TaxTMI 
TaxTMI 
TaxTMI 
2013 (4) TMI 39
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....rder of the A.O. assessee preferred appeal before CIT(A). CIT(A) vide its order dated 19.09.2006 granted relief of Rs.9,41,280/- to the assessee. Against the aforesaid order of CIT(A) Revenue preferred appeal before the ITAT. Hon'ble ITAT vide its order in ITA No.2565/Ahd/2006 dated 04.05.2007 opined that question of allowing interest free finance to subsidiary company could fall within the ambit of assessee's business expediency and therefore to verify the correctness of the facts, the matter was restored to the file of the A.O. for re-adjudication after verifying the assessee's claim that the interest free funds were given for revival of subsidiary company as well as keeping in view of the decision of S.A. Builders Ltd. [288 ITR (SC)]. Pu....
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....had written off substantial amount owed by Kanoria Dyechem as bad debt. Since Kanhaiya Trading & Inv. Pvt. Ltd. is a 100 per cent subsidiary company of the assessee and Kanoria Dyechem Ltd. is also a related concern of the assessee, the assessee company was aware of the fact that pumping of money by its subsidiary company in the affairs of Kanoria Dyechem was not going to yield any positive results. And hence, therefore, this transaction cannot be said to be a transaction entered into on account of commercial expediency. This is so, because, in addition to draining of borrowed funds in to non-viable unit, i.e. Kanoria Dyechem, the assessee also claimed huge bad debts on account of transaction of borrowings entered into with Kanoria Dyechem.....
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....ree advance to Kanoriya Traders & Investors Pvt. Ltd. (hereinafter referred to as KTIPL). CIT(A) allowed the appeal. ITAT vide order dated 04-05-2007 restored the matter back to A.O. with a direction to verify the assessee's claim that the interest fee funds were given for revival of subsidiary company, as the assessment order was silent on the relevant facts. 4.1.2 In the consequential assessment proceedings, appellant contended that the interest-free advances to 100% subsidiary company - KTIPL were for revival of its business and later on the said subsidiary got merged with the appellant company and hence the advances were out of commercial expediency. In the impugned assessment dated 19.11.2008, A.O. held the transaction to be colourabl....
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.... of the transactions was that assessee claimed interest payment and also bad debts which was in the nature of colourable devise. He further submitted that the finding of ld. CIT(A) is vague in nature. He thus submitted that assessee has not made out a case of commercial expediency and it seems to be an afterthought. He, therefore, urged that the order of the A.O. in treating the interest as not a business expenditure be upheld. 5. Ld. A.R. submitted that the assessee is an investment company engaged in the business of investments and giving loans and advances. He submitted that Kanhaiya Traders & Investments Pvt. Ltd. had acquired creditors from Kanoria Dychem Ltd. under its activities of investment and to pay all such creditors Kanhaiya T....
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....at the business of subsidiary got revived and the advances got fully recovered (consequent to merger) remained uncontroverted. The coordinate Bench of ITAT vide its order in ITA No.2565/Ahd/2006 dated 04.05.2007 has observed that allowing interest free finance to subsidiary company could fall within the ambit of assessee's business expediency. The findings of the co-ordinate Bench are as under:- "5.1 In view of above discussion, we are of the opinion that the question of allowing interest-free finance to subsidiary company definitely could fall within the ambit of assessee "business expediency" and, therefore, it is very necessary to verify the correctness of the facts. Consequently, we restore this issue involved in this appeal beack to t....