2021 (8) TMI 32

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....r of the lower authorities, are that the assessee company was engaged in the business of generation of power through gas turbines and gas engines, running of multiplex theatres, providing facility management services and real estate development. For the year under consideration, the assessee filed return of income, which was revised on 30/11/2014, declaring loss of Rs. 238,21,63,825/-. The return was further revised on 04/02/2015 for claim of TDS certificates. The return of income filed by the assessee was selected for the scrutiny assessment and statutory notices under Income-tax Act, 1961 (in short 'the Act') were issued and complied with. The scrutiny assessment under section 143(3) of the Act was completed on 22/12/2016 after making disallowance of Rs. 3,15,81,435/- in terms of section 36(1)(iii) and disallowance of Rs. 40,06,740/- under section 14A of the Act. On further appeal, the Ld. CIT(A) deleted the disallowances made by the Assessing Officer. Aggrieved, the Revenue is in appeal before the Income-Tax Appellate Tribunal (in short 'the Tribunal') raising the grounds as reproduced above. 3. Before us, the parties appeared through Video Conferencing facility. The learned Co....

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.... Average Additions- Source of Funds     20114300114         Utilization of Funds:       Investment in immovable property 64914400 64914400 129828800 Investment in partnership firms 5189000 7384856 12573856 Advance recoverable 207024481 290860362 497884843 Advance paid to DLF Ltd. 11753416 11753416 23506832 Other advances 8162462 9407080 17569542 Total 297043759 384320114 681363873         Average additions- Utilization of funds:     340681937 Interest claimed as per book       1864608574 Amount of Disallowance u/s 36(l)(iii) 1864608574*340681937/20114300114   = 31581435 4.3 Before the Ld. CIT(A), the assessee submitted that the issue in dispute was covered in favour of the assessee by the order of Ld. CIT(A) in earlier assessment years. It was also submitted that average of total interest-free fund (own funds) being share capital and reserve and surplus was of Rs. 336.19 crores as compared to average of loans and advances/investment of Rs. 34.07 crores. According to the assessee, the company had sufficient interestfree funds f....

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....e of S.A. Builders Ltd. reported in 288 ITR 1 wherein the Hon'ble Apex Court had held that an expenditure may not have been incurred under any legal objection but yet it is allowable as a business expenditure if it was incurred on the grounds of commercial expediency. We note that the Hon'ble Apex Court has also observed that 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 Ld. CIT (A) has also referred to the judgment of Hon'ble Delhi High Court in the case of CIT vs. Dalmia Cement (Pvt.) Ltd. reported in 254 ITR 377 wherein it had been held by the Hon'ble High Court that once it was established that there was a nexus between the expenditure and the purpose of business, the revenue cannot justifiably claim to put itself in the armchair of the businessman and take up the role to decide as to how much is reasonable expenditure having regard to the circumstances of the case. Thereafter, the Ld. CIT (A) has given a categorical finding that in the instant case the loans and advances have been given on account of commercial expediency. The Ld. Sr. Departmental Representat....

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....est bearing loans taken and interest free advances given, what is to be looked into is the measure of "commercial expediency" and "for the purpose of the business". Hence, keeping in view the facts of the case and legal prepositions laid down on this aspect of allowability of interest u/s 36(1)(iii), we hereby decline to interfere with the order of the ld. CIT (A). The appeal of the revenue on this ground is dismissed." 4.4 We find from the order of the Assessing Officer that most of the investments/advances are continued from last year i.e. assessment year 2012-13, wherein the Tribunal (supra) has deleted the disallowance under section 36(1)(iii) of the Act on the ground that advances/interest free loans have been given for business purposes in view of the commercial expediency. The facts of the year under consideration are also identical to facts of the case for assessment year 2011-12. In view of the above, respectfully following the decision of the Tribunal (supra) and decision of the Hon'ble Delhi High Court (supra), we do not find any infirmity in the order of the Ld. CIT(A) on the issue in dispute and accordingly, we uphold the same. The ground of the appeal of the Revenue....