G. Manjunatha ORDER
G. Manjunatha, Member (A)
1. This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-6, Chennai, dated 28.12.2017 and pertains to AY 2014-15.
2. The assessee has raised the following grounds of appeal:
1. The order of the learned CIT (Appeals) in as much as it confirms the disallowance of Rs. 73,05,596/- is erroneous and opposed to law and the facts of the case.
2. The learned. CIT (Appeals) erred in ignoring the feet that the loan was given to the appellant company's wholly owned subsidiary which is engaged in similar line of business and the loan was given out of considerations of commercial expediency.
3. Further, the Learned Assessing Officer erred in not appreciating the fact that the Loans were provided only out of business receipts and not out of loans borrowed from banks. The overdraft facility, for which Interest was paid, was used for business purpose only and the LIP Loan was given for asset purchase and could not be diverted for giving loan to subsidiaries.
4. The Learned Assessing Officer has not appreciated the fact that there were no fresh loans taken during the year and that the loans to subsidiaries were given out of own funds.
5. The Learned CIT (Appeals)-6. Chennai in an order passed on 04.05.2017 on similar grounds held that, "The fact of advancing loan to subsidiary, interest free or otherwise comes within the realm of commercial expediency. The mere fact of advancing borrowed funds on interest free basis to subsidiary does not make, ipso facto, the purpose to be non-business. I am of the opinion [hat ratio of the decision of the Hon'ble Supreme Court of India in SA Builders' case (supra) is applicable to the facts and circumstances of the appellants' case". Hence, the Appeal was allowed.
6. For the above reasons and evidences to be adduced during the hearing the 'Appellant prays that the Hon'ble Tribunal maybe pleased to set aside the order of the Learned CIT Appeals and allow the appeal.
3. The brief facts of the case are that the assessee is a company engaged in the business of setting up & service of Effluent Water Treatment Plants, filed return of income for the AY 2014-15 on 29.11.2014 declaring a total income of Rs. 1,18,90,850/-. During the course of assessment proceedings, the AO noticed that the assessee company had paid interest on various loans and advances. It was further noticed that the assessee company had also advanced loans and advances to groups/subsidiary companies, but not charged any interest on such loans. Therefore, the AO called upon the assessee to explain, as to why, interest paid on loans, cannot be disallowed u/s. 36(1)(iii) of the Act for diversion of interest bearing funds for non-business purpose. In response, the assessee submitted that the company has advanced loans and advances to groups/subsidiary companies which are in similar line of business in the FY 2011-12 out of own funds being convertible debentures to the extent of Rs. 10 Crs. and also fresh share capital raised during the AY 2012-13 to the extent of Rs. 15 Crs. However, no part of interest bearing funds have been used to advance loans and advances to groups/subsidiary companies. The assessee further contended that even otherwise, loans and advances given to groups/subsidiary compan........