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| The Tax Publishers2019 TaxPub(DT) 4021 (Del-Trib) INCOME TAX ACT, 1961
Section 36(1)(iii)
As evident, no amount was actually paid by assessee to its AE. The amount remaining outstanding against AE was on account of advertisement and brand promotion expenses which had been incurred by the assessee but debited to the account of the holding company but interest was not charged due to commercial expediency inasmuch as the assessee undoubtedly would be benefited by making advertisement of the brand name Adidas to augment and promote sale effected by assessee in notified territories accordingly no disallowance of deduction under section 36(1)(iii) was called for.
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Business deduction under section 36(1)(iii) - Interest on borrowed capital - Interest free advance to sister concern - Commercial expediency
Assessee claimed deduction under section 36(1)(iii). AO disallowed assessee's claim proportionately on the ground of assessee having advanced interest free loan to its AE out of borrowed funds, on which, assessee paid interest.Held: As evident, no amount was actually paid by assessee to its AE. The amount remaining outstanding against AE was on account of advertisement and brand promotion expenses which had been incurred by the assessee but debited to the account of the holding company but interest was not charged due to commercial expediency inasmuch as the assessee undoubtedly would be benefited by making advertisement of the brand name adidas to augment and promote sale effected by assessee in notified territories accordingly, no disallowance of deduction under section 36(1)(iii) was called for.
Relied:S.A. Builders Ltd. v. CIT (2007) 288 ITR 1 (SC) : 2007 TaxPub(DT) 833 (SC).
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2006-07
INCOME TAX ACT, 1961
Section 32(1)
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