S. A. Builders Ltd. .. Petitioner vs Commissioner Of Income Tax (Appeals) ... on 14 December, 2006
41. We observe that there is no dispute to the fact that assessee has not used
borrowed funds for giving interest free advances to its sister concerns. The borrowed
fund has been utilized by the assessee for its business purposes. Hence, there is no
nexus between the interest free advances given by the assessee to its sister concerns
and money borrowed by the assessee on which interest has been claimed by the
assessee in its profit and loss account. The case of S.A. Builders (supra) relied upon by
ld D.R. is not applicable to the facts of the case as in that case, Hon'ble Supreme Court
observed that assessee borrowed funds from the bank and lent some of it to its sister
concern (subsidiary) as interest free loan. In that context, it was held that there was
not commercial expediency to advance to sister concern and, accordingly, interest was
disallowed, which is not a case before us. Hence, we do not find any infirmity in the
order of ld CIT(A) to delete the disallowance of interest made by the AO. Accordingly,
we uphold order of ld CIT(A) and reject Ground No.(e) of the appeal taken by
department.