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TMI Blog2019 (8) TMI 1057X X X X Extracts X X X X X X X X Extracts X X X X ..... notices u/s 143(2) and 142(1) of the Act were issued and the assessment u/s 143(3) was completed on 22.12.2006 and 19.12.2007 at the total income at Rs. 2,85,71,067/- and Rs. 6,06,67,270/- for respective Assessment Years. Certain additions were made in the assessment orders and the assessee preferred appeal before Hon'ble I.T.A.T., Indore and the Hon'ble Bench set aside the issue vide order dated 16.9.2011 and accordingly fresh notices u/s 143(2) and 142(1) were issued. Ld. A.O assessed the income at Rs. 2,85,71,067/- and Rs. 6,06,67,274/- for respective Assessment Years 2004-05 and 2005-06 respectively after making addition for notional interest income at Rs. 4,17,54,965/- and Rs. 4,62,24,821/-. Thereafter in compliance to the direction of the Tribunal given in the Miscellaneous Application No.121/Ind/2012 dated 16.4.2013 the additions made by the Ld. A.O were revised to Rs. 3,56,46,484/- and Rs. 2,54,33,672/-. Against this revised additions, assessee came in the appeal before the Ld. CIT(A) and the total addition was deleted by Ld. CIT(A) observing that the assessee has advanced the money and has received interest ranging from 6.50% to 14% and it is not the case that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oup concerns on lower rate and also did not appreciate the fact that the assessee failed to prove the commercial expediency in such transactions. We find that Ld. CIT(A) deleted the addition giving following finding; 4.1 Ground No.1 & 2:-Through these grounds of appeal the appellant has challenged the addition of Rs. 4,70,54,965/- on account of interest. The return of income declaring total loss of Rs. 1,87,41,0201- has been filed on 29-10-2004. The AO made the addition of RsA,70,54,965/- on account of interest while passing the original assessment order under section 143(3) on 22-12-2006. The appellant filed the appeal before the CIT(A), Ujjain. The CIT(A), Ujjain while deciding the appeal of the appellant vide appeal no.U- 736/2006-07, dated 29-04-2008 deleted the addition made by the AO. The revenue filed the appeal before the Hon 'ble IT AT, Indore against the order passed by the CIT(A), Ujjain. The Hon'ble Tribunal while deciding the appeal of the appellant vide ITA No.288/Ind./2008 dated, 16-09-2011 set aside the matter to the AO to pass the order as per the direction to decide the issue as per the law laid down by Hon'ble Supreme Court in the case of S.A. Bui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cture Leasing & Financial Services Ltd. The appellant has also raised the fund by issuing of debentures. The appellant has borrowed the money by issuance of debentures @ 10.50 for a period of 3 years. The appellant has borrowed the funds from ILFS @ 6 during the year under consideration. The interest rate paid to G.E. Capital Services India and Standard Chartered Bank is @ 10.50. Therefore, the AO is not justified in holding that the appellant has borrowed the fund at the interest rate of 10.50. The interest rate is fluctuating on day-to-day basis and the same is governed by MIBOR Rates i.e. Mumbai Inter Bank Offer Rate prevailing during the year. This is the rate at which the banks gives and tax loan to/from each other. The loans to borrowers are given at about little higher rates from the above rates of MIBOR. The MIBOR Rates during the year under consideration were ranging from 4.50 to 6. 4.1.3 The appellant had received the interest from the loans given varying rates from 7 to 16. The appellant had received interest @ 12 from M/s Birla Global Finance Ltd. for the period from 01-04- 2003 to 26-05-2003. The appellant had also received interest @ 7 from Birla TMT Holding Pvt. Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yet it is allowable as a business expenditure if it was incurred on grounds of commercial expediency. 26. No doubt, as held in Madhav Prasad Jatia vs. CIT (supra), if the borrowed amount was donated for some sentimental or personal reasons and not on the ground of commercial expediency, the interest thereon could not have been allowed under s. 36(1)(iii) of the Act. In Madhav Prasad's case (supra), the borrowed amount was donated to a college with a view to commemorate the memory of the assessee's deceased husband after whom the college was to be named. It was held by this Court that the interest on the borrowed fund in such a case could not be allowed, as it could not be said that it was for commercial expediency. 27. Thus, the ratio of Madhav Prasad Jatia's case (supra) is that the borrowed fund advanced to a third party should be for commercial expediency if it is sought to be allowed under s. 36(1)(iii) of the Act. 28. In the present case, neither the High Court nor the Tribunal nor other authorities have examined whether the amount advanced to the sisterconcern was by way of commercial expediency. 29. It has been repeatedly held by this Court that the expression "for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... need not necessarily be the business of the assessee itself), the Revenue cannot justifiably claim to put itself in the armchair of the businessman or in the position of the board of directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. No businessman can be compelled to maximize its profit. The IT authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. The authorities must not look at the matter from their own viewpoint but that of a prudent businessman. As already stated above, we have to see the transfer of the borrowed funds to a sisterconcern from the point of view of commercial expediency and not from the point of view whether the amount was advanced for earning profits. 35. 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 utilize the amount advanced to it by the assessee for their personal benefit, obviously it cannot be s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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