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2016 (5) TMI 102 - AT - Income TaxDisallowance of expenditure - existence of business expediency - taking over of the loan or discharge of the loan of RIL due to ICICI Bank - capital loss - Held that:- The loan from ICICI Bank Ltd. to RIL has been advanced as a term loan for working capital requirements of RIL and the same has been discharged by the assessee in view of the debt restructuring scheme. The debt restructuring scheme is pursuant to transfer of the cement business from RIL to the assessee herein. Thus, the business expediency of the transaction is established. Further, as regards the learned Commissioner of Income-tax (Appeals)'s finding that the loan is in the capital field and, therefore, the resultant loss is capital loss and is not allowable under section 37(1) of the Income-tax Act, we find that the sum of ₹ 12 crores is not towards payment of interest but it is for the repayment of the principal as well as the interest as on the date of repayment of the loan. The sum of ₹ 12 crores has been offered by RIL as "the liability no longer required and written back" but in the hands of the assessee, it is an expenditure to safeguard its interests or its investment in the subsidiary company. Therefore, it is for the business purpose of the assessee and, hence, revenue in nature and cannot be treated as a capital loss - Decided in favour of assessee Interest-free advance to its subsidiary company in the U.S.A - Held that:- The transaction of capital financing including any type of long- term or short-term borrowing, etc., has become an international transaction with retrospective effect by virtue of clause (i)(c) of the Explanation to section 92B with effect from April 1, 2002, as inserted by the Finance Act of 2012. Therefore, during the relevant period, i.e., financial year 2006-07, when the said transaction was not an international transaction, no such imputation can be made. As far as the nexus between the interest-free loan and the interest-free advance is concerned, we are satisfied that the nexus has been established by the assessee and when there is no interest burden on the assessee by virtue of the loan advanced to its subsidiary, we are of the opinion that no such interest income can be attributed in the hands of the assessee - - Decided in favour of assessee
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