TMI Blog2021 (9) TMI 1200X X X X Extracts X X X X X X X X Extracts X X X X ..... o the question of business expediency in this transaction, any act carried out for the purpose of its own business or carried out for the benefit of the subsidiary as a share holder can be referred to as business expediency. In the given case, the assessee is in the business of consultancy and no business commitment to fund other sister concern and the action of the assessee to fund step down subsidiary will not fit into representing any share holder commitment. The actual share holders are the holding company, any holding company diverting its own funds to the subsidiaries will fit into business expediency as held in the case of SA Builders [ 2006 (12) TMI 82 - SUPREME COURT ] The assessee company was used as a source for funding the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). The undersigned concurs with the findings of the Assessing Officer and after considering the submissions of the appellant and the findings in the assessment order. Apart from the findings in the assessment order, it is not worthy that the Hon'ble Supreme Court in the case of Hero Cycles Pvt. Ltd. vs. err relied upon by the appellant has been distinguished aptly on page 10 and 11 of the assessment order. Considering the facts, issues and circumstances of the issue, disallowance made u/s. 36(1)(iii) is upheld. Hence, Ground No. 2, 3, 4, 5, 6 7 in appeal are partly allowed. 3. Learned authorized representative next stated at the Bar that the instant issue of sec 36(1)(iii) interest disallowance qua advances made to the assessee&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount which leaves no doubt that the loans/advances to subsidiary company has been made out of 'borrowed' funds. He opined that the deduction of interest on borrowing can be allowed only if the assessee fulfils the provisions of section 36(1)(iii) of the Act. In view of the above observations and also following few case law, the AO held that the interest claim of the assessee to the extent of interest attributable to investments is to be disallowed. The assessee submitted that the interest charged by banks on its loans was at 13% per annum and, therefore, the interest at the rate of 13% on the funds diverted for investment in loans which worked out to ₹ 7,38,83,333/- and the same was disallowed. 5.2 When the assessee prefe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing subsidiary companies: 1. M/s. Soma Infrastructure Pvt. Ltd., 2. M/s. Soma Tollways Pvt. Ltd. 3. M/s. Soma Highways Pvt. Ltd. 4. M/s. Chennai Elevated Tollway Ltd. 5. M/s. Adilabad Expressway Pvt. Ltd. 6. M/s. Soma Hyderabad City Centre Pvt. Ltd. 7. M/s. Soma Raipur City Centre Pvt. Ltd. 8. M/s. Soma Andaman Resorts Pvt. Ltd. and step-down subsidiaries are: 1. M/s. Soma Energy Ltd. 2. Beta Infratech P. Ltd. 3. Soma Jabalpur Rewa Tollway Pvt. Ltd.(SPV). From the above, it is clear that assessee is a subsidiary company and assessee has diverted the funds sanctioned by ICICI Bank to the step down subsidiaries i.e. Beta Infratech P. Ltd. and Soma Jabalpur Rewa Tollway Pvt. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... funds were not for the purpose of the assessee's business and the expenditure of interest is not for the purpose of assessee's business and clearly for the purpose of other group companies. 5.8 Coming to the question of business expediency in this transaction, any act carried out for the purpose of its own business or carried out for the benefit of the subsidiary as a share holder can be referred to as business expediency. In the given case, the assessee is in the business of consultancy and no business commitment to fund other sister concern and the action of the assessee to fund step down subsidiary will not fit into representing any share holder commitment. The actual share holders are the holding company, any holding compan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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