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2013 (4) TMI 39 - AT - Income TaxInterest free finance to subsidiary company - disallowance u/s 36 - whether would fall within the ambit of assessee's business expediency? - CIT(A) granted relief to the assessee - Held that:- CIT(A), in the second round while deleting the addition, held that the A.O. has not given any finding as to whether the advance to subsidiary was for its revival or not. He has further held that the contention of the assessee that the business of subsidiary got revived and the advances got fully recovered (consequent to merger) remained uncontroverted. The coordinate Bench of ITAT has observed that allowing interest free finance to subsidiary company could fall within the ambit of assessee's business expediency. The aforesaid finding of CIT(A) could not be controverted by the Revenue by bringing any contrary material on record. CIT(A) while deleting the addition has also relied on the decision S.A. Builders Pvt. Ltd. vs. CIT [2006 (12) TMI 82 - SUPREME COURT] wherein held that to decide whether interest on funds borrowed by the assessee to give an interest free loan to a sister concern (e.g., a subsidiary of the assessee) should be allowed as a deduction under section 36(1)(iii) one has to enquire whether the loan was given by the assessee as a measure of commercial expediency. The expenditure may not have been incurred under any legal obligation, but yet it is allowable as business expenditure if it was incurred on grounds of commercial expediency. Thus no reason to interfere with the order of CIT(A) - in favour of assessee.
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