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TMI Blog2023 (8) TMI 1503X X X X Extracts X X X X X X X X Extracts X X X X ..... company which incurs losses, such advance is meant to protect its deep interest in the subsidiary, hence, the interest on amount borrowed is eligible for deduction, though it was advanced interest-free to the subsidiary company. The expression 'commercial expediency' was explained in plethora of cases by various judicial forums including Hon ble Apex Court. The expression 'commercial expediency' is an expression of wide import and it would include such expenditure a prudent businessman would incur for the purpose of business. It may not be a legal obligation but it is allowable if it is incurred on grounds of commercial expediency. Here in this case assessee is not able to make out a case of commercial expediency and also ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO to the income of the Appellant by way of disallowing interest u/s. 36(1) (iii) being difference of interest paid and received by the Appellant on trade advances received and inter-corporate deposit given to unrelated parties. (b) The ld. CIT (A) failed to appreciate that the differential rate of interest paid was due to breach of contract for non-fulfilment of commitments and the same has no relation or comparison with interest received on inter-corporate deposit. (c) In reaching to the conclusion and confirming such addition the ld. CIT (A) omitted to consider relevant factors, considerations, principles and evidences while he was overwhelmed, influenced and prejudiced by irrelevant considerations and factors. The Appellant craves lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 37 Crores. Accordingly, company credited the account of M/s. Ravindra Energy Ltd. and correspondingly debited the account of M/s. Vantmuri Trading and Investments Ltd. Here it is pertinent to mention that assessee company is a subsidiary of M/s. Ravindra Energy Ltd. and M/s. Murkumbi Investments Pvt. Ltd. (To whom assessee provided un-secured loan @ 11.50%) is a shareholder of M/s. Ravindra Energy Ltd. 4. It is also observed that money taken as advance from M/s. Vantmuri Trading and Investments Ltd. for supply of goods in period 2011-12 or may be even before, finally settled with return of money (partially) and 37 Crores as journal entry and that is too in F.Y. 2017-18. For almost six years amount was retained by assessee and parked wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and transparent. No doubt authorities had no jurisdiction to determine a particular rate of interest, but the transactions of the assessee must not be colourable device to fulfil other purposes other than purposes of business enterprise under consideration. Assessee is totally failed to demonstrate the genuineness of its transaction along with the condition wholly and exclusively for the purposes of the Act. 7. In this connection we may refer to section 36(1) (iii) of the Income-tax Act, 1961 (here in after referred to as the 'Act') which states that the amount of the interest paid in respect of capital borrowed for the purposes of the business or profession has to be allowed as a deduction in computing the Income-tax under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Punj. Har.) the assessee borrowed money and gave the same to sister concern which was incurring huge losses and its borrowing was declared as non-performing asset by the bank. The assessee was guarantor to the subsidiary company along with two other guarantors, being the group concerns. The interest-free loan was viewed by the Assessing Officer as a measure to reduce its income by claiming interest on borrowing @ 12% per annum and the sister concern to have the income there from. The tribunal held that there was no commercial expediency in giving interest-free loan to the allied concern and the interest attributable to interest-free advances was not allowable under section 36(1)(iii). The High Court confirmed the order of the tribunal. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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