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2024 (12) TMI 375
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....e facts that the appellant has duly maintained all requisite records prescribed by the act and the deeming fiction of section 68 have been invoked only on the basis of non-furnishing of tax returns and bank statement of lenders. 2. Whether on the facts and circumstances of the case, the learned First Appellate Authority was justified in endorsing disallowing of interest income of Rs. 74,32,292/-. 3. Whether on the facts and circumstances of the case, the learned First Appellate Authority was justified in endorsing disallowing on interest expenses of Rs. 97,66,208/-. 4. Appellant craves leave to add or alter any other ground that may be taken at the time of hearing." 3. Ground no.1, relates to unexplained cash credits amounting to Rs. 5,20,84,000. 4. During the scrutiny assessment, the Assessing Officer noted that the assessee is in receipt of new unsecured loans from various individuals and entities which were reflected in the books of the assessee. Hence, the Assessing Officer sought to verify the genuineness, creditworthiness, and identity of the creditors from whom these loans were reportedly received. The Assessing Officer had directed the asses....
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....e of the cash credits appearing in the books are from genuine sources and in this case, the assessee was unable to discharge this burden satisfactorily. Therefore, the addition of Rs. 5,20,84,000, as unexplained cash credit under Section 68 of the Act was upheld by dismissing the ground raised by the assessee. 7. Ground no.2, relates to disallowance on account of interest amounting to Rs. 97,66,308. 8. The Assessing Officer noticed that the assessee failed to provide adequate documentation to prove that the interest expenses were incurred solely for the purpose of business. The linkage between the borrowed funds and their utilization in business activities was not substantiated satisfactorily. The interest expenses might not have been wholly for the purpose of business. For the reasons, the addition of Rs. 97,66,308, was made to the total income of the assessee. 9. The learned CIT(A) observed that the borrowed funds were used for non-business purposes, such as providing interest-free loans to related parties weakens the case for a business deduction as per income tax laws. The learned CIT(A), based on the examination of the documents furnished and the legal framework, the ....
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....he analysis of the documents presented and the legal framework, the AO's decision to disallow the expenditure of 74,32,292 is confirmed. The burden of proof to establish a direct and justifiable link between the expenditure and the income purportedly earned was not adequately met by the appellant. The importance of maintaining meticulous and compliant accounting records is reiterated to uphold the integrity of tax claims." In effect, all the three grounds were dismissed. 12. The learned Counsel, Shri Mahavir Atal, appearing for the assessee, furnished a detailed written submissions contained in Paper Book from Page-221 to 242, which are reproduced below:- "The Assessee is an individual running a jewellery business under the proprietorship concern M/s Khandelwal Jewellers. The assessee is engaged in this line of business for 5 decades. 1. Addition of Rs. 5,20,84,000 as unexplained cash credit under section 68 1.1. The assessee's proprietorship concern is almost 5 decades old concern. Considering the new model of business, it was decided to incorporate a new private limited company. Accordingly, a new private limited concern, named M/s Khandelwal ....
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....h the law, the assessee had also filed TDS returns. The TDS returns were also submitted before the AO. We are hereby again attaching herewith all TDS returns for the relevant year annexure 3. f) Purpose for which loan was taken:- The Loans were taken for the purpose of business. Your kindness may appreciate that the said loans were advanced to Flagship Company of the group, KJAPL, where most of the business is done. The assessee has submitted requisite ledgers and scan copy of the bank statements to substantiate that the said funds were indeed advanced to the private limited company which was further used for the business purpose. g) Copy of bank statements of lenders:- The assessee had humbly submitted before the AO that these details being personal details, the lenders are not ready to provide their personal and financial details to us. In this regard, we humbly wish to submit that your kindness has a right to issue summon and enforce the attendance of the parties. As far as bank statements of the assessee is concerned, the assessee has submitted the bank account statements of the assessee's both business and personal accounts highligh....
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....refore, as the loans were borrowed and also repaid, there is apparently no case of bogus loans or capitalization. Your kindness may also appreciate the fact, at the cost of the repetition that the assessee has duly deducted TDS on interest payments. A complete working vis-à-vis loan receipt, repayment, bank statement and TDS returns are enclosed for your kind perusal. These parties have also reported income and claimed benefit of TDS credit. The assessee had discharged his onus with respect to proving the identity and genuineness of the transaction. With respect to the creditworthiness, the assessee has had also submitted all the details available with the assessee. However, the assessee was not in a position to submit the personal details of the lenders as they were not ready to share the same. k) Copy of ledger accounts of all the lenders and copy of confirmations of transactions by the lenders:- In this regard we humbly wish to submit that the assessee had submitted the ledger account of almost all the lenders of loans from the date of receipt of loan till its repayment and the confirmations of these parties also before the AO. ....
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....eady repaid back to them. We are hereby again attaching a detailed chart of the working of accepting and repaying the loan. A fact which deserves to be appreciated is that all the lenders are assessed to tax and are regularly filing their returns of income. Moreover, the loans advanced to the assessee were through the regular banking channel and were also repaid through the banking channel after deducing TDS on interest. 1.8. Moreover, the assessee had duly deducted and paid TDS on the interest amount. During the year under consideration, the assessee has neither purchased any capital asset nor undertook any big expenditure, like marriage, house construction or foreign trips. The borrowed funds were utilized in Khandelwal Jewelers Akola Private Limited, as the jewelry is a very capital-intensive business and the business man has to invest a majority of its funds, in the stocks of jewelry. 1.9. The assessee had discharged his onus by submitting the requisite documents available with the assessee. It is a well settled Law that assessee need not prove source of the source. For this jurisprudence we rely upon the Judgment of the Hon'ble Delhi High Court in the case of....
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.... case of CIT vs. Nemi Chand Kothari reported at (2003) 264 ITR 254 (Gauhati) it has been held that- "Under section 68 of Income Tax Act creditor"s creditworthiness has to be judged vis-à-vis transactions, which have taken place between assessee and creditor, and it is not business of assessee to find out source of money of his creditor or genuineness of transactions, which took place between creditor and sub-creditor and/or creditworthiness of sub-creditors for these aspects may not be within special knowledge of assessee." 1.14. In a case before Hon'ble Delhi High Court in the case of CIT vs. Mod Creations Pvt. Ltd., (2013) 354 ITR 282 (Del.) it was held as under : 1.15. The Hon'ble Delhi High Court in the case of CIT vs. Kamdhenu Steel and Alloys Ltd., & Ors. 361 ITR 220 (Del.) held that - "The Tribunal has adopted an erroneous approach on the aspects of genuineness of the transactions in issue and the creditworthiness of the persons/creditors who lent money to the assessee. The first aspect, i.e., identity of the creditors was established before any of the authorities below. It will have to be kept in mind that section 68 only sets up a....
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....nsideration, the assessee has received unsecured loans to the tune of Rs. 85,60,000/- in his personal capacity. A fact which deserves to be appreciated is that out of the loans borrowed during the year to the tune of Rs. 85,60,000/-, an amount of Rs. 55,00,000/- has also been repaid in the current year itself. 2.3. The AO has disallowed the said interest expenses stating that the assessee has not routed the said interest through the Profit and Loss Account of the proprietorship business and has claimed it in the return of income directly. The AO has also stated that no evidences have been furnished in order to prove that the loans claimed to be received in individual capacity were used for business purpose. 2.4. With all humbleness we wish to submit that the assessee, maintains two set of accounts, one is for the proprietary concern (Khandelwal Jewelers) and the other is for the individual personal account. As already mentioned above the assessee has formed a new private limited company named as M/s Khandewal Jewellers (Akola) Private Limited. As and when there is an urgent requirement of funds to the company, funds were transferred to the aforementioned company f....
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.... 26,767 2,677 7 Bherulal Dhanraj 4,083 - 8 Fakirchand B Goenka 20,075 2,008 9 Gaurav R Chandak 30,417 3,042 10 Geetabai K Savana 30,417 3,042 11 Hauldar Leasing & Finance Pvt Ltd 44,411 4,441 12 J S Corporation 8,167 817 13 Khandelwal Silvers 302,220 30,222 14 Ku. Shruti Ravi Khandelwal 19,470 1,947 15 Ku. Vijeta A Agrawal 30,000 3,000 16 Murlidhar R Chandak 30,417 3,042 17 Namita N Khandelwal 81,812 8,181 18 Nitin M Khandelwal 3,577,401 357,740 19 Omprakash M Sharma 132,000 13,200 20 Prabla Manoj Shah 61,000 6,100 21 Pragya Alok Agrawal 30,000 3,000 22 Pranita N Khandelwal 207,785 20,779 23 Pratik R Khandelwal 130,592 13,059 24 Pushpa M Rathi 67,513 6,751 25 Radheshyam M Chandak 30,417 3,042 26 Rajshree Anil Chandak 24,333 2,433 27 Ravindra M Khandelwal (HUF) 2,192,604 219,260 28 Sau. Asha A Agrawal 84,000 8,400 29 Sau. Rupa P Agrawal 15,600 1,560 30 Sudhir M Rathi (HUF) 67,920 6,792 31 ....
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....a 60,900 6,090 24 R G Agro Industries 29,450 2,945 25 R G Udyog 1,44,767 14,027 26 Radheshyam Biharilal Khandelwal 47,800 4,780 27 Rajendra K Chandak (HUF) 1,52,083 15,208 28 Rajesh B Khandelwal 20,075 2,008 29 Ravindra Gopidasji Mohata 14,250 1,425 30 Ravindra M Khandelwal HUF 1,15,125 11,513 31 Ravindrakumar Harikisanji Chandak 5,167 517 32 S K Udyog 10,920 1,092 33 Sandip Tejpalji Shah 27,191 2,719 34 Sanjay Industries 19,000 1,900 35 Sau. Binti R Bhala 1,08,982 10,897 36 Sau. Chitra Umesh Agrawal 18,958 1,896 37 Sau. Lajwanti S Motwani 47,700 4,770 38 Smt. Nirmalal R Khandelwal 1,22,383 12,238 39 Sau. Rashmi R Chandak 1,52,083 15,208 40 Sau. Sarika Vinit Mohata 15,000 1,500 41 Sau. Usha Ashok Agrawal 47,725 4,773 42 Shah Agencies 26,667 2,667 43 Shah Brothers 1,23,750 12,375 44 Sharad Makhanlal Agrawal HUF 15,334 1,534 45 Snehlata B Shah 1,21,667 12,167 46 Sukhdeo Sitaram 1,02,634 10,264 47 Sumi....
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.... on the facts and circumstances of the respective case. For instance, if the directors of the sister concern utilize the amount advanced to it by the assessee for their personal benefit, obviously it cannot be said that such money was advanced as a measure of commercial expediency. However, money can be said to be advanced to a sister concern for commercial expediency in many other circumstances. Where holding company, has a deep interest in its subsidiary, and the holding company advances borrowed money to a subsidiary and the same is used by the subsidiary for some business purposes, the holding company would ordinarily be entitled to deduction of interest on its borrowed loans. [Para 35] 3.4 Therefore, the very fact that the loan was used for the purpose of the business of a related concern is quite evident. As the newly formed Private Limited company could not borrow more from for the financial institutions the only option available was to mobilize funds from the open market. However, as the Company Acts prohibit direct acceptance of loans from the public. The assessee, being a shareholder member borrowed loan from the open market and advanced same to the company. The ....
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....e of incurring it is directly to earn income falling under the head "income from other sources". The plain natural construction of the language of section 57(iii) of the Act, irresistibly leads to the conclusions that to bring a case within that section it is not necessary that any income should in fact have been earned as a result of the expenditure. What section 57(iii) requires is that the expenditure must be laid out or expended wholly and exclusively for the purpose of making or earning income. The section does not require that this purpose must be fulfilled in order to qualify, the expenditure for deduction it does not say that the expenditure shall be deductible only if any income is made or earned (CIT vs. Rajendra Prasad Moody (1978), Taxation 51 (3)-52, 115 ITR 519 (SC) : CIT vs. MurliManohar (1998) IX SITC 673 (All): CIT vs. Rampur Tirnber&Turney Co. Ltd. (1981) 129 ITR 58 (All.) : CIT vs. Administrator General of Madras (1998) 142 Taxation 85 (Mad)). A similar view was also taken by the Hon'ble Madras High Court in the case of "CIT vs. M Ethurajan" (273 ITR 95) (Mad).) 4.6 In the assessee's case, assessee has made an investment in a related company, and the....
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....) laid out or expended wholly and exclusively for the purpose of making or earning such income (income chargeable under the head "income from other sources'). This means section 57(iii) provides for deduction only of expenditure incurred wholly and exclusively 'for the purpose of making or earning such income". In order that expenditure may be admissible under section 57(iii), it is necessary that the primary motive of incurring it is directly ITA No. 960/JP/2019 Shri Kailash Chand Soni, Jaipur Vs. ACIT, Jaipur 16 to earn income falling under the head "income from other sources". The plain natural construction of the language of section 57(iii) of the Act, irresistibly leads to the conclusions that to bring a case within that section it is not necessary that any income should in fact have been earned as a result of the expenditure. What section 57(iii) requires is that the expenditure must be laid out or expended wholly and exclusively for the purpose of making or earning income. The section does not require that this purpose must be fulfilled in order to qual0, the expenditure for deduction it does not say that the expenditure shall be deductible only if any income is made....
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....y findings or evidences are lead by Ld. AO. The repayment of loan or advances when no fault is found by Ld. AO, constitutes a good evidence regarding genuineness of the said loans or advances. This commercial logic & common knowledge is recognized by judiciary. The Hon'ble jurisdictional High Court in case of Ayachi Chandrashekhar Narsangaji TA 992 of 22013 datd. 2-12-2013 has held that "It has also come on record that the said loan amount has been repaid by the assessee to 'IA' in the immediately next year and the Department had accepted the repayment of loan without probing into it. In the aforesaid facts and circumstances of the case, when the Tribunal has held that the matter is not required to be remanded as no other view would be possible, there was no reason to interfere with the impugned order passed by the Tribunals". Further the Hon'ble ITAT Surat in case of Kalubhai A. Dhamelia ITA No. 88/SRT/2018 dtd. 18-9- 2018 & in case of Damjibhai Varjibhai Gangani ITA 124/SRT/2018 dtd. 18-9-2018 have also taken a view that the repayment of loan/advances constitute evidence regarding genuineness of the impugned loan or advances. The above binding decisions s....
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....0,000 1,30,00,000 6-27 days 7. M/s. Rama Exports 07/05/2015 75,00,000 08/09/2015 75,00,000 124 days 8. M/s. Kaushal Diamonds 07/05/2015 15,00,000 15/09/2015 15,00,000 131 days 9. M/s. Kumar Exports 07/05/2015 13/05/2015 14/05/2015 63,25,000 30,00,000 28,00,000 15/09/2015 01/10/2015 01/10/2015 30,00,000 83,25,000 8,00,000 131-141 days 10. M/s. Piyush Exports 08/05/2015 15/05/2015 19/05/2015 25/05/2015 50,00,000 28,00,000 20,00,000 8,00,000 01/10/2015 10,60,00,000 146 days 11. M/s. Jai Shree Exports 19/05/2015 27,00,000 01/10/2015 27,00,000 135 days 12. Rajen Vasant 29/12/2015 2,00,00,000 13/05/2016 16/05/2016 1,00,00,000 1,00,00,000 138 days 13. M/s. Osiaji Exports 22/03/2016 Rs. 49,54,500 22/03/2016 46,54,500 1 day Total 11,57,79,500 11,57,79,500 6. A bare perusal of the aforesaid details makes it clear that the assessee has refunded the entire deposits either within in a day or in a week in respect of seven transactions. It wa....
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....hed the copies of returns filed by the creditors with the Department along with their statement of income. All the loans were received by the assessee by account payee cheques and the repayments of loans have also been made by account payee cheques along with the interest in relation to those loans. It is rather strange that although the Assessing Officer has treated the cash credits as non-genuine, he has not made any addition on account of interest claimed/paid by the assessee in relation to those cash credits, which has been claimed as business expenditure and has been allowed by the Assessing Officer. It is also pertinent to note that in respect of some of the creditors the interest was credited to their accounts/paid to them after deduction of tax at source and information to this effect was given in the loan confirmation statements by those creditors filed by the assessee before the Assessing Officer. Thus it is clear that the assessee had discharged the initial onus which lays on it in terms of section 68 by proving the identity of the creditors by giving their complete addresses, GIR numbers/permanent accounts numbers and the copies of assessment orders wherever readily ava....
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.... in the books of an assessee maintained for any previous year. and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year." The phraseology of section 68 is clear. The Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of the assessee of that previous year. In this, case the legislative mandate is not in terms of the words "shall be charged to income-tax as the income of the assessee of that previous year". The Supreme Court while interpreting similar phraseology used in section 69 has held that in creating the legal fiction the phraseology employs the word "may" and not "shall". Thus the unsatisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as the income of the assessee as held by the Supreme Court in the case of CIT v. Smt. P. K. Noorjahan [1999] 237 IIR 570." 11. Keeping in mind the rat....
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.... Smt. Savitri Thakur, it is seen that she had issued cheque payment of Rs. 14 lakhs dated 21- 7-2009 to the Appellant. Prior to the issuance of the cheques, this amount was credited into the bank account of Smt. Savitri Thakur maintained in the State Bank of India. Rae Baraeli Branch. There were three transfers of Rs. 5 lakhs. Rs. 5 lakhs and Rs. 4 lakhs into the above account of Smt. Savitri Thakur before issue of cheques by her to the assessee. Smt. Savitri Thakur claimed that these amounts were received by her as gifts from one Shri Rajendra Bahadur Singh and Smt. Sarojini Thakur. Shri Rajendra Bahadur Singh is the brother of Smt. Savitri Thakur and Smt. Sarojini Thakur is the sister of Smt Savitri Thakur. Shri Rajendra Bahadur Singh had gifted Rs. 5 lakhs to Smt. Savitri Thakur and Smt. Sarojini Thakur had gifted to Rs. 5 lakhs and Rs. 4 lakhs to Smt. Savitri Thakur. Result of verification and remarks by the Department in respect of Shri Rajendra Bahadur Singh is as under: "The donor had retired in 2003 and claims to earn tuition income of Rs. 1.5 Lacs p.a. and this money has been claimed to have been hoarded and kept in cash by him over several years and he claims tha....
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....T v. Veedhata Towers (P) Ltd. [2018] 403 ITR 415 (Bom), this court has held that assessee is only required to explain the source of the credit. There is no requirement under the law to explain the source of the source. In the instant case, there is no dispute as to the identity of the creditor. There is also no dispute about the genuineness of the transaction. That apart, the creditor has explained as to how the credit was given to the assessee. Thus assessee had discharged the onus which was on him as per the requirement of section 68 of the Act. What the Assessing Officer held was that sources of the source were suspect ie, he suspected the two sources Shri Rajendra Bahadur Singh and Smt. Sarojini Thakur of the source Smt. Savitri Thakur. 15. In view of discharge of burden by the assessee, burden shifted to the revenue; but revenue could not prove or bring any material to impeach the source of the credit. Though Mr. Walve, learned standing counsel, has pointed out that the creditor had no regular source of income to justify the advancement of the 45 pm credit to the assessee, we are of the view that the assessee had discharged the onus which was on him to explain the thr....
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....ccosiates ACUPA3503A 3,000,000.00 107,000.00 15.12.17 Khandelwal Jewellers (Akola) Pvt Ltd Bank of India - Rs. 15,00,000 paid on 19-10-18 & Rs. 15,00,000 paid on 22-10-18 TJSB Sahakari Bank Ltd 5 Bilala Refinaries AABFB0957C 3,000,000.00 102,000.00 24.07.17 & 01.09.17 Khandelwal Jewellers (Akola) Pvt Ltd TJSB Bank Repaid during the year - 6 Chetan Ashok Agrawal AEQPA6182D 1,000,000.00 25,550.00 18.01.18 Khandelwal Jewellers (Akola) Pvt Ltd TJSB Bank - Repaid on 18-07-18 TJSB Sahakari Bank Ltd 7 Deepak Mohanlalji Chandak ADDPC9114B 500,000.00 5,167.00 17.10.17 Khandelwal Jewellers (Akola) Pvt Ltd Bank of India Repaid during the year - 8 Gangasahay Tarachand AABHR2376F 1,600,000.00 34,640.00 16.11.17 & 22.02.18 Ravindra M Khandelwal Bank of India Repaid during the year Rs. 8,00,000 Repaid on 27-11-18 Bank of India 9 Garg Agro Industries AAKPG5738R 1,500,000.00 61,975.00 13.12.17 Khandelwal Jewellers (Akola) Pvt Ltd Bank of India - Repaid on 15-10-18 TJSB Sahakari Bank Ltd 10 ....
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....6.10.17 Ravindra M Khandelwal Bank of India - Repaid on 18-06-18 TJSB Sahakari Bank Ltd 23 Sanjay Industries AADFS7290P 2,000,000.00 19,000.00 02.12.17 Khandelwal Jewellers (Akola) Pvt Ltd Bank of India Repaid during the year - 24 Sau. Chitra Umesh Agrawal AIOPA4466E 500,000.00 18,958.00 07.12.17 Shah Brothers (Repayment of Loan) TJSB Bank - Repaid on 20-04-18 Bank of India 25 Sau. Lajwanti S Motwani ABLPM5097P 900,000.00 47,700.00 24.10.17 Khandelwal Jewellers Pvt Ltd Bank of India - Repaid on 24-04-18 Bank of India 26 Smt. Nirmalal R Khandelwal AIQPK2901E 1,000,000.00 122,383.00 08.01.18 Khandelwal & Agrawal Jewellers ((Repayment of Loan) TJSB Bank - Repaid on 19-11-18 Bank of India 27 Sau. Sarika Vinit Mohata AHGPB4663F 1,000,000.00 15,000.00 15.12.17 Khandelwal Jewellers (Akola) Pvt Ltd TJSB Bank Repaid during the year - 28 Sau. Usha Ashok Agrawal ABBPA3187A 1,500,000.00 47,725.00 15.07.17, 17.10.17 & 16.11.17 Khandelwal Jewellers (Akola) Pvt Ltd, Ravindra M Kh....
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....ing the year Rs. 85,500 - 40 Nitin M Khandelwal ACDPK2014R 565,000.00 3,602,112.00 28.02.18 Buldhana Urban Credit Co-op Society (Repayment of Loan) TJSB Bank Repaid during the year Rs. 1,44,35,000/- - 41 Prabla Manoj Shah AECPS 6991 Q 1,500,000.00 61,000.00 06.09.17 Khandelwal Jewellers (Akola) Pvt Ltd Bank of India Repaid during the year - 42 Pratik R Khandelwal HGBPK2211M 540,000.00 130,592.00 08.03.18 Vishwa Automotive Sales and Services Pvt Ltd (Repayment of Loan) Bank of India - - 43 Ravindra M Khandelwal (HUF) AABHR4256A 1,920,000.00 2,192,604.00 18.08.17, 13.09.17, 23.11.17 & 04.12.17 Khandelwal Jewellers (Akola) Pvt Ltd & Nitin Khandelwal (5.00 L) Axis Bank Ltd - - 19. Accordingly, we set aside the impugned order passed by the learned CIT(A) on this issue and restore the same to the file of the Assessing Officer for verification of the fact as to whether loans were duly repaid back by the assessee either in current year or subsequent years and if so, the same need not be added back. Needless to say th....
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....iness." 22. It is observed that the assessee has claimed an interest expenses of Rs. 74,32,292, over and above the interest claimed under section 36(1)(iii) of the Act. It was explained before the authorities below as well as before us that the said interest is allowable under section 57, as the borrowed funds have been transferred to the business concern for business exigencies. It was also explained that the borrowed fund were transferred to the related concern, who is also in the same line of business. However, related concern being a private limited company, as per the Companies Act, cannot borrow funds from the outsiders except financial institutions. Therefore, the assessee who is also a Director as well as shareholder in his Individual capacity in the related concern namely Khandelwal Jewellers Akol Pvt. Ltd., borrowed funds in his individual capacity and advanced the same to the Private Limited Company. 23. The Assessing Officer could not dispute that the transfer of borrowed funds is made to a sister concern. Non-charging of interest on loans given by an assessee cannot itself be a sufficient ground for disallowing interest paid by an assessee on loans taken by it in....
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.... point of view of commercial expediency and not from the point of view whether the amount is advanced for earning profits. 25. It is not correct that in every case interest on borrowed loan has to be allowed if the assessee advances it to a sister concern. It all depends on the facts and circumstances of the respective case. For instance, if the directors of the sister concern utilize the amount advanced to it by the assessee for their personal benefit, obviously it cannot be said that such money was advanced a measure of commercial expediency. However, money can be said to be advanced to a sister concern for commercial expediency in many other circumstances (which need not be enumerated here). 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, ordinary be entitled to deduction of interest on its borrowed loans-SA. Builders Ltd. v. CIT 2007) 158 Taxman 82 (SC). Interest paid on borrowed finds utilized for investment in group companies for strategic business purpose is allowable as deduction ....
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....inancial statements, wherein the application of funds, as contained in Page-27 of the Paper Book is also reproduced below for ready reference:- Particulars No. of Schedule Figures at the end of Current Financial year SOURCE OF FUNDS:- Promoter's Fund A Promotor's Capital A/c A 19405970.01 B Reserve & Surplus B 00 19405970.01 Loan Funds A Secured Loans C 9529106.16 B Unsecured Loans D 24746174.00 34275280.15 Current Liabilities & Provisions A Current Liabilities E 72065313.96 B Provisions F 61600.00 72126913.96 125808164.12 APPLICATION OF FUNDS:- Fixed Assets Opening WDV & Additions G 6692145.65 Less: Depreciation 237031.00 6455114.65 Investments H 151015.00 Current Assets, Loans....