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TMI Blog2021 (5) TMI 632X X X X Extracts X X X X X X X X Extracts X X X X ..... e made is not based on the facts of the case and needs to be deleted. 4. That, the appellant, carves leave to add alter and/or delete any of the grounds of appeal. Assessment Year 2014-15 1. That the Learned Commissioner of Income Tax (Appeals) erred in confirming disallowance made by the Assessing Officer at Rs. 1120776/- on account of interest expense. 2.That the Learned Commissioner of Income Tax (Appeals) failed to appreciate the submission made by the appellant. 3. That the disallowance made is not based on the facts of the case and needs to be deleted. 4. That, the appellant, carves leave to add alter and/or delete any of the grounds of appeal. 3. As accepted by both the parties since the facts involved and issues raised in these appeals are common and pertaining to same assessee these appeals were heard together and are being disposed off by this common order for the sake of convenience and brevity. 4. On perusal of the grounds we find that the common grievance is against the finding of Ld. CIT(A) confirming the disallowance of interests expenses made by the Ld. A.O alleging that the assessee has charged interest at lower rate but paying interest on higher rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... @ 12% from M/s Padma Homes Pvt. Ltd. That the AO calculated the disallowance considering the rate of interest paid to bank @ 16% intend of 12% in most of the cases. That as stated above the assessee was carrying on the business of money lending for the past may years. Too substantiate the above claim a copy of the assessment order for assessment year 2006-07 is enclosed for ready perusal. That the complete chart in respect of the amount of interest paid is enclosed. Copy of assessment order with details for assessment year 2012-13 is also enclosed. With this synopsis, a perusal of the same will show that rate of interest paid is between 12% to 15% and around 16% on overdraft from bank. That therefore the AO should not have calculated the disallowance considering the amount of interest paid to the bank. Secondly the point to be considered is that interest @18% was charged from the amount advanced to Kalani Industries. It therefore is beyond doubt that the assessee was prudently carrying on her business. That the learned AO ignored the fact that the amount advance to P.S. Kalani should have been considered as a related concern out of commercial expediency which is allowable under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d decided on similar facts earlier and dismissed the Revenue's appeal, there was no reason to take a different view of the matter for the assessment year 2013-14. We may submit here the question before the High Court was that when the assessee had not advanced interest bearing fund without charging any interest. The Hon'ble High Court referred to the following cases: (i) Commissioner of Income tax vs. Lokhandwala Construction Inds. Ltd (Bombay High Court) 260 ITR 579 "Where an assessee claims deduction of interest paid on capital borrowed, all that the assessee has to show is that the capital which was borrowed was used for business purpose in the relevant year of account and it does not mater whether the capital was borrowed in order to acquire a revenue asset or a capital asset." (ii) S. A. Builders Ltd. Vs. Commissioner of Income tax (Appeals) and Another (Supreme Court of India) "Interest on borrowed capital - Interest on money borrowed from bank and lent to sister concern without charging interest - when allowable - test same as that for allowance of business expenditure, viz., "for the purpose of the business" - allowable if made as a measure of commercial e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Departmental Representative vehemently argued supporting the orders of both the lower authorities. 9. We have heard rival contentions and perused the records placed before us and carefully gone through the submissions made by the Ld. Counsel for the assessee as well as finding of both the lower authorities. The instant appeal pertains to Assessment Years 2013-14 and 2014-15. Though various grounds are raised but the sole grievance is commonly raised against the disallowance of interest expenditure of Rs. 9,22,643/- and Rs. 11,20,776/- for Assessment Years 2013-14 and 2014-15 respectively. 10. We observe that the assessee is into money lending business and holds registration certificate for running this business given by the local authority. Books of accounts are regularly maintained and audited u/s 44AB of the Act. Assessee is regularly accepting both secured and unsecured loans on interest and giving loans and advances for earning income. Details for party wise interest received and interest paid have been filed before us. For Assessment Year 2013-14, we find that the assessee has charged the interest in the range of 6% to 18% more specifically interest @18% per annum has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aring funds have been advanced interest free to the sister concern was deliberated upon by the Hon'ble Supreme Court in S.A. Builders (supra) 288 ITR 1 (SC). The ratio laid down by the Hon'ble Supreme Court is as under:- " In order to decide whether interest on funds borrowed by the assessee to give an interest free loan to a sister concern (e.g., a subsidiary of the assessee) should be allowed as a deduction under section 36(1)(iii) of the Income Tax Act, 1961, one has to enquire whether the loan was given by the assessee as a measure of commercial expediency. The expression "commercial expediency" is one of wide import and includes such expenditure as a prudent businessman incures for the purpose of business. The expenditure may not have been incurred under any legal obligation, but yet it is allowable as business expenditure if it was incurred on grounds of commercial expediency." 14. Examining the instant case and on the facts of above judgment we are of the view that firstly there is a clear nexus of interest paid against the income received during the year, the transactions carried out by the assessee are for the commercial expediency and for this purpose the rate of inter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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