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TMI Blog2016 (2) TMI 744X X X X Extracts X X X X X X X X Extracts X X X X ..... n the claim of the assessee - Decided against revenue X X X X Extracts X X X X X X X X Extracts X X X X ..... Learned CITA placed reliance on the decision of the Hon'ble Apex Court in the case of S.A.Builders Ltd vs CIT reported in 288 ITR 1 (SC) and deleted the disallowance of interest. Aggrieved, the revenue is in appeal before us on the following ground:- "1. Whether ld.CIT(A)-XII, Kolkata was justified in deciding the issue of Commercial expediency of loan given to sister concern without giving reason in his order?" 2.3. The Learned DR argued that the subsidiary company is in foreign location which is accessible to easy loans at cheap cost. While this is so, why should the assessee herein paying huge interest in India to banks should divert its funds to its subsidiary company. The business expediency herein is not understandable. In response to this, the Learned AR argued that the investments and advances to subsidiary company are strategic investments and commercial expediency is proved beyond doubt. He further argued that the memorandum of association allows the assessee to do investment activity and argued that through the subsidiary company, the huge businesses were obtained by the assessee and also relied on the co-ordinate bench decision of this tribunal in the case of EIH Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of S.A. Builders Ltd. v. CIT reported in (2007) 288 ITR 1 (SC). After taking note of and discussing on the scope of commercial expediency, the Court summed up the legal position in the following manner:- '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 expenditure may not have been incurred under any legal obligation, but yet it is allowable as a business expenditure if it was incurred on grounds of commercial expediency. 27. No doubt, as held in Madhav Prasad Jatia v. CIT [1979 (118) ITR 200 (SC)], if the borrowed amount was donated for some sentimental or personal reasons and not on the ground of commercial expediency, the interest thereon could not have been allowed under section 36(1)(iii) of the Act. In Madhav Prasad's case [1979 (118) ITR 200 (SC)], the borrowed amount was donated to a college with a view to commemorate the memory of the assessee's deceased husband after whom the college was to be named, it was held by this court that the interest on the borrowed fund in such a case could not be allowed, as it could not be sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck the entire loan given to M/s. Hero Fibres Limited by the assessee but this was refunded with interest. In the year in which the aforesaid interest was received, same was shown as income and offered for tax. 16. In so far as the loans to Directors are concerned, it could not be disputed by the Revenue that the assessee had a credit balance in the Bank account when the said advance of ₹ 34 lakhs was given. Remarkably, as observed by the CIT (Appeal) in his order, the company had reserve/surplus to the tune of almost 15 crores and, therefore, the assessee company could in any case, utilise those funds for giving advance to its Directors. 17. On the basis of aforesaid discussion, the present appeal is allowed, thereby setting aside the order of the High Court and restoring that of the Income Tax Appellate Tribunal. In view of the aforesaid facts and circumstances and the judicial precedents on the impugned issue, we hold that the advances were made by the assessee to its wholly owned subsidiary company during the course of its business and is a strategic investment and as a measure of commercial expediency to protect its business interests. Accordingly we don't find an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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