9911796707
TMI Blog2021 (9) TMI 599X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income Tax (Appeals) is opposed to law, facts and circumstances of the case. - NA - 2. The order is passed in haste, without providing sufficient and reasonable opportunity of being heard. - NA - 3. The order is passed against the principle of natural justice and thus liable to be quashed. - NA - 4. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the action of Ld. Assessing Officer in respect of disallowance of Rs. 40,46,607/- under section 36(1)(iii) of the Act. Rs. 12,50,402/- 5. The Ld. Assessing Officer has grossly erred in not appreciating the fact that the borrowings w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the subsidiary (Amethyst Hospitality Private Limited) of Rs. 5.22 crores was disallowed which worked out to an amount of Rs. 40,46,607/- u/s. 36(1)(iii) r.w.s. 37 of the Act and added to the income. The Assessing Officer on examination has held that the amount spent by the assessee on its subsidiary in Malaysia is allowable, as it is in the same line of business and there is some commercial expediency in advancing the amount to it. But the subsidiary, Amethyst Hospitality Private Limited, is in hospitality business and there is no connection whatsoever between the assessee's business of 'land development and construction' and hospitality done by the other company. In such circumstances, the payment of interest by the assessee on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for its business operations. The transaction was in the nature of shareholders activity or stewardship activities. 5. The ld. DR submitted that the assessee has advanced interest-free loan to its subsidiary out of borrowed funds and has not derived any business advantage by advancing such a huge amount and there was no commercial expediency to advance such loan. Being so, it is not a business expenditure to allow as a deduction u/s. 36(1)(iii) r.w.s. 37 of the Act. 6. We have heard both the parties and perused the material on record. In this case, the assessee advanced an amount of Rs. 7.1 crores to Amethyst Hospitality (P) Ltd. and Rs. 6.9 crores to Davanam Constructions Sdn Bhd, Malaysia. With regard to amount advanced to the subsidia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Hospitality (P) Ltd. to related parties without any interest. 8. Before us, the assessee strongly relied on the judgment of Supreme Court in S.A. Builders v. CIT, 288 ITR 1 (SC) wherein it was held that though interest expenditure may not have been incurred under any legal obligation, but it is allowable as business expenditure, if it was incurred on grounds of commercial expediency. Thus, whether the business funds was diverted for interest free loans to subsidiaries, the main criterion for allowability of those funds are based on whether it was on grounds of commercial expediency or not. The phrase "commercial expediency" has following important trites as established by this case law (supra):- (1) Such purpose as is expected by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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