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TMI Blog2018 (10) TMI 505X X X X Extracts X X X X X X X X Extracts X X X X ..... was made to the opening balance of the paid up share capital of the respondent-assessee, enhancing the same to Rs. 1259,68,00,000/-. The respondent-assessee had invested Rs. 1165,23,06,015/- in shares of group companies. The respondent-assessee had also taken unsecured loans of Rs. 223,10,02,165/- on which interest of Rs. 12,83,76,153/- was paid and claimed as a deduction under Section 36(1)(iii) of the Income Tax Act, 1961 (the Act, for short). The respondent-assessee had also given unsecured loans of Rs. 205,20,21,046/- to subsidiary companies. The respondent-assessee had received Rs. 12,83,76,153/- as interest on unsecured loans given to the subsidiary companies and others, which was shown as income. 3. The Assessing Officer in the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,604/- and they had made investment of Rs. 257,56,99,484/- by way of current asset, advances and loans including unsecured loans to subsidiaries of Rs. 205,20,21,046/-. 5. Agreeing with the respondent-assessee, the Commissioner of Income Tax (Appeals) vide order dated 7th January, 2015 held that the Assessing Officer had not taken into account crucial evidence in the form the loans extended by the respondent-assessee to subsidiary companies and the interest received/earned on the said loans. The Commissioner of Income Tax (Appeals) had reproduced the following table:- " S.No. Name of the Subsidiary Companies Balance as on 31.03.2010 Gross Interest 1 Bedelia Builders & construction Pvt. Ltd. 37,948,027 2,452,596 2 DLF ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng investments cannot be disallowed under Section 36(1)(iii) of the Act. 7. Apart from the incongruities in the reasoning and calculations made by the Assessing Officer referred to in the order of the Commissioner of Income Tax (Appeals), which have been accepted by the Tribunal, the issue raised is covered against the Revenue by the decision of the Supreme Court in S.A. Builders Limited versus Commissioner of Income Tax and Another, (2007) 288 ITR 1 (SC) and in Munjal Sales Corporation versus Commissioner of Income Tax, (2008) 298 ITR 298 (SC). The Supreme Court in S.A. Builders Limited (supra) held as follows:- "24. In our opinion, the decisions relating to Section 37 of the Act will also be applicable to Section 36(1)(iii) because in S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expression "commercial expediency" is an expression of wide import and includes such expenditure as a prudent businessman incurs for the purpose of business. The expenditure may not have been incurred under any legal obligation, but yet it is allowable as a business expenditure if it was incurred on grounds of commercial expediency. XXX 37. We wish to make it clear that it is not our opinion that in every case interest on borrowed loan has to be allowed if the assessee advances it to a sister concern. It all depends on the facts and circumstances of the respective case. For instance, if the Directors of the sister concern utilise the amount advanced to it by the assessee for their personal benefit, obviously it cannot be said that such m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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