TMI Blog2013 (7) TMI 806X X X X Extracts X X X X X X X X Extracts X X X X ..... how much is reasonable expenditure having regard to the circumstances of the case - No businessman can be compelled to maximize its profit – court relied upon the judgement of CIT v. Dalmia Cement (B.) Ltd 2001 (9) TMI 48 - DELHI High Court) - the assessee borrowed the fund from the bank and lent some of it to its sister concern (a subsidiary) on interest-free loan - the test in such a case is really whether this was done as a measure of commercial expediency – appeal decided against revenue. - TAX APPEAL No. 829 of 2007 - - - Dated:- 5-12-2011 - MR. AKIL KURESHI AND MS SONIA GOKANI, JJ. For the Appellant: MR MR BHATT, SR. ADV. AND MRS MAUNA M BHATT The judgment of the court was delivered by Ms. Sonia Gokani J.-To briefly state, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellate Tribunal is right in law and on facts in confirming the order passed by the Commissioner of Income-tax (Appeals) deleting the disallowance of Rs. 18,66,000 made by the Assessing Officer on the ground that the assessee had given interest free loans to associate concerns out of interest bearing funds ?" Though notice has been served to the respondent, no one has contested the same. On hearing learned counsel, Mr. Manish Bhatt, and on closely examining the paper-book produced in this case, this appeal is decided. As can be noted from the order of the Tribunal, the Assessing Officer disallowed the interest solely on the ground that the assessee had given interest-free loans to the associate concerns, viz., R. R. Family Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... funds available with the assessee, interest was not disallowable merely on account of the utilization of the funds for non-business purposes. Thus, as can be seen the Tribunal actually relied on the findings given in case of Torrent Financiers (supra) and furthermore there was nothing contrary that could be brought on record by the Department for it to hold otherwise. Factually, it found huge funds were available without any interest liability with the assessee and that there was no evidence to hold that the borrowed money was utilized for the purpose of advance to the sister concerns. All these aspects cumulatively led the Tribunal to hold that the disallowance made only on the ground that advances were given out of the borrowed funds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our opinion, in such a case is really whether this was done as a measure of commercial expediency. The expression 'commercial expediency' is an expression of wide import and includes such expenditure as a prudent businessman incurs for the purpose of business. The expenditure may not have been incurred under any legal obligation, but yet it is allowable as a business expenditure if it was incurred on grounds of commercial expediency. We agree with the view taken by the Delhi High Court in CIT v. Dalmia Cement (B.) Ltd. [2002] 254 ITR 377 (Delhi), that once it is established that there was nexus between the expenditure and the purpose of the business (which need not necessarily be the business of the assessee itself), the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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