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TMI Blog2019 (1) TMI 754X X X X Extracts X X X X X X X X Extracts X X X X ..... rowed funds has been diverted to its sister concerns. In fact, the Tribunal has held that the assessee company has not derived any benefit out of such advances to the sister concern. If that is so, the exercise that is required to be done is to examine whether any part of the borrowed funds was diverted to its sisters concerns. This exercise appears to have not been done to the fullest extent. Tribunal has not given cogent reasons as to why the decision in the case of S.A. Builders (2006 (12) TMI 82 - SUPREME COURT) cannot be applied to the facts of the present case as the test in such a case was whether this was done as a measure of commercial expediency. Thus AO has to take a fresh look into the matter, as we are not satisfied on the basi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irect nexus between the borrowed funds and the investment in the sister concerns, which were made only out of share capital reserves and surpluses ? B. Whether on facts and circumstances of the case the Appellate Tribunal was right in disallowing the entire interest paid by the Appellant, even when the loans were utilized exclusively and wholly for business purposes ? 3. Heard Mr.R.Sivaraman, learned counsel for the Appellant and Mrs.R.Hemalatha, learned Senior Standing Counsel for the Revenue. 4. The Assessing Officer while completing the assessment vide order dated 27.12.2010 held that the assessee claims entire interest paid on its borrowed capital as its expenditure. However, part of the borrowed funds has been diverted to its siste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 008/- claimed u/s.36(1)(iii). 4. It is submitted that the appellant had made the above advances made to the sister concerns out of its own funds and not the borrowed funds. The appellant had total funds of ₹ 53.09 crores (share capital+Reserves) on 01.04.2007). The advances to sister concerns were made out of these funds. Hence the contention of the AO is erroneous. 5. Admitting but not accepting the contention of the AO, even if the advances were made by the appellant to its sister concerns out of borrowed funds, the same were made in connection with the assessee's business and ought to he viewed in the light of commercial expediency. 6. As per Section 36(1)(iii) of the IT Act, the amount paid in respect of capital borrowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order passed by the First Appellate Authority has not given any elaborate independent reasoning but has quoted the order passed by the CIT(A) in para 5 of the impugned order. The assessee claimed that these funds were given to the sister concerns bearing in mind the commercial expediency and relied upon the decision in the case of S.A.Builders Ltd., Vs. Commissioner of Income-Tax (Appeals) Chandigarh [288 ITR 1 (SC)]. The Tribunal would state that the return benefit is not an essential requirement and it is sufficient if the holding company (assessee) has a deep interest in its subsidiary, the assesseee should be able to prove that the assessee's subsidiary sister companies are sick or not having regular funds and are in dire need ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cles (P) Ltd v. Commissioner of Income-Tax (Central), Ludhiana [2015 379 ITR 347 ], wherein, it has been held as follows:- "Once it is established that there is nexus between the expenditure and the purpose of business (which need not necessarily be the business of the assessee itself), the revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the Board of Directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. No businessman can be compelled to maximize his profit and that the revenue authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. The authorities must not loo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents would be out of the interest-free fund generated or available with the company, if the interest-free funds are sufficient to meet the investments. 12. Thus, considering the facts and circumstances of the case, we deem it appropriate that the Assessing Officer has to take a fresh look into the matter, as we are not satisfied on the basis on which the Assessing Officer had come to the conclusion that part of the borrowed funds have been diverted by the assessee to its sister concerns. Thus, we are inclined to remand the matter for fresh consideration. One more reason which convinced us that the Assessing Officer should take a fresh look is that the judgment in Abhishek Industries (supra) has been held to be no longer good law in the lig ..... X X X X Extracts X X X X X X X X Extracts X X X X
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