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2022 (4) TMI 338 - AT - Income TaxDisallowance of interest u/s 36(1)(iii) - proof of sufficient cash generation to advance loans - CIT(A) deleted the impugned additions - DR advanced arguments to submit that the test of commercial expediency was not satisfied by the assessee - HELD THAT:- A part of the loans and equity investments have been made in M/s TVS Infotech Ltd. which facilitated IT operations for the assessee. The earlier loans as granted to M/s SFZL were utilized to expand overseas market. It is also an undisputed fact that all these entities generated dividend and the assessee was benefitted by way of dividend, capital appreciation and ease of operations. The test of commercial expediency, in our opinion, was duly satisfied by the assessee. It could be said that the investments were made in furtherance of business interest and the ratio of decision of Hon’ble Supreme Court in the case of CIT V/s S.A. Builders [2006 (12) TMI 82 - SUPREME COURT] would favor the case of the assessee. In this decision, it was held that once nexus was established between the expenditure and the purpose of the business, which need not necessarily be the business of the assessee itself, revenue could not disallow the claim assuming what was reasonable. Assessee is successful in establishing that there was sufficient cash generation to make the aforesaid investments. In fact, overall interest free loans have reduced from ₹ 3605.38 Lacs to ₹ 3337.22 Lacs during the year. As against this, there was sufficient cash generation to source this investment. Therefore, as per the ratio of Hon’ble Supreme Court in the case of CIT V/s Reliance Industries Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT] it could be presumed that the investments were made from interest free funds available with the assessee. the assessee has sufficient cash generation to advance loans. In the present case, the loans have been advanced in furtherance of assessee’s business interest and the assessee has sufficient cash generation to fund those advances. These facts have already been noted by us in the preceding paragraphs. - Decided against revenue.
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