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2016 (1) TMI 657 - AT - Income TaxDisallowance of interest - amounts diverted to subsidiary company - Held that:- As the entire money in a business entity comes in a common kitty Monies are received as share capital or as term loan or working capital loan or as internal accruals do not have different colour. Whatever the receipts in the business, have the colours of business receipts and have no separate identification. The only thing sufficient is to disallow the interest paid on the borrowing to the extent of amount lend to subsidiary company without carrying any interest would be that the assessee has some loans or interest bearing debts to be repaid. In case, the assessee had a surplus which according to it could not be immediately, it would either be required to be circulated and utilized for the purpose of business or to be invested in a manner in which it generates income and not diverted towards subsidiary free of interest. Otherwise it amounts to not presenting the true and correct income of the assessee and the subsidiary company would be enjoying the benefit at the cost of assessee. In our opinion, interest incurred by the assessee to the extent amounts are diverted to subsidiary company on interest free basis on whatever reason may be are to be disallowed. If there is any chance of recoverability, then there is a provision in the Act to claim the same as bad debt. Various case law relied by the assessee's counsel is of no relevance to the facts of the present case. In view of this, we are of the opinion that CIT(A) not justified in deleting the disallowance proportionate interest on the loan advanced to the sister concern. - Decided in favour of revenue
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