TaxTMI 
TaxTMI 
2019 (12) TMI 408
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....and allied publications. For the assessment year 2012-2013, the return of income was filed on 28.09.2012 declaring loss of Rs. 2,25,85,635. The assessment was completed u/s 143(3) of the I.T.Act vide order dated 31.03.2015 determining loss of Rs. 1,79,70,640. In the assessment completed, the Assessing Officer disallowed interest on borrowings amounting to Rs. 20,90,000 u/s 36(1)(iii) and Rs. 25,25,000 u/s 40(a)(ia) of the I.T.Act. 3. Aggrieved by the order of assessment, the assessee filed an appeal before the first appellate authority. The CIT(A) dismissed the appeal of the assessee vide impugned order dated 15.03.2019. 4. Aggrieved by the order of the CIT(A), the assessee has filed the present appeal before the Tribunal, raising fol....
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....oans were granted in the names of directors and there is no interest payment to the directors and consequently the provisions of TDS was not applicable." 5. The learned AR did not raise any contention with regard to ground No.3 above. The assessee has filed a paper book enclosing the details of advances made to sister concern, copies of audited accounts of the assessee as on 31.03.2012 and audited accounts of various sister concerns etc. We shall adjudicate the issues raised as under: Disallowance of interest paid amounting to Rs. 20,90,000 on account of diversion of funds to sister-concern. 6. The only contention raised before us is that the advances were made to sister-concern out of commercial expediency and hence no disallow....
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.... that the interest free loans advanced by the Appellant to the sister concerns has an element of "commercial expediency" in it and consequently, the interest expense to the extent of diversion of funds to sister concerns cannot be allowed as deduction under section 36(1 )(iii) of the Act. Therefore, it is held that there is no merit in the ground raised by the Appellant on the issue of "commercial expediency" and hence, the ground raised on this issue is dismissed." 6.2 The contentions raised before the Tribunal by the assessee read as follows:- "The advance to sister concern was out of commercial expediency. The assets of the company and guarantee of the directors for common for all the concerns including sister concerns. The a....
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.... of commercial expediency unless the assessee proves that failure of business of sister-concerns has an impact on the business / goodwill of the assessee. The assessee in this case has not been able to prove with necessary evidence that the failure of the business of the sister concern has an impact on the assessee. The assessee has not been able to prove that there is commercial expediency in diverting interest free funds to the sisterconcerns when assessee was paying huge interest on its borrowings. Therefore, the interest expenditure to the extent of funds diverted to sister concerns has been rightly disallowed by the A.O. Therefore, Ground No.2 raised is rejected. Disallowance of Rs. 25,25,000 u/s 40(a)(ia) of the I.T.Act. 7. The ....
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....the Appellant under the TDS provisions. Hence, the disallowance of Rs. 25,25,000 under section 40(a)(ia) of the Act is upheld and the ground raised on this issue is dismissed." 7.2 Aggrieved by the order of the CIT(A) in making disallowance of interest paid amounting to Rs. 25.25 lakh u/s 40(a)(ia) of the I.T.Act, the assessee has raised this issue before the Tribunal. In the brief written submission, the assessee has contended as follows:- "The Commissioner of Income tax(Appeals) went wrong in disallowing interest paid to banks amounting to Rs. 25,25,000 for non-deduction of tax at source. The Commissioner of Income tax (Appeals) failed to appreciate the fact that the though the loans were granted in the names of directors, the....