Case Law Details
Trimex Industries Pvt Ltd Vs ACIT (ITAT Chennai)
ITAT Chennai held that disallowing the interest to the extent of amount advanced to its sister concern unsustainable as subsidiaries are engaged in the business as that of the assessee and it is called the expansion of business.
Facts- The AO on perusal of profit & loss account and balance sheet of the assessee noted that there was substantial increase in quantum of secured loans and unsecured loans during the relevant financial year 2008-09. The AO noted the details of total loans including secured and unsecured loans as on 31.03.2008 were Rs.55.47 crores, whereas the same have been increased to Rs.109.02 crores as on 31.03.2009. Further, he noted from the Schedule of Financial Charges that assessee has paid interest on term loan of Rs.2.01 crores and interest of working capital loan of Rs.11.07 crores compared to last year’s of Rs.1.36 crores and Rs.5.10 crores respectively.
According to AO in view of the above, the assessee had made substantial borrowings and paid huge interest in respect of the same which has been claimed as business expenditure amounting to Rs.3,30,08,590/-. Hence, he required the assessee to explain as to why the interest pertaining to the above interest free advance given to subsidiaries or sister concern i.e., investment shown in Trimax Sands as on 31.03.2009 at Rs.57 crores, donation paid of Rs.5 crores to Sri Sathya Sai Medical Trust on 04.08.2008, advance made to Pradeep Shipping of R.34,16,061/- on 28.02.2009 and interest claimed on the same to be disallowed.
The CIT(A) confirmed the action of the AO in disallowing the interest to the extent of amount advanced to its sister concern, Pradeep Shipping and donation made to Sri Sathya Sai Medical Trust. Being aggrieved, the present appeal is filed.
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