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2020 (11) TMI 764 - AT - Income TaxDisallowance u/s 36(1)(iii) - claim interest expenditure disallowed as investment made in subsidiary companies - sister concerns have invested in capital assets and mutual funds and not utilized the same in commercial activities - HELD THAT:- The assessee company is holding substantial shareholding and also considering the set up of the group companies, we can see that Global Holding company controls the whole group concerns which includes assessee company. The assessee company also under control of Global Holding. Assessee companies invest in other group companies in which holding company controls the majors shares as well as controls composition of directors. The companies GIL and CNIL are subsidiary companies, which clearly indicates that the investment made by the assessee company in other sister concerns rather we can say subsidiary companies are meant to be for commercial expediency and commercial necessity. Therefore, in our considered view the investment made by the assessee in these companies are for commercial expediency and we also note that apart from it is holding substantial shares and we also notice that substantial portion of their commercial activities are sourced through the subsidiary companies. These investments made by the assessee will fall within the term business expediency /commercial expediency expressed by the Hon’ble Apex Court in its landmark judgement of S. A. Builders [2006 (12) TMI 82 - SUPREME COURT]. Therefore, the investment made by the assessee are for its commercial purposes hence the interest expenditure borne by the assessee for the investment made by the assessee on its subsidiary company are allowable expenditure under section 37(1) of the Act. Therefore, we are inclined to allow the grounds raised by the Assessee. Accordingly, grounds raised by the assessee are allowed.
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