Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2013 (4) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2013 (4) TMI 767 - AT - Income TaxDisallowance of interest u/s 36(l)(iii) in respect of interest free loan/ advance to sister concern - HELD THAT:- The expenditure may not have been incurred under any legal obligation, but yet it is allowable as a business expenditure, if it was incurred on grounds of commercial expediency". Undoubtedly, this aspect of the matter is important for the reason that in case the fact of commercial expediency of advancing interest free advances to the subsidiary companies is established, even if one is to come to the conclusion that interest free advances to the subsidiary companies are out of the borrowed funds, interest on borrowed funds is to be allowed in full nevertheless. However, having held that the assessee did have sufficient interest bearing funds to advance interest free advances to sister concerns, this aspect of the matter is somewhat academic. In a case in which an assessee has sufficient interest free funds, to cover the interest free advances, the principles laid down by Hon’ble Supreme Court in SA Builders’ case [2006 (12) TMI 82 - SUPREME COURT] dealing with governing commercial expediency in advancing interest free advances will not really be relevant. Ld Commissioner (Appeals)’s stand was thus devoid of legally sustainable merits on this aspect as well. Thus, we uphold the grievance of the assessee and direct the Assessing Officer to delete the impugned disallowance out of interest expenses. The assessee gets the relief accordingly. In the result, the appeal is allowed.
|