TMI Blog2017 (5) TMI 302X X X X Extracts X X X X X X X X Extracts X X X X ..... orts to show any nexus between the borrowing and the subsequent advancing of loans to the subsidiary company, then, the disallowance made by the Assessing Officer had to be deleted. We do not think that the Tribunal's exercise of maintaining the order of the Commissioner of Income Tax (Appeals) raises any substantial question of law. More so, when it was ascertained that no interest bearing funds were released for advancing the sums to the subsidiary company or its related company on account of share application money.The assessee had sufficient reserves. - Decided against revenue - INCOME TAX APPEAL NO. 1222 OF 2014 - - - Dated:- 21-4-2017 - S.C. DHARMADHIKARI SMT. SADHANA S. JADHAV, JJ. Mr. Arvind Pinto for the Appellant. M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest paid should not be disallowed as non-business purpose. Meaning thereby, the advances were not given for business purposes. At the same time, the Revenue does not dispute that the assessee's explanation for a sum of ₹ 1,87,50,000/was accepted. The loans amounting to ₹ 2,64,32,769/to Dalmia Fresenius Ltd., Luster Print Media Ltd. and DALF others were considered as interest free loans given for purposes other than business. In other words, the explanation in regard to ₹ 1,87,50,000/was accepted and as far as the balance was concerned, that was not an acceptable explanation. The disallowance was worked out at 20% of the amount of ₹ 2,64,32,769/, amounting to ₹ 52,86,553/. This was challenged by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en to its group concern to the extent of ₹ 2,64,32,769/in the earlier year from its reserves and not from interest bearing loan. Similar disallowances were made in the later year and were deleted by the First Appellate Authority following the decision of the Hon'ble Supreme Court of India in the case of S.A. Builders Ltd. Vs. Commissioner of IncomeTax (Appeals) and another, reported in (2007) 288 ITR 1 (SC). It was pointed out that none of the share application monies are disbursed during the year under consideration and were advanced in the earlier years. How surplus of general reserve was utilised in advancing the monies has then been set out. It is in these circumstances that the Judgment of the Hon'ble Supreme Court wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the arguments of both sides arrived at the conclusion that Section 36(1)(iii) of the Income Tax Act, 1961 states that the amount of interest paid in respect of capital borrowed for the purposes of the business or profession has to be allowed as a deduction in computing the income under Section 28 of the Income Tax Act. The Hon'ble Supreme Court then referred to its earlier Judgment and concluded that the assessee borrowed the fund from the Bank and lent some of it to its sister concern (a subsidiary) as interest free loan. The Hon'ble Supreme Court observed that the test is, whether this was done as a measure of commercial expediency. It is in this context that the Hon'ble Supreme Court referred to both Sections 37 and 36 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y efforts to show any nexus between the borrowing and the subsequent advancing of loans to the subsidiary company, then, the disallowance made by the Assessing Officer had to be deleted. We do not think that the Tribunal's exercise of maintaining the order of the Commissioner of Income Tax (Appeals) raises any substantial question of law. More so, when it was ascertained that no interest bearing funds were released for advancing the sums to the subsidiary company or its related company on account of share application money. The assessee had sufficient reserves. 10. As a result of the above discussion, we do not find any reason to entertain this appeal. It is dismissed. There will be no order as to costs. - - TaxTMI - TMITax - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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