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2012 (5) TMI 160 - HC - Income TaxInterest free advances – Revenue contested that Tribunal held that funds available with the Assessee are much more than the amount invested in its subsidiary even though the sources of funds without considering secured loans are not sufficient for the application of funds - the Assessee does not have its own funds for making investment in the subsidiary or for advances and therefore borrowed funds have been utilized and interest on a pro rata basis has been rightly disallowed by the Assessing Officer – Held that:- The assessee has significant interest in the business of the subsidiary since both the assessee and the subsidiary are engaged in providing telecommunication services and utilizes even borrowed money for furthering its business connection, there is no reason or justification to make a dis allowance in respect of the deduction which is otherwise available under Section 36(1)(iii) - when the assessee advanced an amount to RIL for furthering the business of the assessee it in turn was to execute counter guarantees in favour of financial institutions for the benefit of the discharge of the EPCG obligations by the assessee – the findings of Tribunal are consistent with the judgment of the Supreme Court in S.A. Builders v. Commissioner of Income Tax (Appeals) (2006 -TMI - 2870 - SUPREME COURT OF INDIA)that if the business purpose is there while advancing money to the sister concern the dis allowance of interest cannot be sustained - against revenue.
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