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2018 (10) TMI 439 - DELHI HIGH COURTInterest free advances - Disallowance of part interest paid on unsecured loans - assessee had advanced loans to third parties on which no interest was charged and received - advancement of loan on “business expediency” - Held that:- Tribunal was of the correct view that the respondent-assessee had paid interest on capital borrowed for business purpose and in the absence of any allegation and finding that the respondent-assessee had diverted unsecured loans for non-business purpose no disallowance could be made. As per Section 36(1)(iii) of the Act interest paid for capital borrowed for purpose of business has to be allowed as a deduction. Purpose of business need not be the business of the assessee, for deduction under Section 36(1)(iii) of the Act to be allowed. Further, Revenue cannot assume the role and occupy armchair of a businessman to decide whether expenditure was reasonable. The Revenue cannot look at the matter from its own standpoint, but opinion and decision of a businessman on “business expediency” matters. Money borrowed even when advanced to a subsidiary for some business purpose would qualify for deduction of interest. In the context of the present case the unsecured loans were not used for personal purpose. Merely because non-interest-bearing advances were given to third parties, would not justify a finding that the test of “commercial expediency” was not satisfied. Interest free advances were preferred to the parties connected with the business of the respondent/assessee. Money taken on loan was not diverted for non business purpose - decided in favour of assessee
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