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2016 (1) TMI 857 - AT - Income TaxDisallowance of interest expenditure under section 36(1)(iii) - interest free loan to sister concern - Held that:- When the assessee had sufficient interest free funds available with it, the plea of the assessee that it has advanced the interest free loan to the sister concern out of such non–interest bearing funds is acceptable. Therefore, in our view, no disallowance of interest expenditure can be made. As far as commercial expediency is concerned, it has been brought to our notice by the learned Counsel for the assessee that almost the entire product manufactured by the sister concern to which interest free loan was advanced was sold to the assessee. This very fact reveals that assessee has a business interest in the sister concern, therefore, advancement of interest free loan to the sister concern can be considered to be for commercial expediency. In view of the aforesaid, we delete the addition made by the Assessing Officer on account of disallowance of interest expenditure - Decided in favour of assessee Disallowance under section 14A - Held that:- Considering the fact that the assessee has not challenged the disallowance before the first appellate authority, and a plea was taken before us by the learned counsel that the assessee did not earn any exempt income during the impugned assessment order, hence, no disallowance under section 14A is called for, we consider it appropriate to restore the issue to the file of the Assessing Officer for examining assessee’s claim and decide it in accordance with law after due opportunity of being heard to the assessee - Decided in favour of assessee for statistical purposes.
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