TMI Blog2011 (9) TMI 1095X X X X Extracts X X X X X X X X Extracts X X X X ..... ontroverted by the revenue. In any case, as held by Hon’ble Supreme Court in the case of S.A. Builders (2006 (12) TMI 82 - SUPREME COURT) the expression ‘commercial expediency’ is of wide import and even advances for the purpose of business of the sister concern are required to be treated as for business purposes. The Assessing officer was thus clearly in error in resorting to the disallowance on the short ground that while the assessee has borrowed the money on interest, it has given an interest free advance to the sister concern. That approach certainly constitute a very superficial view of the matter, and the CIT(A) was justified in reversing the disallowance so made by the Assessing Officer. We approve the conclusions arrived at by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17,59,189 being the interest added by the AO on interest free advances made to group concern without appreciating that the assessee company had not entered into business transaction with its sister concerns and nature of business expediency was not proved beyond doubt before the AO. 3. Briefly stated, relevant material facts are like this. The assessee is engaged in the business as manufacturer and dealer in precious and semi precious stones and diamonds. During the course of assessment proceedings, the Assessing Officer noticed that while the assessee has paid interest of ₹ 45,15,680 on bank loans, the assessee has also advanced interest free amount of ₹ 4,91,500 to a sister concern by the name of M/s. Diadem Investments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arified the legal position as under: In order to decide whether interest on funds borrowed by the assessee to give an interest free loan to a sister concern, should be allowed as a deduction u/s. 36(1)(iii) of the I.T.Act, 1961, one has to enquire whether the loan was given by the assessee as a measure of commercial expediency. The expression commercial expediency is one 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 business expenditure if it was incurred on grounds of commercial expediency. Decisions relating to section 37 will also be applicable to section 36(1)(iii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stitute a very superficial view of the matter, and the CIT(A) was justified in reversing the disallowance so made by the Assessing Officer. We approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter. 6. Ground No.1 is thus dismissed. 7. In Ground No.2, the Assessing Officer has raised the following grievance: 2. On the facts and in the circumstances of the case and in law, the ld CIT(A) erred in deleting amount of ₹ 1,05,78,350 being the profit on sale of shares and assets added by the AO to the book profit u/s.115JB without appreciating that the decision on the Jurisdictional High Court in the case of Veekaylal Investment Co. Pvt.Ltd is applicable in the present case. 8. Learned r ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
