TaxTMI 
TaxTMI 
2017 (7) TMI 70
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....hed within time by Speed Post which, however, reached the office of the Tribunal late. Considering explanation of the assessee, the nominal delay of one day in filing the appeal is condoned. 4. On revised ground No. 1, assessee challenged the disallowance of Rs. 3,96,246/- under section 36(1)(iii) of the Income Tax Act. The Assessing Officer observed that assessee firm had given interest free advance to its sister concern M/s B.S.W. Tools Pvt. Ltd., Ludhiana and M/s Synergy Tooling Solution. The assessee was asked to explain why interest not charged from both the sister concerns to whom advance was given without any business expediency during the year while assessee has paid interest of Rs. 15,98,468/- on unsecured and secured loans duri....
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....utilized loan for business purpose and earned profit by doing business and paid 30% taxes. Therefore, income in the hands of one concern is expenditure in the hands of another concern. 5(i). The assessee relied upon decision of Hon'ble Supreme Court in the case of CIT Vs Glaxo Smithkline (Asia) Pvt. Ltd. 236 CTR 113 in which it was held that, "Where there is a revenue neutral, no adverse inference should be drawn". The ld. CIT(Appeals), however, did not accept contention of the assessee and noted that advance was given to the sister concern who stood guarantee for the assessee. The assessee has failed to discharge the burden of proving commercial expediency. The ld. CIT(Appeals) also noted that assessee contended that Assessing Offic....
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....ordinarily be entitled to deduction of interest on its borrowed loans". 7. Hon'ble Punjab & Haryana High Court in the case of Bright Enterprises Pvt. Ltd. Vs CIT 381 ITR 107 considering the decision of Hon'ble Supreme Court in the case of S.A.Builders (supra) in para 17 held as under : " 17. The Assessing Officer's view that the advance was not for business purposes as the appellant had no business dealings with the sister company is erroneous. Commercial expediency in advancing loans does not arise only on account of there being transactions directly between the holding company and the subsidiary company or between the group companies inter se. The two companies may even be in a different line of business. It would ....
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....assessee also pleaded before authorities below that Assessing Officer has not proved any nexus that interest free advances were made out of borrowed funds. The ld. CIT(Appeals) relied upon decision of High Court in the case of Abhishek Industries Ltd. (supra) which have been over-ruled by Hon'ble Supreme Court in the case of Hero Cycles Pvt. Ltd. 379 ITR 347 in which it was held that, "Advance given to sister concern for business expediency, no disallowance should be made under section 36(1)(iii) of the Act". 9. Considering above discussion, I am of the view disallowance of interest under section 36(1)(iii) of the Act is not justified. I, accordingly, set aside the orders of authorities below and delete the addition. This ground of a....