2018 (10) TMI 2070

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....p;11,69,841/- on account of interest paid to banks as the assessee utilized the borrowed funds to advance the interest free loans to sister concern for the business purposes whereas it is settled law that if any person advanced interest free loans to his sister concern due to commercial expediency than interest paid to banks cannot be disallowed. Hence the addition of Rs. 11,69,841/- may kindly be deleted or in the alternative deduction of interest payment to the bank was clearly allowable under law as section 57(lll) of the Income tax Act and may allowed." 2. The facts are that addition of Rs. 11,69,841/- was made by the AO out of interest paid on borrowed funds on the ground of diversion of funds to the assessee received inte....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....he assessee. 3. The ld. CIT (A) has held as follows: "As observed from the provisions of section 57(iii) of the Act, it is clearly envisaged that deduction may be allowed to an assessee wherein only when 'any expenditure laid out or expended wholly and exclusively for the purpose of making or earning such income.' However in the facts of the instant appeal, the aforesaid condition or requirement of section 57(iii) is not met with by the appellant as in its case no interest income has been earned on the deposits made with Neoteric Developers Pvt. Ltd. The appellant has not challenged the working of interest made by the AO on the loans utilized for the investment in two companies from where interest has been earned. At the sam....