2021 (12) TMI 1248

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....Act) for assessment year 2015-16. 2. First we will decide the Revenue's appeal i.e. ITA. No. 7959 (Del) of 2019. 3. Facts relevant to the adjudication of this appeal are that the Assessing Officer has made an addition of Rs. 2,18,26,743/- under Section 36(1)(iii) of the Act on account of disallowance of interest expenses mainly on the basis that total available interest free funds in the hands of the Assessee as on 31st March, 2015 were Rs. 56,82,25,201/- only whereas the Assessee has invested in nonbusiness assets to the tune of Rs. 91,72,51,774/. The said addition was challenged before the ld. Commissioner, who vide impugned order deleted the said addition against which the Revenue- Department being aggrieved preferred this appeal. ....

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....mstances of the case. The Apex Court had held that no businessman could be compelled to maximize his profit. The Income Tax Authorities were directed to put themselves in the shoes of the Assessee and see how a prudent businessman would act. It was also held that the Authorities should not look at the matter from their own view point but that of a prudent businessman. The Hon'ble Court held that the Authorities has to see the transfer of the borrowed funds to a sister concern from the point of view of commercial expediency and not from the point of view whether the amount was advanced for earning profits. 6.15 The material facts of the case at the same in the instant year in the case of the appellant. In accordance with the princip....

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.... 36(1)(iii) of the Act on account of disallowance of interest expenses is liable to be sustained. We find the Hon'ble Apex Court in S. A. Builders Ltd. Case (supra) itself dealt with deduction of interest on borrowed funds given to subsidiary company and held that 'where it is obvious that a holding company has a deep interest in its subsidiary, and hence if the holding company advances borrowed money to a subsidiary and the same is used by the subsidiary for some business purposes, the Assessee would, in our opinion, ordinarily be entitled to deduction of interest on its borrowed loans.' 6.5 Even Hon'ble Madras High Court in CIT Vs. Spencers & Co. Ltd. & Co. Ltd. (supra) and Bombay High Court in CIT Vs. Phil Corporation Ltd. & Anr. (sup....

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....the case of CIT Vs. Everest Kanto Cylinder Ltd. (2015) 378 ITR 57 (Bom.)partly affirmed the addition qua 'corporate guarantee' while reducing to 0.5% instead of 1.3% as determined by the AP/TPO. 8.1 Though the Assessee has preferred the instant appeal against the impugned order on this particular issue in hand, however accepted the factual position as submitted by the ld. DR to the effect that vide order dated 10th December, 2020 the Hon'ble Madras High Court dealt with the identical issue in hand in the case of Pr. CIT Vs. M/s. Redington (India) Ltd. 430 ITR 298 and has clearly held that the 'corporate guarantee' is covered within the definition of 'International Transaction'. The Hon'ble High Court in the said case has also consider....