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TMI Blog2017 (5) TMI 900X X X X Extracts X X X X X X X X Extracts X X X X ..... d from Profit & Loss Account that assessee had claimed expenses of Rs. 4,67,832/- on account of payment of interest on borrowed funds, as per following details :- Unsecured loans Rs.41,89,706/- Unsecured loans Rs.83,95,459/- Total interest bearing funds Rs.1,25,85,165/- 3. The Assessing Officer noticed that the assessee had advanced a sum of Rs. 1,00,88,796/- to the firm M/s Martin and Brown Bioscience, Baddi, wherein he was one of the partners. He noted that the assessee had not received/charged any interest on the amount of advance to the firm. He also examined the account of debtor and noticed that assessee was having a running account with this concern, wherein, numerous transactions of advancing loans had been carried ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee had advanced certain funds to sister concerns or any other persons without any interest, there would be very heavy onus on the assessee to be discharged before the Assessing Officer to the effect that inspite of pending term loans and working capital loans, on which the assessee is incurring liability to pay tax, there was justification to advance loans to sister concerns for non-business purposes without any interest and, accordingly, the assessee should be allowed deduction of interest being paid on the loans raised by it to that extent. After taking into consideration, securities received from others totaling to Rs. 53,14,501/-, the Assessing Officer disallowed the proportionate interest amounting to Rs. 2,63,317/-. Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court has held that the law laid down by it (SC) is binding on all, notwithstanding the fact that it is against the State or a private party; it is binding even on those who were not parties before the court. Also as per Article 141 of the Constitution of India the law declared by the Supreme Court shall be binding on all courts within the territory of India. Moreover, cases decided by the Jurisdictional High Courts are also binding within the State." 5. Ld. counsel submitted that assessee had invested the amount as capital to earn profit. He pointed out that but for the section 80-I of the Act, the profit would have been taxable in the hands of the assessee and, therefore, the decision in the case of Abhishek Industries (supra) is not ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant for the purposes of its business and no loans to that extent were required to be raised and interest there on is therefore not allowable. 5.3 It is to be examined, in view of the decision of the honorable Supreme Court as to whether there was reasonable nexus or business exigency for advancing interest free funds out of interest bearing funds. It has been held by the Supreme Court in the case of Hero Cycles pvt. Ltd. V. CIT(2015) 63 taxmann.com 308 (SC), quoting from the case of SA Builders 288 ITR 1, that "the expression 'commercial expediency' is an expression of wide import and includes as much expenditure as a prudent businessman incurs for the purpose of business. The expenditure may not have been incurred under any lega ..... X X X X Extracts X X X X X X X X Extracts X X X X
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