Dismissing the appeal of the revenue the court held that the Tribunal had rightly allowed the deduction claimed by the assessee under section 36(1)(iii) . By its investment in the share capital of GR, the assessee was to acquire a controlling stake in GR which was also engaged in the business of real estate development and therefore, there was a direct nexus between the expenditure incurred and the purpose of business. Followed Hero Cycles (P) Ltd. v. CIT [2015] 379 ITR 347 (SC) and S. A. Builders Ltd. v. CIT (A) [2007] 288 ITR 1 (SC) . As regards other transactions of the interest-free advance made by the assessee, the Tribunal had given finding that the assessee had sufficient interest free funds .( AY.2014-15)
PCIT v .Gaursons Realty Pvt. Ltd. (2020)422 ITR 123 /104 CCH 0733/ 274 Taxman 512 (Delhi) (HC)
S. 36(1)(iii) :Interest on borrowed capital – Borrowed from banks and advanced to sister concern- Commercial expediency – Sufficient interest free fund was available – Deletion of disallowance is held to be justified .