TMI Blog2017 (12) TMI 861X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee's issue under consideration is not covered by the provisions of section 40A (2) (a) of the Act. Therefore, based on the above discussions, we are of the view that assessee has a interest in its joint venture, and hence if the assessee advances money to a joint venture and the same is used by the joint venture for some business purposes, the assessee would, in our opinion, ordinarily be entitled to deduction of interest on its loans and advances under section 37 (1)/36(1) (iii). -Decided in favour of assessee. - ITA No. 412/Kol/2015 - - - Dated:- 15-12-2017 - SHRI A. T VARKEY, JM And DR. A.L.SAINI, AM Assessee by : Shri Subash Agarwal, Advocate Respondent by : Shri Sallong Yaden, Addl. CIT ORDER Per Dr. Arjun La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 2.43 crore to M/s. Pir Panchal Construction (P) Ltd. - Joint Venture. The notice u/s.133(6) was issued to both the parties and on perusal of the replies received, it was noticed by the AO that out of ₹ 2.43 crore loan given to M/s Pir Panchal, an amount of ₹ 1.90 crore was remained an interest free loan. Further, the assessee company itself has taken unsecured loan from M/s. Marda Commercial and Holding Limited. Therefore, the AO noted that the said advances were given without any commercial expediency. Had the said amount been paid to the parties from whom secured and unsecured loan was taken, the profit of the assessee company could have been higher. The assessee explained to AO that the said amount was invested in the join ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Joint Venture claiming the same to be capital contribution in the Joint Venture. However the same has been shown as advance and not Share Application or Share Capital in the Joint Venture Company. Therefore it is clear that while on one hand the Assessee is paying interest to a sister concern, it has also providing interest free advance to another concern in which it is interested, i.e. Pir Panchal Construction (P) Ltd. The Assessee's contention and the case laws cited by it were in respect of claim of interest u/s.36 (1)(iii) of the Act, however here the issue is in respect of interest payment covered uls.40A(2)(a) which is the specific provision. Therefore, ld CIT(A) did not accept the submissions of the Assessee and held that the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the said loan was out of interest bearing funds. The loans were given to the Joint Venture by the assessee is out of its Own Funds and, therefore, assessee is entitled to claim deduction under Section 36(1)(iii) of the Act.We also note that the issue under consideration is identical to the facts which were considered by the Hon`ble Supreme Court Of India, in the case of S.A. BUILDERS LTD. 288 ITR 01, wherein it was held that the assessee borrowed the fund from the bank and lent some of it to its sister-concern (a subsidiary) on interest- free loan. The test in such a case is really whether this was done as a measure of commercial expediency. The decisions relating to s. 37 will also be applicable to s. 36(1)(iii) because in s. 37 also ..... X X X X Extracts X X X X X X X X Extracts X X X X
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