TaxTMI 
TaxTMI 
2016 (1) TMI 657
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....reciate the fact that the loans borrowed by the assessee are for the business of the sister concern and not for its own business and hence three is no commercial expediency as such to the assessee. 3. The Learned CIT(A) has not appreciated the fact that the Hon'ble ITAT B-Bench Hyderabad in assessee's own case in ITA No.1173/Hyd/2009 dated 31/03/2011 for the assessment year 2003-04 upheld the disallowance of interest under similar conditions. 4. ...." 3. Briefly stated, the Assessing Officer made the disallowance of interest of Rs. 23,04,880 out of the interest claimed by the assessee during the year. Assessee had given an interest free loan of Rs. 255 lakhs to its subsidiary, Survayavanshi Textiles Ltd. (STL). It was submitted ....
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....d a profit of Rd.81,88,810/- for the period relating to the assessment year 2006-07. It is evident from the above that advancing money without receipt of interest to M/s. Suryavanshi Textiles Limited, while itself paying interest on "borrowed funds' is by no means commercial expediency. It is further mentioned in the judgment of the Apex Court that it does not mean that interest on borrowed funds advanced to subsidiary concerns always to be allowed but it could depend upon the facts and circumstances of the cases. Suryavanshi Textiles Limited is not a subsidiary of the assessee during the previous year relevant to the Asst. Year 2006-07 and the facts and circumstances of the case do not entitle the assessee for such deduction. The ass....
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....circumstances (which need not be enumerated here). However, where it is obvious that a holding company has a deep interest in its subsidiary, and hence if the holding company advances borrowed money to a subsidiary and the same is used byte eh subsidiary for some business purposes, the assessee would, in our opinion, ordinarily be entitled to deduction of interest on its borrowed loans." These observations are relevant because the advances have been given by the appellant to its subsidiary which had become a sick company and which utilised the advances for its business purposes. Respectfully following the decisions of the Supreme Court in the case of S.A. Builders Ltd., the disallowance of interest is directed to be deleted." 5. Revenu....
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....ide. 8. We have considered the issue and examined the orders placed on record. Coordinate bench of this Tribunal in assessment year 2003-04 on Revenue's appeal, has reversed the order of the CIT(A), by stating as under- "9. We have heard both the parties and perused the materials on record and carefully gone through the case laws cited by the parties. The main plea of the assessee's counsel herein is that M/s SVTL as become a sick company, as such interest was not charged. The contention of the department is that the assessee cannot foresee the sickness of SVTL and thereby cannot take a plea that it has not charged the interest. If the SVTL going to become sick unit, then it will very much claim the same as bad debt. We find force in the....
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....pts and have no separate identification. The only thing sufficient is to disallow the interest paid on the borrowing to the extent of amount lend to subsidiary company without carrying any interest would be that the assessee has some loans or interest bearing debts to be repaid. In case, the assessee had a surplus which according to it could not be immediately, it would either be required to be circulated and utilized for the purpose of business or to be invested in a manner in which it generates income and not diverted towards subsidiary free of interest. Otherwise it amounts to not presenting the true and correct income of the assessee and the subsidiary company would be enjoying the benefit at the cost of assessee. In our opinion, intere....