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TMI Blog2016 (6) TMI 1395X X X X Extracts X X X X X X X X Extracts X X X X ..... the sister concerns from out of the interest free advances, the Assessing Officer is perfectly justified in disallowing interest in proportion to the advances made. Subsequently, the Honourable Supreme Court also had occasion to consider the provisions of Section 36(1)(iii) in the judgment in S.A.Builders Ltd. v. CIT (Appeals) [2006 (12) TMI 82 - SUPREME COURT] . In that case, after a detailed examination of the provisions, the Supreme Court held that when a claim for deduction under Section 36(1)(iii) is made, the authorities should enquire as to whether the interest free loan was given as a measure of commercial expediency and on facts if it is so found, deduction is liable to be allowed. The court also explained that the expression ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law raised is whether the Tribunal was right in allowing the deduction under Section 36(1)(iii) of the Income Tax Act. 2. We heard the Senior Counsel for the Revenue and the learned counsel appearing for the assessee. 3. Learned counsel appearing for the assessee questioned the maintainability of these appeals placing reliance on Circular No.21/2015 dated 10.12.2015 issued by the CBDT. According to the learned counsel, since the tax effect in these cases is less than 20 lakhs, in view of the provisions contained in the Circular, these appeals are liable to be withdrawn by the Revenue. Though we find that such a Circular has been issued by the CBDT, in the context of a Circular 3/11 issued in 2011, the Supreme Court itself has clarifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various other courts and the Apex Court. 5. In the judgment in CIT v. V.I.Baby and Co. 254 ITR 248 (Ker) , a Division Bench of this court considered this provision and held that in a case where interest free advance was given by the assessee and deduction is claimed, the question to be considered is what is the benefit that is derived by the assessee by giving such interest free advance. It was also held that so long as the assessee is not the beneficiary of the investments made by the partners, their relatives and the sister concerns from out of the interest free advances, the Assessing Officer is perfectly justified in disallowing interest in proportion to the advances made. Subsequently, the Honourable Supreme Court also had occasio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax (Appeals) is concerned, in that order also, by merely making reference to the records produced by the assessee, the Commissioner has made certain factual assumptions without any basis and it is on such erroneous assumption that the Commissioner has set aside the order passed by the Assessing Officer. It is also seen from paragraphs 2 and 3 of the order that the Commissioner has faulted the Assessing Officer for having not understood the basic accountancy and facts of the case. Though the Commissioner has referred to the judgment in S.A.Builders Ltd. v. CIT (Appeals) [2007] 288 ITR 1 (SC), the question as to how the principles therein would apply to the facts of the case, has not been examined. 7. Similar assumptions have been made ..... X X X X Extracts X X X X X X X X Extracts X X X X
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