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2024 (2) TMI 893 - HC - Income TaxDisallowance of the interest expenses claimed u/s 36(1)(iii) - interest bearing funds were given to subsidiary company as interest free deposits in guise of share application money - ITAT confirmed CIT(A) order deleting the addition - HELD THAT:- CIT(A) and the ITAT arrived at finding of fact that the amount advanced to subsidiaries was for the business purposes as the same are linked with the business of the subsidiary in which assessee had deep interest - valuation of Telecom business at the relevant time was very high and hence, it was a commercially expedient decision to invest in that business. Both the CIT(A) and the ITAT accepted assessee’s view point that if the subsidiary company expands and progresses, assessee will be benefited by the same as the valuation and net-worth of assessee will also increase. Moreover, the transaction was approved and authorised by the Board of Directors in the normal course of business activities and hence, any interest paid on funds utilized for the purpose of such business activity is allowable expenditure under Section 36(1)(iii) - On facts also, it was concluded that assessee had an aggregate share holding of 64% in the subsidiary and, therefore, it cannot be contended that share application money made is not for business purpose. Since both the CIT(A) as well as the ITAT had come to a factual finding and the law is also clear that if an assessee for commercial expediency and in the normal course of its business activities takes loan to invest in shares of its subsidiary, the interest paid on these advances utilized is allowable expenditure under Section 36(1)(iii) of the Act - no substantial question of law arises. Appeal dismissed.
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