TaxTMI 
TaxTMI 
TaxTMI 
2022 (4) TMI 338
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.... Aggrieved, the revenue is in further appeal before us. 2. For the purpose of adjudication, facts from AY 2006-07 have been considered in the appeal. The grounds taken by the revenue in AY 2006- 07 read as under: - 1. The order of the ld. CIT(A) is contrary to the law and facts of the case 2. The Ld. CIT(A) erred in deleting the disallowance of interest when assessee failed to prove the Commercial expediency in advancing interets free loan to a subsidiary company. 2.1 The Ld. CIT(A) failed to appreciate that the revenue has filed an appeal against the order of the Hon'ble Tribunal in the assessee's own case on the very same issue for the AYs 2003-04 and 2005-06 before the Hon'ble Madras High Court, which is still pending. 2.2 The Ld. CIT(A) ought to have appreciated that the Dispute Resolution Panel (DRP) has confirmed the addition made by the Assessing Offcier on the very same issue for the AYs 2012-13 and 2013-14. As evident, the sole subject matter of the appeal is interest disallowance u/s 36(1)(iii). 3. This is second round of appeal, since the matter of interest disallowance, in the first round, was set aside by Tribunal to the file of Ld. AO vide ITA No.591 & 675/....
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....hether interest loans were given to the sister concern was as a measure of commercial expediency. Their lordship took a view that once nexus was established between the expenditure and the purpose of the business, which need not necessary be business of the assessee itself, Revenue could not disallow the claim assuming what was reasonable. Considering, the facts and circumstances of the case, we are of the opinion that lower authorities failed to verify whether loans given by the assessee to its subsidiaries were commercially expedient. The amount that were given as loans was not stagnant. Therefore, we set aside the order of the lower authorities and remit the issue regarding allowability of pro-rata interest on interest free loans granted to subsidiaries, back to the file of the ld. Assessing Officer for consideration of fresh in accordance with law. Ground No.3 of the Revenue is allowed for statistical purpose. 4. Pursuant to these directions, assessment has been reframed by Ld. AO wherein the assessee was called upon to demonstrate commercial expediency of granting of loan to subsidiaries i.e., M/s Sundaram Fasteners Investment Ltd. (SFIL). After considering assessee's reply, ....
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.... to Rs. 850.82 Lacs from financial years 2015-16 to 2018- 19. The financial performance of this entity revealed that it generated return on capital employed in the range of 19% to 22% during financial years 2015-16 to 2017-18. M/s TVS Infotech Ltd. was stated to be engaged in the business of software development, implementation of ERP, data center services and software consultancy services. The assessee invested in this entity through M/s SFIL. It was submitted that the assessee's accounting system was running on SAP and the assessee had outsourced all its IT requirements to M/s TVS Infotech Ltd. The assessee was able to get expeditious response to all its IT requirements as opposed to depending upon third parties. In this way, the confidentiality of business and operational data was maintained. It was also tabulated that the Profit of this entity increased over a period of time. M/s SFZL was stated to be promoted by the assessee through SFIL to manufacture and sell fasteners and bearing housings in overseas market. The dividend received from this entity, over the years, were also tabulated. 5.3 In the above background, it was submitted that the assessee benefitted from strategi....
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....he assessee. Thus the onus as casted upon the assessee was not discharged. 7. The Ld. AR, on the other hand, controverted the stand of Ld. CITDR by submitting that the funds position was duly furnished by the assessee before lower authorities and the ratio of various judicial decisions including the decision of Hon'ble Supreme Court in the case of CIT V/s S.A.Builders (288 ITR 1), the decision of Hon'ble Madras High Court in CIT V/s Hotel Savera (239 ITR 795) and the decision of Hon'ble Bombay High Court in CIT V/s Reliance Utilities (313 ITR 340) was applicable to the assessee's case. The Ld. AR also submitted that the test of commercial expediency was duly satisfied by the assessee which has already been elaborated by Ld. CIT(A) in the impugned order. 8. Having heard rival submissions and after due consideration of material facts, our adjudication would be as given in succeeding paragraphs. Our findings and Adjudication 9. Upon perusal of material facts, it could be gathered that the loans have been advanced by the assessee to its subsidiary i.e., SFIL which is an investment arm of the assessee. M/s SFIL, as on investment company, promoted new ventures and made investments on....