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The Tax PublishersITA No. 489/DEL/2017
2020 TaxPub(DT) 2301 (Del-Trib) : (2020) 082 ITR (Trib) 0258INCOME TAX ACT, 1961
Section 36(1)(iii)
Assessee having advanced interest-free loans to sister concern for equity infusion in associate concerns and not for business purpose, AO rightly disallowed assessee's claim proportionately on the ground that assessee had advanced interest-free loans to sister concern.
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Business deduction under section 36(1)(iii) - Interest on borrowed capital - Advancement of interest-free loan to sister concern - No business expediency
Assessee claimed deduction under section 36(1)(iii). AO disallowed assessee's claim proportionately on the ground that assessee had advanced interest free loans to sister concern. Assessee's case was that advances were given due to business expediency. Held: From the persual of the facts, it could be seen that loan was taken for the purpose of 'equity infusion' in associate concerns. Since, entire fund was diverted for equity infusion in associate concerns, funds borrowed were not utilized for business purposes. Accordingly, disallowance made by AO was justified.
Distinguished:Hero Cycles (P) Ltd. v. CIT (2015) 379 ITR 347 (SC) : 2015 TaxPub(DT) 4897 (SC)
REFERRED :
FAVOUR : Against the assessee.
A.Y. : 2013-14
INCOME TAX ACT, 1961
Section 56(2)(viiib)
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