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2023 (8) TMI 956 - AT - Income TaxDisallowance of Interest Expenses related to Interest free Advance/loan given to its subsidiary company - HELD THAT:- We note that only parent company can help the wholly owned subsidiary company. The profit and loss of the wholly owned subsidiary company is the profit and loss of the parent company. We note that loan at a concessional rate of interest were given to sister concern for commercial expediency. The loan advanced to subsidiary company is financed from Interest Free Funds accumulated by the company, as noted above. Such loan was advanced out of commercial expediency to expand the business of the subsidiary company. For that reliance can be place on the decision of SA builder Ltd. [2006 (12) TMI 82 - SUPREME COURT] Who can help the wholly owned subsidiary in needy hours? This is the parent company, who can help the wholly owned subsidiary in needy hours to save the business. Based on these facts, we note that addition made by the assessing officer needs to be deleted. We note that the entire loan to subsidiary, is brought forward from preceding years and is financed from Interest Free Funds after considering Application of Funds for Fixed Assets and Working Capital. Thus, no part of Loan to subsidiary is attributable to Interest Free loans which were taken for specific purposes. The Assessee Company had advanced loan to its wholly owned subsidiary Company, M/s Synergy Films Pvt Ltd, as a 100% stake Holder Company is required to provide quasi capital and margin for working capital as mandated by the Banker of the subsidiary Company who has sanctioned the bank facilities with the stipulation that Company to maintain the level of Unsecured loans from Holding Company at the projected level and same is sub- ordinated to the bank dues till the currency of the facilities. Appeal of assessee allowed.
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