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2012 (9) TMI 358 - AT - Income TaxDis-allowance of interest expenses on account of interest free advances given to subsidiary company and advances given to sister concerns at concessional interest rates - Held that:- It is clear that the loan to the sister concern at concessional rate of interest as well as the investment in the subsidiary had not taken place during the previous year. As rightly contended by assessee, the revenue has accepted the fact that same were either out of own funds or were owing to commercial expediency. Even otherwise, we find that the investment in the subsidiary was only in the nature of an advance for the purchase of shares. Shares however had not been actually allotted. In such circumstances, it cannot be said that the interest free loans are investments in the subsidiary for the purpose of earning income which will not form part of total income under the Act so as to justify invoking section 14A. Since, there was commercial expediency in giving the advance by the assessee to its subsidiary, dis-allowance cannot be even sustained u/s 36(1)(iii). As far as loans to the sister concern at concessional rate of interest is concerned, we are of the view that it would be just and appropriate to direct the Assessing Officer to examine the availability of overall funds – Decided in favor of assessee for statistical purposes.
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