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2021 (9) TMI 1162 - AT - Income TaxAllowability of financial charges including interest expenditure - interest free loans granted to subsidiary companies - AO has disallowed interest expenditure claimed by the assessee u/s.37(1) stating that the loan funds are utilized for the purpose of investment in equity shares, Interest free loans and advances and not for the purpose of assessee's business - HELD THAT:- We observe from the financial statements of the assessee that it has given loans and advances and invested in shares of the related parties and to others from its own funds as well as from the borrowed funds. From the entire arguments of assessee, we find that it was unable to quantify the amount of borrowed funds which have been utilized for other than the business purposes of the assessee. AR could not controvert the submissions/observations of the ld. DR in regard to both the issues i.e. commercial expediency and to meet the particular financial requirements of SPVs. Further, he was also unable to controvert the regarding revenue receipts, which are extraordinary receipts compared to the expenditure incurred by the assessee. Assessee has given interest free loans/advances from interest bearing account which was not a debit balance i.e. loan funds have been utilized for advancing to its subsidiary, fellow subsidiary ultimate holding co. and to others. Assessee was unable to establish the use of the funds for business purposes as per the decision relied on by the ld. AR of the assessee. He also unable to establish the commercial expediency as observed supra, in all the years the assessee has not received any dividend or interest income and has not produced any agreements between / amongst the companies to whom the loans and advances were made and what was the purpose for giving loans and advances. The assessee failed to produce documentary evidences, the end use of funds invested in subsidiary, fellow subsidiary, ultimate holding company and to others. We also do not find any weightage on the submission of the ld. AR of the assessee that assessee had sufficient own funds for giving loans and advances and invested in shares and further, could not produce the availability of own funds on the date investments in shares and giving loans and advances on the particular date of investments. Thus the disallowance of interest made by the AO is justified and accordingly, we set aside the order of the CIT(A) and restore the order of AO in all the appeals under consideration. Thus, the grounds raised by the revenue in all the appeals, on this issue are allowed.
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