of the Tribunal in assessee s own case should be followed and assessee s appeal should be dismissed. 10. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an was advanced out of commercial expediency to expand the business of the subsidiary company. For that reliance can be place on the decision of Hon'ble Supreme Court in the case of SA builder Ltd. Vs CIT, 158 Taxman 74, Delhi High Court. Other decisions referred by the assessee on this issue were: In the case of CIT Vs Dalmia cement Ltd. 254 ITR 377, and in the case of CIT Vs. Reliance Utilities and Power Ltd 313 ITR 340. Thus, we note that above facts and decision of Hon ble Supreme Court in the case of SA builder Ltd. Vs CIT, 158 Taxman 74, have not been considered by the Tribunal (in assessee`s own case) in right perspective. Who can help the wholly owned subsidiary in needy hours? This is the parent company, who can help the wholly owned subsidiary in needy hours to save the business. Based on these facts, we note that addition made by the assessing officer needs to be deleted. 13. The assessee submitted the accumulated sources of funds as at 01/04/2015, which are as under: Thus, we note that the entire loan to subsidiary, is brought forward from preceding years and is financed from Interest Free Funds after considering Application of Funds for Fixed Assets and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Pvt Ltd is a wholly owned subsidiary Company and being a 100% stakeholder, Company is required to provide quasi capital and margin for working capital as mandated by the Banker of the subsidiary Company. The Assessee Company had failed to establish the link with interest free funds available and loans lent out of said funds to the sister concerns. The Interest Free Loan advanced to subsidiary company is solely attributable to interest free funds as demonstrated in the preceding para a above. The Share Capital relates to the old period, which implies that it has already been utilized for the purchase of asset, hence it cannot be said to be available with the Assessee Company for the money to be lent. Share capital is not the only interest free fund as Company has substantial accumulated free reserves generated out of internal cash accruals. In any case, no loan was advanced during the previous year from the interest bearing fund which were availed for specific end uses. 15. Thus, the facts on the basis of which, Tribunal has decided the case in assessee`s own case are substantia ..... X X X X Extracts X X X X X X X X Extracts X X X X
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