TaxTMI 
TaxTMI 
2011 (1) TMI 903
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....nce : "The learned Commissioner of Income-tax (Appeals) erred in confirming the disallowance of interest Rs. 11,22,551." 3. The material facts, so far as this grievance of the assessee is concerned are like this. During the course of scrutiny assessment proceedings the Assessing Officer noticed that the assessee has taken interest-bearing unsecured loans and paid interest at 18 per cent. on these unsecured loans amounting to Rs. 11,22,551. The assessee has advanced interest-free funds to one M/s. Tej Sons, a concern belonging to a family member of one of the directors. When the assessee was called upon to explain the reason for granting interest-free loans to sister concerns, it was submitted by the assessee that the said concern had ....
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....cts as prevalent in the appellant's case are totally distinguishable. In the appellant's case it was very apparent that it had borrowed fund which carried interest payment and they have been given directly to its sister concern for whatsoever the business needs the sister concern had and it is a fact on record that the appellant had not charged any interest from its sister concern and at the same time the appellant had paid interest on the borrowed funds. So the nexus is there automatically that the appellant had given interest-bearing funds to the sister concern from whom the appellant had not charged interest. Secondly, the contention of the appellant that it had received interest-free funds from its sister concern as and when it needed i....
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....mity in the action of the Assessing Officer for restricting the disallowance to the extent of Rs. 11,22,551. The alternate plea of the appellant that the disallowance after considering would not have been in excess of Rs.3,95,658. The calculation as given by the appellant are not acceptable because the peak credit is worked out by the Assessing Officer has been to the extent of Rs. 75,60,446. I am of the considered view that Assessing Officer has rightly worked out the disallowance of the interest as called for in the appellant's case and the same has been restricted to the amount of interest as debited by the appellant in its profit and loss account. The addition of Rs. 11,22,551 as made by the Assessing Officer is hereby confirmed. The ap....
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....considered view that whether mutual accommodations by sister concerns, by way of interest-free funds, can be said to be commercial expedient or not, is essentially a question of fact, which, in the said case, was decided in favour of the assessee by the Tribunal. It is thus clear that non-charging of interest on advances by the sister concern, particularly in the situation where both the concerns having benefits of such mutual accommodation, could indeed be justified on the ground of commercial expediency in a particular fact situation. The plea of the assessee, therefore, cannot be simple brushed aside as the authorities below have chosen to do. On the facts of the present case and having noted that there have been mutual accommodations by....