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TMI Blog2019 (3) TMI 1921X X X X Extracts X X X X X X X X Extracts X X X X ..... f business expediency in this transaction, any act carried out for the purpose of its own business or carried out for the benefit of the subsidiary as a share holder can be referred to as business expediency. In the given case, the assessee is in the business of consultancy and no business commitment to fund other sister concern and the action of the assessee to fund step down subsidiary will not fit into representing any share holder commitment. The actual share holders are the holding company, any holding company diverting its own funds to the subsidiaries will fit into business expediency as held in the case of SA Builders [ 2006 (12) TMI 82 - SUPREME COURT] - The assessee company was used as a source for funding the step down subsidiar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee, engaged in the business of engineering consultancy services, filed its return of loss of ₹ 6,78,62,660/- for the AY 2012-13 on 30/09/2012. In scrutiny assessment u/s 143(3), dated 30/01/2015, the AO made the following disallowances: 1. Disallowance of interest u/s 36(i)(iii) ₹ 7,38,83,333/- 2. Disallowance u/s 14A ₹ 5,08,86,768/- 3. When the assessee preferred an appeal before the CIT(A), the CIT(A) deleted the disallowance u/s 14A and confirmed the disallowance of interest u/s 36(1)(iii) of the Act. 4. Aggrieved by the order of CIT(A), both the assessee and revenue are in appeal before us against the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above observations and also following few case law, the AO held that the interest claim of the assessee to the extent of interest attributable to investments is to be disallowed. The assessee submitted that the interest charged by banks on its loans was at 13% per annum and, therefore, the interest at the rate of 13% on the funds diverted for investment in loans which worked out to ₹ 7,38,83,333/- and the same was disallowed. 5.2 When the assessee preferred an appeal before the CIT(A), the CIT(A) confirmed the disallowance by observing as under: The appellant took interest bearing loan from ICICI bank, in turn passed on substantial amount to sister concerns interest free, these sister concerns interest free, these sister conce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Centre Pvt. Ltd. 8. M/s Soma Andaman Resorts Pvt. Ltd. and step-down subsidiaries are: 1. M/s Soma Energy Ltd. 2. Beta Infratech P. Ltd. 3. Soma Jabalpur Rewa Tollway Pvt. Ltd.(SPV). From the above, it is clear that assessee is a subsidiary company and assessee has diverted the funds sanctioned by ICICI Bank to the step down subsidiaries i.e. Beta Infratech P. Ltd. and Soma Jabalpur Rewa Tollway Pvt. Ltd.(SPV). 5.6 We further notice that assessee is a company incorporated and active in providing consultancy services to its parent company i.e. Soma Enterprise Ltd. Assessee has no other business connection with the step down subsidiaries except related concern. The assessee was utilised by the parent company to source th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut for the benefit of the subsidiary as a share holder can be referred to as business expediency. In the given case, the assessee is in the business of consultancy and no business commitment to fund other sister concern and the action of the assessee to fund step down subsidiary will not fit into representing any share holder commitment. The actual share holders are the holding company, any holding company diverting its own funds to the subsidiaries will fit into business expediency as held in the case of SA Builders (supra). The assessee company was used as a source for funding the step down subsidiaries and the cost should also be transferred to the subsidiary who has utilized the funds and the burden of cost of funds on the assessee is u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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