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2023 (2) TMI 860 - AT - Income TaxAddition under the head ‘Interest Free Loans and advances given to subsidiaries’ u/s 36(1 )(iii) - Proof of commercial expediency in giving interest free funds to its subsidiary - HELD THAT:- As observed that the assessee was issued notice u/s 142(1) to explain commercial expediency in giving interest free funds to its subsidiary but the AO failed to take cognizance of the nature of work and fund flow of the company of assessee as being in business of being agent of international and domestic airlines so it had fast movement of funds, due to recovery of commission. The finding of the AO that assessee company did not have enough funds to lend to the subsidiaries as bulk of its borrowed funds were invested in fixed assets, investments and debtors, so lending of funds to subsidiaries out of surplus fund, is not sustainable and is a finding not backed by any valid reasons. As a matter of fact, these loans to body corporate and two subsidiaries were not new but were part of previous assessments. The commercial expediency, factor has to be examined at the initial stage when money is lend and there cannot be year to year basis explanation of commercial expediency of giving interest free funds, to its subsidiaries, by assessee. The fact that the revenue appeals stand dismissed in regard to the assessment years 2010-11 to 2012-13 by this Tribunal further, bolsters the findings of this Bench that the question of commercial expediency of the interest free loans attaining finality for previous assessment years, then for the present assessment year of 2014-15, the question of commercial expediency require no further adjudication. The order of FAA and of the AO are liable to be set aside. The appeal of assessee is allowed. AO is directed to delete the addition under the head ‘Interest Free Loans and advances given to subsidiaries’ u/s 36(1 )(iii). - Decided against revenue.
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