Commercial expediency supports interest deductions where interest-free advances fund a wholly owned subsidiary's genuine group business project.

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....Commercial expediency of interest-free advances to a wholly owned subsidiary should be assessed from the perspective of a prudent businessman, without substituting the Revenue's commercial judgment. The note addresses deduction of interest on borrowed funds advanced to a special purpose vehicle formed to acquire land for group business operations. Documentary evidence of the subsidiary's land-acquisition purpose, subsequent lease of the land for the proposed business, and a board-approved start-up interest holiday supports the business purpose of the advance. Delay in completing land-acquisition formalities does not, by itself, negate that purpose. Interest expenditure under section 36(1)(iii) is described as allowable, with the disallowance deleted.....