TMI Blog2016 (11) TMI 964X X X X Extracts X X X X X X X X Extracts X X X X ..... ut of the interest free advances, the Assessing Officer is perfectly justified in disallowing interest in proportion to the advances made. Subsequently, in the judgment in S. A. Builders Ltd. v. CIT (Appeals) [2006 (12) TMI 82 - SUPREME COURT ] held that when a claim for deduction under section 36(1)(iii) is made, the authorities should enquire as to whether the interest-free loan was given as a measure of commercial expediency and on facts if it is so found, deduction is liable to be allowed. The court also explained that the expression "commercial expediency" is an expression of wide import and includes such expenditure that a prudent businessman incurs for the purpose of business and that such expenditure may not have been incurred u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ders were passed, allowing the appeals. The Revenue carried the matter in appeals before the Tribunal and by the impugned annexure C orders, the Tribunal dismissed the appeals. It is in this context, these appeals are filed and the main question of law raised is whether the Tribunal was right in allowing the deduction under section 36(1)(iii) of the Income-tax Act. 2. We heard the senior counsel for the Revenue and the learned counsel appearing for the assessee. 3. Learned counsel appearing for the assessee questioned the maintainability of these appeals placing reliance on Circular No. 21 of 2015, dated December 10, 2015 [2015] 379 ITR (St.) 107 issued by the Central Board of Direct Taxes. According to the learned counsel, since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to in section 28 the deductions provided for in the various clauses of the said section shall be allowed. One of the matters dealt with in clause (iii) is the amount of interest paid in respect of capital borrowed for the purposes of the business or profession. This section came up for consideration before this court, various other courts and the apex court. 5. In the judgment in CIT v. V. I. Baby and Co. [2002] 254 ITR 248 (Ker) a Division Bench of this court considered this provision and held that in a case where interest-free advance was given by the assessee and deduction is claimed, the question to be considered is what is the benefit that is derived by the assessee by giving such interest-free advance. It was also held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efit from the advances made or whether such advances were made on commercial expediency, the claim was disallowed merely referring to some judgments including the judgment in CIT v. V. I. Baby and Co. [2002] 254 ITR 248 (Ker) and CIT v. Abhishek Industries Ltd. [2006] 286 ITR 1 (P H). In so far as the order that was passed by the Commissioner of Income-tax (Appeals) is concerned in that order also, by merely making reference to the records produced by the assessee, the Commissioner has made certain factual assumptions without any basis and it is on such erroneous assumption that the Commissioner has set aside the order passed by the Assessing Officer. It is also seen from paragraphs 2 and 3 of the order that the Commissioner has faulted the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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