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TMI Blog2012 (5) TMI 261X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 40(a)(ia) is not attracted. - Decided in favor of assessee. Deduction of interest - commercial expediency - held that:- matter remitted to the tribunal for deeper scrutiny and examination. The tribunal will re-examine the issue and record factual finding and apply the legal ratio explained in S.A. Builders Ltd. (2006 (12) TMI 82 (SC)). - ITA 894/2011 - - - Dated:- 14-5-2012 - MR. JUSTICE SANJIV KHANNA, MR. JUSTICE R.V.EASWAR, JJ. For Appellant: Ms. Rashmi Chopra, Sr. Standing Counsel. For Respondent: Mr. Rajat Navet, Advocate. O R D E R Having heard learned counsel for the parties in this appeal, which pertains to the assessment year 2005-06, we frame the following substantial question of law:- Whether the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in that case, only so much of the income as is derived from his activities performed in that other Contracting State may be taxed in that other Contracting State. 4. The finding recorded by the tribunal is that the payments in question were for architectural work and covered by the term professional services . The tribunal has also recorded a finding that the recipient i.e. M/s. HOK International (Beijing) Limited did not have a permanent establishment or a fixed base in India. It is not the case of the Revenue that clauses (a) or (b) to Article 14 are attracted and satisfied. 5. In view of the said factual findings, which are not under challenge, we do not think that any substantial question of law arises on the said aspect. Article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the previous year as also during this assessment year". This plea of the assessee is not in accordance with the audited accounts of the assessee filed with the return of income for A.Year 2005-2006, as per which liabilities are reflected as "Advances received against booking of flats/space Rs.42,57,12,100/- (Previous yearRs.15,44,64,357/-) . Therefore, the consideration of receiving funds from sister concerns as well as from other miscellaneous customers is purely against booking of flats/space, and is not an exgratia interest free loan from sister concerns. This is further corroborated by the assessee's reply dated 22.06.2007, wherein the details of amounts received on "Booking of flats as on 31.3.2005" covers all the payments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the sides, we find that the revenue has failed to establish the corroboration that the advances were made from the interest bearing funds. The assessee was having sufficient non-interest bearing funds to cover up the interest free loans to the sister concerns. In view of this matter, we uphold the order of CIT (A) on this issue and dismiss this ground of revenue s appeal. 8. A reading of the aforesaid paragraph exposits that there is hardly any discussion on the issue in question. It is only recorded that the assessee had sufficient non-interest bearing funds to cover the interest free loans to the sister companies. It is not disputed that the assessee was a construction company and was in the process of constructing flats at Gurgaon. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of Income-Tax (Appeals) and Another [2007] 288 ITR 1 (SC). In the said case, it has been held as under:- 25. In our opinion, the High Court as well as the Tribunal and other Income Tax Authorities should have approached the question of allowability of interest on the borrowed funds from the above angle. In other words, the High Court and other authorities should have enquired as to whether the interest-free loan was given to the sister company (which is a subsidiary of the assessee) as a measure of commercial expediency, and if it was, it should have been allowed. 26. The expression commercial expediency is an expression of wide import and includes such expenditure as a prudent businessman incurs for the purpose of business. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holding company has a deep interest in its subsidiary, and hence if the holding company advances borrowed money to a subsidiary and the same is used by the subsidiary for some business purposes, the assessee would, in our opinion, ordinarily be entitled to deduction of interest on its borrowed loans. 11. In view of the aforesaid position, noticing the arguments, which were advanced by the Revenue and the reasons given by the tribunal, we deem it appropriate to remit the matter to the tribunal for deeper scrutiny and examination. The tribunal will re-examine the issue and record factual finding and apply the legal ratio explained in S.A. Builders Ltd. (supra). Accordingly, we answer the aforesaid question of law in favour of the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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