TMI Blog2018 (10) TMI 440X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot look at the matter from its own standpoint, but that of a businessman. Money borrowed, even when advanced to a sister concern for some business purpose, would qualify for deduction of interest. However, if the money borrowed is utilized by the assessee for personal benefit and not for business purpose, interest paid on that amount would not satisfy the test of commercial expediency. There is another glaring error by the Assessing Officer. Instead of disallowing interest paid on the borrowed fund, the Assessing Officer made an addition of ₹ 1,50,04,133/- by notionally computing interest @18% p.a. on ₹ 8,33,56,295/- i.e. the interest free advances given by the respondentassessee to the sister concerns. This is clearly im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner of Income Tax, (2007) 1 SCC 781. 3. The Assessment Order on remand observes that the respondentassessee had been asked to adduce material to prove that the interest free advances to sister concerns were out of its own funds and not out of borrowed capital from the bank on which there was interest liability. This was necessary to examine the question of commercial expediency . The respondent-assessee having expressed their disability to correlate each and every entry of the advances to the sister concerns with availability of its own funds, there was failure to justify and explain commercial expediency in giving interest free advances of ₹ 8,33,56,295/- to the sister concerns. Accordingly, the ratio in S.A. Builders (Supra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purpose of business. Therefore, once it is established that there was a nexus between expenditure and purpose of business, which need not be the business of the assessee, deduction under Section 36(1)(iii) of the Act must be allowed. 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 that of a businessman. Money borrowed, even when advanced to a sister concern for some business purpose, would qualify for deduction of interest. However, if the money borrowed is utilized by the assessee for personal benefit and not for business purpose, interest paid on that amount would not satisfy the test of commercial expedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le evidence to show that sufficient funds were available to give interest free loans. Accordingly, addition of ₹ 1,50,04,133/- was directed to be deleted. The aforesaid factual reasoning negates and nullifies the factual reasoning given by the Assessing Officer. 7. Agreeing with the said factual finding and not finding any justification to upset the facts as found by the first appellate authority, the Tribunal has dismissed the appeal filed by the Revenue. 8. Decision of the Supreme court in S.A. Builders(supra) has been followed in Hero Cycles Private Limited versus Commissioner of Income Tax (2015) 16 SCC 359 and Munjal Sales Corporation versus Commissioner of Income Tax and Another (2008) 3 SCC 185. The reasons and groun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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