2015 (11) TMI 1913

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....h regard to disallowance of interest to the extent of Rs. 45,81,145/-. 2. Sh. Philip George, the Ld. counsel for the assessee, submitted that the assessee-company advanced interest free loan on account of demerger to M/s TT Enterprises Pvt. Ltd., M/s TT Trading Pvt. Ltd. and M/s TT Insurance Braking Services Pvt. Ltd. The Assessing Officer disallowed the interest paid by the assessee on the borrowed funds on the ground that the interest expenditures were not used for the business purposes. On appeal by the assessee, the CIT(Appeals) found that the assessee failed to establish the interest free loans given to the group concerns were for business purpose. According to the Ld. counsel, the assessee advanced loan on account of demerger of TT....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ndia (P.) Ltd. (2013) 217 Taxman 362 and on the judgment of Bombay High Court in CIT v. Reliance Communications Infrastructure Ltd. (2013) 260 CTR 159 and that of the Delhi High Court in CIT v. Dalmia Cement Bharat Ltd. (2011) 330 ITR 595. 4. On the contrary, Shri A.V. Sreekanth, the Ld. Departmental Representative, submitted that the assessee has not filed any material to substantiate that the interest free loan was given for business purpose of the group concerns. On a query from the Bench, when the Assessing Officer herself found that the loan was advanced on account of demerger of TT Enterprises Ltd., whether the payment made by the assessee on account of demerger is for commercial expediency or not, the Ld. D.R. clarified that befor....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....dvancing the money that merely because a third party benefits out of the advance, there cannot be any disallowance of interest. The Apex Court has found that "for the purpose of business" included expenditure voluntarily incurred for commercial expediency also. The Apex Court further found that the expenditure may not have been incurred under legal obligation but, yet it is an allowable expenditure if it is incurred on the ground of commercial expediency. Therefore, what is to be seen is whether there was any commercial expediency in advancing money by the assessee to other sister concerns. As observed by the Apex Court, the Revenue cannot put itself in the arm-chair of the businessman and assume what is reasonable expenditure and what is n....