2009 (12) TMI 282

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....We have heard standing counsel appearing for the appellant and advocate Sri P. Balakrishnan, appearing for the respondent. 3. The assessee is a limited company engaged in export of marine products. On verifying the accounts, the Assessing Officer found that the assessee had advanced an interest free loan of Rs. 4,03,75,000 to another limited company by name M/s. Amalgam Investments P.Ltd. which is styled as a sister concern of the assessee. The Assessing Officer found that advances were made out of borrowed funds on which the assessee had paid an interest of Rs. 64,72,004. It was found that the term loan outstanding in the end of the previous years was Rs. 17.74 lakhs. Under section 36(1)(iii) of the Income-tax Act, 1961 (for short "the ....

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....essee's case was that it had available funds like, surplus for giving interest free loans to another company. However, when the matter went to the Tribunal in second appeal, the assessee changed the stand of availability of surplus funds for giving interest free advances, but took a stand that on an earlier occasion, the Tribunal allowed the assessee's case on the same issue relying on the decision of the Supreme Court in S. A. Builders Ltd. v. CIT (Appeals) [2007] 288 ITR 1. In similar case, we have found that the decision of the Supreme Court could be applied only if commercial expediency is established with facts. Unless the interest free loan goes to advance business interest of the assessee, there cannot be any commercial expediency. F....