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| The Tax Publishers2019 TaxPub(DT) 3204 (Kol-Trib) INCOME TAX ACT, 1961
Section 36(1)(iii)
As granting of interest-free loan to subsidiary company became imperative as a business expediency, therefore, no disallowance of deduction under section 36(1)(iii) could be made.
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Business deduction under section 36(1)(iii) - Interest on borrowed capital - Interest-free loan given to subsidiary company - Commercial expediency
Assessee-firm claimed deduction under section 36(1)(iii). AO disallowed assessee's claim proportionately on the ground of assessee having advanced interest free loans to its subsidiary company. Held: AO could not justifiably put himself in arm-chair of businessman and assume role to decide how much was reasonable interest to be charged on loan given to subsidiary. As granting of interest free loan to subsidiary company became imperative as a business expediency, therefore, no disallowance of deduction under section 36(1)(iii) could be made.
Followed:S.A. Builders Ltd. (2007) 288 ITR 01 (SC) : 2007 TaxPub(DT) 0833 (SC) and also in the case of S.P. Jaiswal Estates Pvt. Ltd. (2012) 147 TTJ 649 (Kol.-Trib.) (TM) : 2012 TaxPub(DT) 2577 (Kol-Trib), Munjal Sales Corporation v. CIT (2008) 168 Taxman 43 (SC) : 2008 TaxPub(DT) 1671 (SC) and Hero Cycles (P.) Ltd. v. Commissioner of Income Tax (Central) (2015) 379 ITR 347 (SC) : 2015 TaxPub(DT) 4897 (SC)
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2014-15
INCOME TAX ACT, 1961
Section 37(1)
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