TaxTMI 
TaxTMI 
2017 (12) TMI 861
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....come Tax Act 1961, (hereinafter referred to as the 'Act') dated 01.03.2013. 2. The grounds of appeal raised by the assessee are as follows: 1) For that the learned Commissioner of Income Tax (Appeals) should have accepted the contention of the assessee that disallowance on interest payment of Rs. 22,80,000/- which was covered u/s.40A(2)(a) made by the Assessing Officer was illegal and he acted wrongly in confirming the disallowance on alleged grounds. 2) For that the CIT(A) has confirmed the disallowance merely on doubt and presumption and ignoring various submissions made and evidence produced before him. 3) For that other ground or grounds may be taken before or at the time of hearing of appeal. 3.....
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....ed by the addition made by the AO, the assessee filed an appeal before the ld. CIT(A) who has confirmed the addition made by the AO. During the appellate proceedings the assessee submitted that the amount of Rs. 1.90 Crores contributed to the Joint Venture by the Assessee as interest free advance was nothing but capital contribution of the Assessee for the Joint Venture from which it could be eligible for 25% of the net profits. Further that the capital contribution had been done out of the internal funds of the Assessee and its reserves and surplus were to the extent of Rs. 47,25,09,026/-.Therefore there was no question of the borrowed funds of the company being utilized for the same. The ld CIT(A) observed that the Assessee's explanat....
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....on the stand taken by the Assessing officer. On the other hand, ld Counsel for the assessee reiterated the submissions already made before the Assessing Officer and CIT(A). 6. We have given a careful consideration to the rival submissions,we note that the amount of Rs. 1.90 Crores contributed to the Joint Venture by the Assessee as interest free advance was nothing but capital contribution of Assessee for the Joint Venture from which it could be eligible for 25% of the net profits. Further that the capital contribution had been done out of the internal funds of the Assessee and its reserves and surplus were to the extent of Rs. 47,25,09,026/-. Therefore, there was no question of the borrowed funds of the assessee being utilized for the s....
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....ave approached the question of allowability of interest on the borrowed funds from the above angle. In other words, the High Court and other authorities should have enquired as to whether the interest-free loan was given to the sister company (which is a subsidiary of the assessee) as a measure of commercial expediency, and if it was, it should have been allowed. The expression "commercial expediency" is an expression of wide import and includes such expenditure as a prudent businessman incurs for the purpose of business. The expenditure may not have been incurred under any legal obligation, but yet it is allowable as a business expenditure if it was incurred on grounds of commercial expediency. We note that loans and advances were given....