Kumar Builders, Pune V. Deputy Commissiner of Income-tax,

ITA 2257/PUN/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6948 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 11-12-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 18-12-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Proportionate interest; Commercial expediency
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.2257/PUN/2014 / ASSESSMENT YEAR : 2010-11 KUMAR BUILDERS, 10 TH FLOOR, KUMAR BUSINESS CENTRE (KBC), OPP. BUND GARDEN ROAD, PUNE 411 001 PAN : AACFK1478L . /APPELLANT VS. DCIT, CIRCLE-4, PUNE . / RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK REVENUE BY : SHRI AJAY MODI, JCIT / DATE OF HEARING : 11.12.2017 / DATE OF PRONOUNCEMENT: 13.12.2017 / ORDER PER D. KARUNAKARA RAO, AM : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF CIT(A)-II, PUNE DATED 29-08-2014 FOR THE ASSESSMENT YEAR 2010- 11. 2. ASSESSEE RAISED 4 GROUNDS. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT GROUND NOS. 2 TO 4 SHOULD BE DISMISSED EITHER AS NOT PRESSED OR AS GENERAL. ACCORDINGLY, W E ORDER. THAT LEAVES, GROUND NO.1 FOR ADJUDICATION AND THE SAME IS EXTRA CTED HERE AS UNDER : 1. THE LD.CIT(A) GROSSLY ERRED IN NOT CONSIDERING INTEREST FREE FUNDS AVAILABLE WITH THE APPELLANT FOR WORKING OUT THE PROPORTIONATE DISALLOWANCE OF INTEREST U/S.36(1)(III) OF THE I.T. ACT, 1961. ITA NO.2257/PUN/2014 KUMAR BUILDERS 2 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT TH E ASSESSEE IS A PROMOTER AND BUILDER AND FILED THE RETURN OF INCOME DEC LARING TOTAL INCOME OF RS.10.05 CRORES (ROUNDED OFF). IN THE ASSESSMENT MADE U/S.143 OF THE ACT, AO DETERMINED THE ASSESSED INCOME AT RS.11,60,61,126/-. APART FROM OTHER ADDITIONS ABOVE, AO MA DE AN ADDITION U/S.36(1)(III) R.W.S. 14A OF THE ACT. THE SAME IS SUBJEC T MATTER OF THE PRESENT APPEAL AND IT RELATES TO THE DISA LLOWANCE MADE U/S.36(1)(III) OF THE ACT AMOUNTING TO RS.81,52,033/-. RELEVANT FA CTS ARE DISCUSSED BY THE AO IN PARA NO.4.3 AND THE SAME IS S UMMARIZED AS UNDER : ASSESSEE CLAIMED FINANCIAL EXPENSES AGGREGATING RS.9,60,86,241/-. DURING THE ASSESSMENT PROCEEDINGS, AO N OTICED GRANTING OF INTEREST FREE ADVANCES/LOANS TO THE RELATED C ONCERNS/ OR PARTNERS OF THE FIRM-THE ASSESSEE AMOUNTING TO RS.12.46 C RORES (ROUNDED OFF) AS ON 31-03-2010. ASSESSEE WAS ASKED TO E XPLAIN AS TO WHY PROPORTIONATE INTEREST AMOUNT SHOULD NOT BE DISALLOW ED OUT OF THE DEDUCTION CLAIM MADE UNDER FINANCIAL EXPENSES ON ACC OUNT OF DIVERSION OF INTEREST BEARING FUNDS FOR THE PURPOSE OF GIVING INTEREST FREE LOANS AND ADVANCES TO THE RELATES PARTIES. IN RESP ONSE, THE ASSESSEE FURNISHED THE WRITTEN SUBMISSIONS DATED 22-02-2 013. IN THE SAID REPLY, IT IS THE CLAIM OF THE ASSESSEE THAT ENTIRE FUNDS HAVE BEEN UTILIZED SOLELY FOR THE BUSINESS PURPOSES AND THEREFO RE, NO DISALLOWANCE IS WARRANTED. ASSESSEES EXPLANATION WAS NOT ACCEPTED BY THE AO CONSIDERING THE FACT THAT AN AMOUNT OF RS.12.4 6 CRORES (ROUNDED OFF) WAS UNDISPUTEDLY GIVEN TO THE PARTNER/SISTER CONCERNS FOR NON-BUSINESS PURPOSES. ACCEPTING THE FACT THAT ASSE SSEE MAINTAINS HYBRID ACCOUNTS CONTAINING BOTH INTEREST FREE AS WELL AS INTEREST BEARING FUNDS, THE AO APPLIED THE FORMULA LAID DOWN IN RULE ITA NO.2257/PUN/2014 KUMAR BUILDERS 3 8D OF THE I.T. RULES, 1962 AND QUANTIFIED THE DISALLOWANCE AT RS.81,52,033/-. THE CALCULATIONS ARE GIVEN IN PARA NO.4.3.2 O F THE ASSESSMENT ORDER. AO DISALLOWED THE SAME U/S.14A R.W. RULE 8D AND THE CIT(A) DEALT THIS ISSUE U/S.36(1)(III) OF THE ACT. 4. AGGRIEVED WITH THE SAME, ASSESSEE FILED AN APPEAL BEFOR E THE CIT(A) VIDE GROUND NO.2 OF THE APPEAL. CIT(A) ADJUDICATED TH E SAID ISSUE AND THE CONTENTS OF PARA NOS. 4 ALONG WITH ITS SUB PARAGRAPHS UPTO PARA NO.4.4 (PAGE NOS. 16 TO 23 OF THE ORDER) ARE R ELEVANT. DURING THE PROCEEDINGS BEFORE THE CIT(A), ASSESSEE SUBMIT TED INTEREST FREE ADVANCES WERE GIVEN TO THE PARTNERS/GROUP CONCER NS. ASSESSEE ALSO SUBMITTED THAT OUT OF THE TOTAL INTEREST FREE ADVAN CES, AN AMOUNT OF RS.10,82,97,853/- RELATES TO THE ADVANCE GIVEN TO SHRI LALIT KUMAR JAIN, THE PARTNER OF THE FIRM. MR. JAIN STOOD AS GUARANTOR FO R ALL THE LOANS AVAILED BY THE ASSESSEE FIRM FROM THE BANKS AND THE SAME CONSTITUTES BUSINESS PURPOSED. THEREFORE, THE LOANS GIVEN BY THE FIRM TO SHRI LALIT KUMAR JAIN CANNOT BE CONSIDERED HAVING NO BU SINESS CONSIDERATIONS. IT IS PLEADED BEFORE THE CIT(A) THAT THE A DVANCES PAID TO SHRI LALIT KUMAR JAIN SHOULD NOT BE CONSIDERED WHILE WORK ING OUT THE DISALLOWANCE OF INTEREST EXPENSE, IF ANY. HE ALSO MADE A PRAYER WITH REGARD TO NETTING OF AN AMOUNT OF RS.56,25,000/- WH ICH WAS WRONGLY INCLUDED BY THE ASSESSEE UNDER THE HEAD FINANC IAL EXPENSES. FURTHER, ASSESSEE RELIED ON VARIOUS HIGH COUR T/SUPREME COURT JUDGMENTS VIZ. IN THE CASE OF JCIT VS. BEEKAY ENGIN EERING CORPORATION 325 ITR 384, MUNJAL SALES CORPORATION VS. CI T AND ANOTHER 298 ITR 298 (SC), CIT VS. HOTEL SAVERA 239 ITR 795 (MAD.) AND CIT VS. PREM HEAVY ENGINEERING WORKS PVT. LTD. 285 ITR 584 (ALL.). CIT(A) CONSIDERED THE SAME AND DEALT WITH THIS ISSUE OF INTEREST DISALLOWANCE OF RS.81,52,033/- ON PROPORTIONATE BASIS AND ALS O ITA NO.2257/PUN/2014 KUMAR BUILDERS 4 CONSIDERED THE FACT ABOUT GRANTING OF INTEREST FREE FUNDS TO SHRI LALIT KUMAR JAIN AMOUNTING TO RS.10,82,97,853/- AND THE SAME IS EVIDENT IN HIS ORDER. FURTHER, THE CIT(A) CONSIDERED VARIOUS DECIS IONS RELATING TO THE PRINCIPLE OF COMMERCIAL EXPEDIENCY (S.A. BUILDER S LTD. VS. CIT 288 ITR 1 (SC), CIT VS. H.R. SUGAR FACTORY PVT. LTD . 187 ITR 363 (ALL.)) ETC. CIT(A) FAVOURABLY CONSIDERED THE FACT OF REDU CING THE AMOUNT OF RS.56,25,000/- FROM THE TOTAL FINANCIAL EXPENSES OF RS.9,60,86,241/- AND EVENTUALLY, THE AO WAS DIRECTED TO RE WORK THE DISALLOWANCE ON PROPORTIONATE BASIS TAKING INTO CONSIDERATIO N THE FINANCIAL EXPENSES OF ONLY RS.9,04,61,241/- (NETTING OF AFTER RE DUCING THE SAID AMOUNT RS.56,25,000/- WRONGLY BOOKED). TO THAT EXTENT, THE CLAIM OF THE ASSESSEE WAS PARTLY ALLOWED BY THE CIT(A). 5. AGGRIEVED WITH THE SAME, THE ASSESSEE IS IN APPEAL BEFO RE US. THERE IS NO APPEAL FILED BY THE REVENUE ON THE PART RELIE F GRANTED BY THE CIT(A). 6. BEFORE US, LD. COUNSEL FOR THE ASSESSEE NARRATED THE ABOVE FACTS OF THE CASE AND SUBMITTED THAT NO DISALLOWANCE IS CA LLED FOR ON ACCOUNT OF INTEREST DISALLOWANCE ON THE REASONING OF DIVER SION OF INTEREST BEARING FUNDS TOWARDS INTEREST FREE ADVANCES GR ANTED BY THE ASSESSEE FIRM TO THE RELATED CONCERNS OR PARTNER OF THE FIRM. LD. COUNSEL BROUGHT OUR ATTENTION TO PAGE NO.8 OF THE PAPE R BOOK (COPY OF BALANCE SHEET AS ON 31-03-2009 TO 31-03-2010) AND MEN TIONED THAT THE SAME EVIDENCES THE AVAILABILITY OF THE OWN OR INTEREST FREE FUNDS. FURTHER, BRINGING OUR ATTENTION TO THE INTEREST FREE ADVA NCES TO THE CONCERNS/SHRI LALIT KUMAR JAIN, LD. COUNSEL FOR THE ASSESS EE SUBMITTED THAT AN AMOUNT OF RS.12.40 CRORES (ROUNDED OFF) W AS THE PAY OUT. THEREFORE, IT IS THE CASE WHERE THE FUNDS DIVER TED IS MUCH ITA NO.2257/PUN/2014 KUMAR BUILDERS 5 LESS THAN THE INTEREST FREE FUNDS AVAILABLE WITH THE ASSESS EE IN THE FORM OF PARTNERS CAPITAL. HE ALSO SUBMITTED THAT, DURING TH E YEAR ASSESSEE EARNED THE PROFIT OF RS.5.24 CRORES (ROUNDED OFF). CONTENTS OF PAGE 17 OF THE PAPER BOOK IS RELEVANT. ACCORDING TO L D. COUNSEL FOR THE ASSESSEE, SUFFICIENT FUNDS ARE AVAILABLE FOR GIVING INTERES T FREE ADVANCES TO THE PARTNERS/CONCERNS AND NO DISALLOWANCE ON PROPORTIONATE BASIS U/S.36(1)(III) IS WARRANTED. FURTHER, HE BR OUGHT OUR ATTENTION VARIOUS TO THE FOLLOWING JUDGMENTS/DECISIONS OF THE TRIBUNAL/HIGH COURT TO SUPPORT HIS CASE AND SUBMITTED TH AT WHEN THE ASSESSEE MAINTAINS HYBRID ACCOUNTS CONTAINING BOTH IN TEREST BEARING AND INTEREST FREE FUNDS, THE PRESUMPTION WOULD THA T THE NON INTEREST BEARING FUNDS ARE DIVERTED TOWARDS INTEREST FREE ADVANCES AND THEREFORE NO DISALLOWANCE IS WARRANTED U/S.36(1)(III) OF THE ACT. 1. ACIT VS. KUMAR URBAN DEVELOPMENT PVT. LTD. AND VICE VERSA ITA NOS. 39 AND 46/PUN/2015 FOR A.Y. 2010-11 ORDER DATED 31-10- 2017 2. TRINITY INDIA LIMITED VS. DCIT ITA NO.666/PN/20 12 FOR A.Y. 2009-10 ORDER DATED 28-08-2013 3. CIT VS. SHARADA ERECTORS PVT. LTD. DT. 03-10-20 16 76 TAXMANN.COM 107 (BOMBAY) 4. ACIT VS. SHARADA ERECTORS PVT. LTD. AND VICE VER SA ITA NOS. 472, 566 AND 906/PN/2010 FOR A.YRS. 2004-05 AND 200 5-06 ORDER DATED 25-06-2013 5. UNIVERSAL CONSTRUCTION MACHINERY AND EQUIPMENTS LTD. VS. ACIT ITA NOS. 1465, 1466 AND 975/PN/2013 FOR A.Y. 2009-10 ORDER DATED 10-04-2015 7. IN RESPONSE TO THE ABOVE SUBMISSION OF THE ASSESSEE , LD. DR FOR THE REVENUE SUBMITTED DUTIFULLY STATING THAT THIS IS THE C ASE WHERE FUNDS ARE OBVIOUSLY DIVERTED BY THE ASSESSEE FIRM TO THE EXTENT OF RS.12.46 CRORES (ROUNDED OFF) TO THE BENEFIT OF THE PARTNE RS/CONCERNS. IN THE ABSENCE OF ESTABLISHING THE COMMERCIAL NEXUS, THE DISALLOWANCE IS CERTAINLY WARRANTED FOR DIVERSION OF THESE FU NDS FOR ITA NO.2257/PUN/2014 KUMAR BUILDERS 6 NON-BUSINESS PURPOSES. FURTHER, BRINGING OUR ATTENTION T O PAGE NO.8 OF THE PAPER BOOK (COPY OF BALANCE SHEET), LD. DR FOR THE REVENUE SUBMITTED THAT THE PARTNERS CAPITAL NORMALLY CONSTITUTE S AN INTEREST BEARING FUND. IT ALWAYS COMES AS A LIABILITY OF THE FIRM TO PAY INTEREST BY THE FIRM. FURTHER, BRINGING OUR ATTENTION TO THE BREAK UP OF SCHEDULE 18 RELATING TO FINANCIAL EXPENSES (PAGE 9 OF THE P APER BOOK IS RELEVANT), LD. DR SUBMITTED THAT SCHEDULE 18 DOES NOT IN DICATE ANY PAYMENT OF INTEREST BY THE FIRM TO THE PARTNERS CAPITAL OR OTHERWISE. HE READ OUT THE FINANCIAL EXPENSES AMOUNT OF RS.9.60 CROR ES (ROUNDED OFF) AND INFERRED FOR HIM THAT PAYMENT OF RS.61,281,44 5/- ON ACCOUNT OF INTEREST PAID TO OTHERS MAY RELATE TO T HE SAID INTEREST PAYMENT MADE TO THE PARTNERS CAPITAL. CONSIDERING THE ABSENCE OF COMMERCIAL NEXUS OF THE SAID DIVERTED LOANS AND ALSO CONSID ERING THE USE OF FUNDS BY THE PARTNER, LD. DR SUBMITTED THAT THE DECISION OF THE CIT(A) IS FAIR AND REASONABLE AND THE SAME SHOULD BE CONFIRM ED. LD. DR ALSO WAS CRITICAL OF THE DECISIONS CITED BY THE LD. COU NSEL FOR THE ASSESSEE AND SUBMITTED THAT THEY ARE ALL DISTINGUISHABLE ON FACTS. 8. DURING THE REBUTTAL TIME, SHRI NIKHIL PATHAK, LD. COUNSEL FO R THE ASSESSEE CLARIFIED THE DETAILS RELATING TO THE INTERES T PAID TO OTHERS AND SUBMITTED THE SAME RELATES TO UNSECURED LOA N CREDITORS WHICH IS AROUND RS.20.88 CRORES (ROUNDED OFF) AS PER SCHED ULE 3 OF THE BALANCE SHEET. HE ALSO BROUGHT OUR ATTENTION TO TH E FACTS RELATING TO PAYMENT OF INTEREST TO THE PARTNERS OF THE FIRM. MENT IONING THAT THE ASSESSEE FIRM NEVER PAID INTEREST TO THE PARTNERS, L D. COUNSEL SUBMITTED THAT RS.36.61 CRORES (ROUNDED OFF) SHOWN IN THE P ARTNERS CAPITAL CONSTITUTES INTEREST FREE FUNDS WHICH FORM PART OF T HE TOTAL FUNDS OUT OF WHICH ONLY RS.12.46 CRORES (ROUNDED OFF) WAS D IVERTED FOR THE BUSINESS PURPOSES. PROPORTIONATELY, THE DIVERTED FUN DS ARE MUCH ITA NO.2257/PUN/2014 KUMAR BUILDERS 7 LOWER THAN THE INTEREST FREE FUNDS. THEREFORE, THE PRESUM PTION WOULD BE THAT INTEREST FREE FUNDS WERE DIVERTED FOR ADVANCING LO ANS TO THE PERSONS/RELATED CONCERNS. THEREFORE, NO DISALLOWANCE U/S.3 6(1)(III) OF THE ACT IS CALLED FOR AS PER THE BINDING OF THE HONBLE BOM BAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES AND POWER LTD. 313 ITR 340 AND CIT VS. HDFC LTD. 366 ITR 505. 9. WE HEARD BOTH THE PARTIES ON THIS LIMITED ISSUE OF PRE SUMPTION BASED RELIEF TO BE GRANTED TO THE ASSESSEE WITH REGARD TO THE DIVERSION OF FUNDS WHEN EXCESS INTEREST FREE FUNDS ARE AVAILABLE IN TH E COMMON KITTY OF THE ASSESSEE FIRM. WE HAVE ALSO CONSIDERED THE V ARIOUS ARGUMENTS AND WRITTEN SUBMISSIONS MADE BY BOTH THE PAR TIES AS WELL AS THE DECISIONS CITED BY THEM BEFORE US. WE HAVE ALSO C ONSIDERED THE OBJECTIONS OF THE REVENUE WITH REGARD TO ESTABLISHING OF BUSINESS CONNECTION AND ABSENCE OF INTEREST FREE FUNDS. 10. REGARDING THE INTEREST FREE FUNDS, IT IS UNDISPUTED FACT THAT THE TOTAL PARTNERS CAPITAL IS RS.36.61 CRORES (ROUNDED OFF) AN D THE RELIANCE IS BASED ON CONTENTS OF PAGE 8 OF THE PAPER BOO K (COPY OF BALANCE SHEET) FOR THE RELEVANT PERIOD. THE FUNDS DIVERTED BY THE ASSESSEE ARE OBVIOUSLY LESSER THAN THE SAID AMOUNT OF PARTNERS CAPITAL. IT IS CLARIFIED ADEQUATELY THAT SAID AMOUNT OF PARTNERS CAPITA L IS NOT AN INTEREST BEARING LOANS FROM THE FIRMS. ASSESSEE NEVER PAID INTEREST TO THE PARTNERS FOR ALL THE YEARS INCLUDING THE Y EAR UNDER CONSIDERATION. THEREFORE, IT CANNOT BE SAID THAT THE PART NERS CAPITAL IS NOT AN INTEREST FREE FUNDS OF THE ASSESSEE. CONSIDERING THIS FACT, WE ARE OF THE VIEW THAT AVAILABILITY OF INTEREST FREE FUNDS IS MUC H HIGHER THAN THE FUNDS DIVERTED BY THE ASSESSEE. ON THIS REASO NING, WE ARE OF THE OPINION THAT THE DECISIONS OF THE JURISDICTIONAL HIGH COU RT IN THE ITA NO.2257/PUN/2014 KUMAR BUILDERS 8 CASES OF CIT VS. RELIANCE UTILITIES AND POWER LTD. AND CIT VS. HDFC LTD. (SUPRA) ARE RIGHTLY INVOKED AND APPLIED TO THE FACTS O F THE PRESENT CASE. 11. REGARDING THE BUSINESS NEXUS AND USE OF THE SAID DIV ERTED FUNDS FOR BUSINESS PURPOSES OF THE ASSESSEE, WE ARE OF TH E VIEW THAT THIS ISSUE NOW STANDS COVERED IN FAVOUR OF THE ASSESSEE BY VARIOUS DECISIONS INCLUDING OUR DECISION IN THE CASE OF ACIT VS. KUMAR URBAN DEVELOPMENT LIMITED FOR A.Y. 2010-11 VIDE ORDER DATED 31-1 0-2017. FOR THE SAKE OF COMPLETENESS OF THIS ORDER, WE PROCEED T O EXTRACT THE RELEVANT PARAGRAPHS FROM THE SAID ORDER OF THE TRIBUNAL. IT IS FINDING OF THE TRIBUNAL IN THE SAID CASE THAT THE PROVISIONS OF SE CTION 36(1)(III) CANNOT BE INVOKED IN RESPECT OF FUNDS DIVERTED WHEN SUC H DIVERTED FUNDS ARE MUCH LESS THAN THE INTEREST FREE FUNDS AVAILABLE IN THE COMMON KITTY OF THE ASSESSEE. RELEVANT OPERATIONAL PARAG RAPH IS REPRODUCED HERE AS UNDER : 8.4 IN RESPECT OF GROUND NO. 4 RELATING TO DISALLO WANCE OF INTEREST EXPENDITURE U/S. 36(1)(III), THE LD. AR SUBMITTED T HAT THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF INTEREST RS.3,34,6 2,116/-. THIS DISALLOWANCE WAS MADE BY ASSESSING OFFICER IN RESPE CT OF INTEREST PAID BY THE ASSESSEE TO ITS SISTER CONCERNS. IN FIR ST APPEAL THE COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT ADVAN CES GIVEN TO TWO CONCERNS VIZ. KUMAR HOUSING CORPORATION LTD. AND KU MAR SINEW DEVELOPERS PVT. LTD. ARE FOR NON BUSINESS PURPOSES. THE COMMISSIONER OF INCOME TAX (APPEALS) IN PARA 4.3.15 OF THE IMPUG NED ORDER HAS COMPUTED TOTAL INTEREST DISALLOWANCE AT RS.5,34,01, 201/-. IN RESPECT OF AMOUNTS ADVANCED TO THE ABOVE TWO CONCERNS, THE LD. AR SUBMITTED THAT AFTER REDUCING INTEREST DISALLOWANCE MADE BY A SSESSING OFFICER, THE COMMISSIONER OF INCOME TAX (APPEALS) ENHANCED T HE INCOME OF THE ASSESSEE BY RS.1,99,39,084/-. THE COMMISSIONER OF IN COME TAX (APPEALS) HAS WORKED DISALLOWANCE ON DAILY BASIS. T HE MAXIMUM AMOUNT OUTSTANDING IN RESPECT OF AMOUNTS ADVANCED T O THE AFORESAID TWO CONCERNS IS TO THE TUNE OF RS.108.82 CRORES. TH E LD. AR SUBMITTED THAT THE ASSESSEE HAS ITS OWN INTEREST FREE FUNDS A VAILABLE IN EXCESS OF PEAK AMOUNT ADVANCED. THE LD. AR REFERRED TO THE BA LANCE SHEET OF THE ASSESSEE COMPANY AT PAGE 13 OF THE PAPER BOOK. THE LD. AR CONTENDED THAT SINCE THE ASSESSEE HAS OWN FUNDS MUCH MORE THA N THE AMOUNT ADVANCED, NO DISALLOWANCE OF INTEREST IS WARRANTED. TO FURTHER BUTTRESS HIS SUBMISSIONS THE LD. AR SUBMITTED THAT IN ASSESSMENT YEAR 2009-10 THE ASSESSEE DEMONSTRATED BEFORE THE TRIBUN AL THAT OWN FUNDS OF THE ASSESSEE WERE MUCH MORE THAN THE AMOUN T ADVANCED. THE TRIBUNAL DECIDED THE ISSUE IN FAVOUR OF THE ASS ESSEE HOLDING NO DISALLOWANCE OF INTEREST IS WARRANTED. ITA NO.2257/PUN/2014 KUMAR BUILDERS 9 12. CONSIDERING THE SAME, WE ARE OF THE VIEW THAT IN THE FA CTS OF THE PRESENT CASE, THERE IS NO REQUIREMENT FOR THE ASSESSEE TO ESTABLISH UTILITY OF THE SAID DIVERTED FUNDS FOR BUSINESS PURPOSES WHE N SAID DIVERTED FUNDS ARE FROM THE INTEREST FREE FUNDS IN THE KITT Y OF THE ASSESSEE FIRM. ACCORDINGLY, GROUND NO.1 RAISED BY THE ASS ESSEE IS ALLOWED. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13 TH DAY OF DECEMBER, 2017. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 13 TH DECEMBER, 2017. / COPY OF THE ORDER FORWARDED TO : BY ORDER // TRUE COPY // //TRUE COPY// SENIOR PRIVATE SECRETARY , / ITAT, PUNE THE APPELLANT THE RESPONDENT THE CIT(A) - II, PUNE CIT - II, PUNE % , , A BENCH PUNE; / GUARD FILE.