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2016 (6) TMI 1346 - AT - Income TaxDisallowance of interest on borrowed funds - scrutiny assessment - direct nexus between the borrowed funds and the investment in the sister concerns - amount advanced to sister concerns was more than the amount borrowed, the entire interest was disallowed holding that the entire interest payment was attributable to the funds diverted to the sister concerns - Held that:- Even if we take for a while, that return benefit is not an essential requirement and it is sufficient if the holding company (assessee) has a deep interest in its subsidiary, the assessee should able to prove that the assessee’s subsidiary sister companies are sick or not having regular funds and are in dire need of help from the appellant company. They being the group concerns, they could have independently approached the banks for funds on the basis of the financial strength of the assessee company. The same package of loans could have very well been obtained from the banks and individuals by the sister concerns, instead of routing through the assessee company and dumping the interest burden on it. Though, the revenue cannot dictate how the business houses should behave, but onus is on them to explain the circumstances, more so when the assessee wants to claim the expenditure attached to it. Therefore we hold that the assessee has failed to establish any commercial expediency for advancing interest-free loans to sister concerns. Under the above facts and circumstances, the disallowance made by the Assessing Officer was rightly confirmed by the CIT(A) and thus, we uphold the order of the ld. CIT(A) and dismiss the ground raised by the assessee.- Decided against assessee.
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