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2015 (9) TMI 1232 - AT - Income TaxDisallowance of interest - whether the amounts advanced by assessee to its sister-concerns was for commercial expediency? - Held that:- In order to reduce the litigation, assessee has charged interest on Natco Organics Ltd., in AY. 2008-09 and accounted for an amount of ₹ 5,96,29,676/-, by way of Board resolution in that year. Since Board resolution was passed subsequently and at the time of advance no interest was provided, the amount cannot be considered as accrued interest and this principle was also accepted by the ITAT in assessee’s own case in AY. 2007-08, when such amount was brought to tax on notional accrual basis in that year. As far as advances to Krishnapatnam Port Co. Ltd., is concerned, assessee charged an amount of ₹ 60,82,000/- as interest and was accounted which was not even reduced by the AO in AY. 2006-07, while notional accrued interest was taxed in earlier year. Keeping these factors in mind and consistent with orders of ITAT in earlier years and later year, we are of the opinion that the amounts cannot be disallowed in this year, when assessee has offered amounts in a later year considering all the years for calculation of interest. The fact that assessee has business interest in various concerns which helps in its own business by way of supply of raw-material for critical products and also for transportation of goods for export, we are of the opinion that the advances are for the purpose of business and commercial expediency is established. For these reasons, we uphold assessee’s contentions and reverse the orders of the AO and CIT(A) on this issue. AO is directed to delete the disallowance of interest, claimed on other borrowals, so made in these two assessment years. - Decided in favour of assessee.
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