2019 (1) TMI 1088

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....nal', for short) dated 7th May, 2018. 2. By the impugned order, the Tribunal has allowed the appeal of the respondent-assessee and deleted disallowance of interest expenditure of Rs. 5,68,97,378/- on interest bearing loans, on account of diversion and advances and interest free loans to sister companies. 3. The respondent-assessee had taken following loans from banks:- " Name of the Bank Loans Raised (Rs.) Interest Paid (Rs.) Andhra Bank 78,00,00,000/- 7,80,04,772/- Bank of Baroda 87,50,00,000/- 7,57,71,924/- Total 16,55,00,00,000/- 15,37,76,696/- " 4. The respondent-assessee had given interest free loans to its sister companies as per details given below:- " Name Amount outstandin....

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.... approved by this Court in several decisions e.g. Eastern Investments Ltd. v. CIT[(1951) 20 ITR 1 : AIR 1951 SC 278] , CIT v. Chandulal Keshavlal & Co. [(1960) 38 ITR 601 : AIR 1960 SC 738] , etc. 26. In our opinion, the High Court as well as the Tribunal and other Income Tax Authorities should have 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." Thus, distinction was made between loans and advances given for business purpose....

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....expenditure under section 36(1)(iii) of the Income Tax Act, 1961. Short Term Loans & Advance is provided to its sister-concern mainly from companies own fund available with the enterprise. Booking deposit from flat buyers and Advances from customers (Rs.1,144,695,481-) available also the assessee company received the amount from the maturity of Fixed Deposit. This means that Advance was not given from the borrowed fund/interest bearing fund. It is respectfully submitted that it is a settled position of law that it is not for the Revenue to dictate to the businessman how to carryon business. Various Courts have, repeatedly, held in the following cases that reasonableness of the expenditure has to be seen from the point of view of bu....