M/S. BIEVEN TECHNOLOGY PRIVATE LIMITED,BENGALURU vs. DCIT, CIRCLE-2(1)(1), BENGALURU

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ITA 2248/BANG/2024Status: DisposedITAT Bangalore15 December 2025AY 2010-11Bench: SHRI WASEEM AHMED (Accountant Member), SHRI KESHAV DUBEY (Judicial Member)10 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the disallowance of interest on advances carried forward from the earlier year (Rs. 12,20,21,743) was not sustainable. This is because no disallowance was made in the previous year, and consistency in approach by the revenue is necessary, as per the Karnataka High Court in CIT v. Sridev Enterprises. Regarding the new advance of Rs. 16,50,36,746 to M/s Nitesh Industries Pvt. Ltd., the Tribunal found that both the assessee and the sister concern were engaged in real estate development, with common business objectives. Applying the principles from the Supreme Court in SA Builders, the Tribunal inferred that the advance was made for commercial purposes. The Tribunal also noted that if the money goes into a common pool, a presumption can be drawn that it was advanced from own funds, provided own funds exceed such advances, though it rejected the assessee's argument based on working capital/current liabilities. However, the Tribunal ultimately concluded that the interest expense claimed by the assessee cannot be disallowed, as the deduction is available either to the assessee or its sister concern, and there was no allegation of a device to reduce income by diverting interest-bearing funds. Therefore, the addition made by the AO was directed to be deleted.

What were the facts?

The assessee, M/s Bieven Technology Pvt. Ltd., is appealing an order from the NFAC, Delhi, dated 25/09/2024, concerning Assessment Year 2010-11. The Assessing Officer (AO) added Rs. 4,02,24,590 to the assessee's total income, representing interest expenses disallowed on the grounds that the assessee advanced interest-free funds to its sister concern while having borrowed funds. The assessee argued that the advances were either share application money or for commercial purposes. The CIT(A) upheld the AO's disallowance, stating the assessee failed to establish business expediency for interest-free advances and that advancing funds for share acquisition is capital in nature. The assessee's total interest expenses were Rs. 4,27,31,394.

What were the issues?

1. Whether the disallowance of interest expenses of Rs. 4,02,24,590 is valid, considering the assessee advanced interest-free funds to its sister concern while having interest-bearing loans, turning on Section 36(1)(iii) of the Income Tax Act, 1961. Assessee's Contentions: - The assessee had sufficient interest-free funds (Rs. 97,76,51,182) available as of March 31, 2010, to cover the advances (Rs. 28,73,18,498), thus the advances were not from interest-bearing funds. (Relied on Paper Book page 60). - A sum of Rs. 12,20,21,743 was carried forward from the previous year, where no disallowance was made, implying consistency. (Relied on CIT v. Sridev Enterprises, 192 ITR 165). - The advance to M/s Nitesh Industries Pvt. Ltd. was for commercial purposes as both entities are engaged in real estate development. (Relied on SA Builders, 288 ITR 1). Revenue's Contentions: - There is no information on record to show whether the advance was made after obtaining interest-bearing loans. If so, it is a clear case of diversion of interest-bearing funds. The matter should be set aside to the AO for verification and fresh adjudication.

Which sections of the Income-tax Act were involved?

Section 36(1)(iii)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘A’ BENCH, BANGALORE

Before: SHRI WASEEM AHMED & SHRI KESHAV DUBEY

For Respondent: Shri Balusamy N, JCIT (DR)

PER WASEEM AHMED, ACCOUNTANT MEMBER:

1.

This is an appeal filed by the assessee against the order passed by the NFAC, Delhi vide order dated 25/09/2024 in DIN No.ITBA/NFAC/S/250/2024-25/1069104091(1) for the assessment year 2010-11.

2.

The only issued raised by the assessee is that the learned CIT(A) erred in confirming the order of the AO by sustaining the addition of interest expenses of Rs. 4,02,24,590.00 only.

. made by him. Thus, the ground of appeal of the assessee is hereby allowed.

9.

In the result, the appeal filed by the assessee is hereby allowed.

Order pronounced in court on 15th day of December, 2025

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