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Real estate development company advanced loans to its Indian subsidiary for funding step-down foreign subsidiaries undertaking real estate projects. Interest paid on loans borrowed for advancing such loans was allowed as business expenditure u/s 36(1)(iii). Subsidiary unable to realize interest from foreign subsidiaries due to financial distress and litigation between partners. Assessee decided not to charge interest to protect business interests and principal loan amount. Loans advanced for business purposes, hence interest paid on borrowings admissible u/s 36(1)(iii) despite no interest income during the year. Appellate Tribunal upheld order allowing deduction.
Real estate development company advanced loans to its Indian subsidiary for funding step-down foreign subsidiaries undertaking real estate projects. Interest paid on loans borrowed for advancing such loans was allowed as business expenditure u/s 36(1)(iii). Subsidiary unable to realize interest from foreign subsidiaries due to financial distress and litigation between partners. Assessee decided not to charge interest to protect business interests and principal loan amount. Loans advanced for business purposes, hence interest paid on borrowings admissible u/s 36(1)(iii) despite no interest income during the year. Appellate Tribunal upheld order allowing deduction.
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