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2022 (6) TMI 559 - AT - Income TaxInterest expenses u/s 36(1)(iii) - Addition of interest component considering that there is no commercial expediency in lending to sister concerns - as per AO assessee has obtained loans at higher rate of interest and the same was provided to the sister concerns at lower rates - HELD THAT:- The main objects of the assessee’s business is real estate development and construction activities. The assessee has obtained these loans for the purpose of providing advances to the sister concerns, where the construction projects are in progress and the assessee is able to substantiate the commercial expediency as the main objects of the assessee is not to earn interest, but to engage in real estate and construction activities. Therefore the action of the CIT(A) that there is no commercial expediency is not tenable and is not supported with any findings except relying on the facts that the higher rate of interest has been paid on loans borrowed. AR explained the accounting concept on the weighted average rate of interest considering the variability of interest rate range from @8.75% to 16% though this approach cannot be incorporated in the audited financial statements but the reasonableness and explanations to provide the loans to sister concerns cannot be over looked and the group transfers between one sister concern to another sister concern as per requirement of funds. The Ld.AR submissions are realistic and duly supported by the material information and is appreciated. Accordingly, we do not find merits in the findings of the CIT(A) and we rely on the judicial decisions and commercial expediency explained by the Ld.AR that the assessee’s business activities as a going concern and the construction projects are in progress. Any delay in project construction activities due to financial crunch will increase the overheads of the projects. Accordingly, we set aside the order of CIT(A) on this disputed issue and direct the Assessing officer to delete the addition and allow the grounds of appeal of the assessee.
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