Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2015 (9) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (9) TMI 896 - AT - Income TaxAdvances made to the sister concern - Disallowance of interest regarding non charging of interest on the loans advanced to sister concern - Held that:- As far as business expediency is concerned, we find that the assessee has not proved as to how its business was benefited directly or indirectly by advancing interest free loans to sister concerns and other related parties.In our opinion,the onus of proving justification was on the assessee and it did not discharge the same.Saving the reputation of sister concern cannot be termed business expendiency. We are of the opinion that every business entity has unrestricted right to manage its own affairs in the manner it deems fit. But, it cannot claim expenditure that are not incurred wholly and exclusively for carrying out its business of profession. If the assessee had not made a claim of interest expenditure in the P &L account on the borrowings that were advanced as interest free loans to the related persons and WCPL,there would not have been any problem. State should not be made party to those items of expenditure that are unrelated with business of an assessee.In the case before us,the assessee has done the same thing.It wants to shift the burden of its generosity in form of claiming an untenable claim.In our opinion there was no commercial expediency in the transactions entered in to by the assessee i.e. non charging of interest from WCPL,PBIPL and others was necessitated by any business consideration. The assessee had failed to establish existence of commercial expediency. The FAA has given a categorical finding of fact that there was no direct nexus between the borrowings of the funds and diversion thereof for non-business purposes. He had dealt with each and every of the four parties to whom loans were advanced and had given a categorical finding of fact that the transactions in question were not guided by commercial expediency.In our opinion,his order does not suffer from any legal or factual infirmity as far as first direction of the Tribunal in concerned. Considering the second direction of the Tribunal availability of funds has been discussed by the FAA. In our opinion,availability of funds from partners’ account has be seen in light of the principle laid down by the Hon’ble Apex Court in the case of Reliance Utility (supra). For the limited purpose of calculation,we are remitting back the matter to the file of the AO. He would consider the argument taken by the assessee before us about availability of funds in partners’ account before making proportionate disallowance,in any. - Decided partly in favour of assessee.
|