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TMI Blog2013 (4) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... ould fall within the ambit of assessee's business expediency. The aforesaid finding of CIT(A) could not be controverted by the Revenue by bringing any contrary material on record. CIT(A) while deleting the addition has also relied on the decision S.A. Builders Pvt. Ltd. vs. CIT [2006 (12) TMI 82 - SUPREME COURT] wherein held that 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) one has to enquire whether the loan was given by the assessee as a measure of commercial expediency. The expenditure may not have been incurred under any legal obligation, but yet it is allowable as business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR (SC)]. Pursuant to the direction of Hon'ble ITAT, A.O., vide order dated 19.11.2008 passed u/s 143(3) read with section 254 of the Act confirmed the addition made earlier by holding as under:- "3.2 The submission of the assessee is considered. On perusal of records, it is seen that the assessee was formerly known as Kanoria Capital Services Ltd. the assessee took loans from Accura Foam Pvt. Ltd. on which the assessee paid interest. The borrowed funds were given by assessee company to Kanhaiya Traders Investments Pvt. Ltd., which is 100 per cent subsidiary company. The funds so received by Kanhaiya Traders Investments Pvt. Ltd. were used for acquiring debtors of Kanoria Dyechem Ltd. All the three entities are related concerns of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noria Dyechem. By the series of transactions, as mentioned above, the net effect of borrowal was that the assessee got away with huge bad debt claim as well as interest claim on borrowed funds in the form of interest paid to Acura Foam Pvt. Ltd. Thus, the series of transactions smacks of colourable device in order to hoodwink the revenue by making bad debt claim as well as interest claim onborrowed funds utilized for making investment in an entity in respect of which the assessee is claiming simultaneously huge bad debt. 3.3 It is pertinent to note that the issue regarding usage of borrowed funds for utilization of non-interest bearing funds given to Smt. Kahini Kanodia has not been dealt with either by ITAT or CIT(A) in the respective ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to be colourable and hence was not out of commercial expediency. However, no finding was given on whether the advance to subsidiary was for its revival or not. The contentions of the appellant that the business of the subsidiary got revived and the advances got fully recovered (consequent on merger) remain uncontroverted. ITAT, in its order at para 5.1 observed that allowing interest free finance to subsidiary - company could fall within the ambit of assessee's' business expediency. 4.1.3 Keeping in view the above facts, written submissions filed and in the light of S.C's decision in the case of S.A. Builders Ltd. v. CIT (288 ITR 1), I hold that disallowance of interest in the instant case is not justified. Accordingly, the said disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch creditors Kanhaiya Traders Investments Pvt. Ltd. Required funds. The assessee made advance from time to time to enable Kanhaiya Traders Investments Pvt. Ltd. to discharge its liability to the creditors. The assessee had made payment on aggregate amount to Rs.1,25,62,000/- from time to time to Kanhaiya Traders Investments Pvt. Ltd. to discharge its liability. He therefore submitted that the monies were advanced to subsidiary company out of commercial expediency to enable the subsidiary company to carry on its business. He therefore submitted that the decision to advance money was out of commercial expediency and it was with the intention to safeguard the business interest of the assessee. Ld. A.R. submitted that on restoring the mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this appeal beack to the file of assessing officer with the directions that the assessee's claim maybe decided afresh in accordance with law and after verifying the assessee's claim that the interest-free funds were given for revival of subsidiary- company as well as keeping in view of decision in the case of S.A. Builders Ltd. (sura). The assessee will be allowed an opportunity of being heard. 6. In the result the appeal of the Revenue is treated as allowed for statistical purposes." 7. The aforesaid finding of CIT(A) could not be controverted by the Revenue by bringing any contrary material on record. CIT(A) while deleting the addition has also relied on the decision of the Apex Court in the case of S.A. Builders Pvt. Ltd. vs. CIT, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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