TMI Blog2018 (10) TMI 439X X X X Extracts X X X X X X X X Extracts X X X X ..... has to be allowed as a deduction. Purpose of business need not be the business of the assessee, for deduction under Section 36(1)(iii) of the Act to be allowed. Further, Revenue cannot assume the role and occupy armchair of a businessman to decide whether expenditure was reasonable. The Revenue cannot look at the matter from its own standpoint, but opinion and decision of a businessman on “business expediency” matters. Money borrowed even when advanced to a subsidiary for some business purpose would qualify for deduction of interest. In the context of the present case the unsecured loans were not used for personal purpose. Merely because non-interest-bearing advances were given to third parties, would not justify a finding that the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer providing details of 50 top parties to whom advances had been made/extended. It was stated that the advances were made on account of purely commercial reasons and business exigencies and were recoverable from such parties. 4. The Dispute Resolution Panel had affirmed the addition as proposed in the draft assessment order observing that the Assessing Officer was empowered by law to examine if such expenses meet the test/rigours of business connection and expediency . Further, the respondent-assessee had failed to furnish necessary details on the proposed disallowance, though with regard to other proposed additions details had been furnished by the respondent-assessee. 5. However, the Tribunal has deleted this addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in proportion to the amount of interest bearing unsecured loans obtained amounting to ₹ 502.69 crore and interest free advances given amounting to ₹ 172.59 crore. The fact that the assessee did pay interest on such unsecured loans has not been disputed. In view of the fact that the assessee paid interest on unsecured loans and did not earn any interest on advances given, we cannot disallow proportionate interest genuinely paid on unsecured loans taken for business purpose. Section 36(1)(iii) simply provides that deduction is allowable for the amount of interest paid in respect of capital borrowed for the purpose of business. As the assessee paid interest on capital borrowed for the business purpose and it is not the case of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s by the said expenditure. The expression commercial expediency is again of wide import and is satisfied once it is established that there was a connection and nexus between the interest paid claimed as expenditure and the business of the assessee. Purpose of business need not be the business of the assessee, for deduction under Section 36(1)(iii) of the Act to be allowed. Further, Revenue cannot assume the role and occupy armchair of a businessman to decide whether expenditure was reasonable. The Revenue cannot look at the matter from its own standpoint, but opinion and decision of a businessman on business expediency matters. Money borrowed even when advanced to a subsidiary for some business purpose would qualify for deduction of int ..... X X X X Extracts X X X X X X X X Extracts X X X X
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