TMI Blog2014 (10) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... of Raheja Group Concern - The explanation was not accepted by the assessing authority as well as the Appellate Commissioner - it is not their opinion that in every case interest on borrowed loan has to be allowed if a assessee advances it to a sister concern - the assessee received payment from its clients and it deposited the same in the account and subsequently, the said amount were paid to the sister concern - No interest was charged for the amounts so advanced to the sister concern - the assessee borrowed the fund from the bank and lent it to the sister concern as interest free loan. The test in such a case is really whether this was done as a measure of commercial expediency - If the interest free loan was given to the sister compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o interest has been collected. In order to ascertain, whether the assessee has made expenditure by paying interest, related details were called for. The assessee furnished general ledger extracts and monthly summary account of M/s.K Raheja Hotels and Estates Private Limited. An analysis of the said accounts reveals that on the amount received from M/s.Ivory Properties Pvt. Ltd., the assessee has paid interest at 18% p.a. and charged to profit and loss account. On the amount given as loan to M/s.K Raheja Hotels and Estates Private Limited, the assessee has not charged and collected any interest. The assessing authority was of the view that the assessee has diverted the borrowed funds in which interest is incurred to non-business purposes, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as correct in holding that due to an award passed in Arbitration Proceedings between M/s.K. Raheja Development Corporation and M/s.Unique Estates Development Corporation and M/s.Sea-Crust Properties Pvt. Ltd. where the Assessee was not a party, interest was paid due to compelling reasons and therefore allowable deduction? 4. We have head the learned Counsel for the Revenue. 5. The material on record shows that the assessee was engaged in the business of real estate development and a dealer. M/s.K Raheja Hotels Estates Pvt. Ltd. were also on similar line of business. The assessee firm wanted certain collaboration with the said company for its own business interests. The assessee borrowed a sum of ₹ 9,45,26,000/- from M/s.Ivory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived payment from its clients and it deposited the same in the account and subsequently, the said amount were paid to the sister concern. No interest was charged for the amounts so advanced to the sister concern. In that context, it was held that the assessee borrowed the fund from the bank and lent it to the sister concern as interest free loan. The test in such a case is really whether this was done as a measure of commercial expediency. If the interest free loan was given to the sister company as a commercial expediency, then such interest paid on such capital could have to be allowed. As the Authorities as well as the High Court has not considered from the said angle, the Apex Court remanded the matter back to the Tribunal to consider ..... X X X X Extracts X X X X X X X X Extracts X X X X
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