DCIT CIRCLE- 3 (3)(1), MUMBAI V. M/S RELIANCE INDUSTRIAL INVESTMENT & HOLDINGS LTD, MUMBAI

ITA 37/MUM/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7827 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 02-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VINAY SINHA LD
• Assessee Lawyers: NIMESH BORA LD
• Keywords: Business income; Business expenditure; Source of fund; Commercial expediency; Rule 8D; Set aside
• Section: 143(3); 14A; 13

Judgement Text

M/S RELIANCE INDUSTRIAL INVESTMENT & HOLDINGS LTD. ASSESSMENT YEAR: 2013 - 14 1 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, VP AND HONBLE SHRI MANOJ KUM AR AGGARWAL, AM (HEARING THROUGH VIDEO CONFERENCING MODE) ./ I.T.A. NO. 37 /M UM/ 2020 ( / ASSESSMENT YEAR: 2013 - 14 ) D CIT CIRCLE 3(3 ) ( 1) , R. NO. 609 , 6 TH FLOOR AAYKAR BHAVAN, M. K. ROAD MUMBAI - 400 020 / VS. M/S RELIANCE I NDUSTRIAL INVESTMENT & HOLDINGS LTD. 9 TH FLOOR, MAKER CHAMBERS IV, 222 NARIMAN POINT, MUMBAI - 400 021 ./ ./ PAN/GIR NO. A A ACR - 5053 - R ( / APPELLANT ) : ( / RESPONDENT ) REVENUE BY : SHRI VINAY SINHA , LD. CIT - D R ASSESSEE BY : SHRI NIMESH BORA , LD. A R / DATE OF HEARING : 10 /08 /2021 / DATE OF PRONOUNCEMENT : 01/09/2021 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY REVENUE FOR ASSESSMENT YEAR (AY) 2013 - 14 ARISES OUT OF THE ORDER OF LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) - 8 , MUMBAI [CIT(A)], DATED 24/10 /20 19 IN THE MATTER OF ASSESSMENT FRAMED BY LD. AO U/S 143(3) OF THE ACT ON 29/12/2016. THE GROUND RAISED BY THE REVENUE READ AS UNDER : - 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN HOLDING THAT AMOUNT HAS BEEN GIVEN ON COMMERCIAL EXPEDIENCY WITHOUT APPRECIATING THAT THE ASSESSEE HAS NOT GIVEN ANY CREDIBLE M/S RELIANCE INDUSTRIAL INVESTMENT & HOLDINGS LTD. ASSESSMENT YEAR: 2013 - 14 2 EVIDENCE THAT RELIANCE HARYANA SEZ LTD. (RHS EZ) WAS NOT ABLE TO GET LOANS FROM OUTSIDE OR WILL NOT BE ABLE TO SURVIVE THE PRESSURE IF INTEREST @ 11.5% OR MORE IS CHARGED AND ON THE CONTRARY RELIANCE INDUSTRIES LTD. (RLL) FROM WHOM THE ASSESSEE COMPANY HAS TAKEN LOAN AT 11.5% COULD HAVE DIRECTLY ADVA NCED THE MONEY TO RHSEZ FROM WHOM INTEREST AT THE RATE OF 10.79% HAS BEEN CHARGED BY ASSESSEE? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN HOLDING THAT THE ASSESSEE HAS RECEIVED BOTH INTEREST F REE FUNDS AS WELL AS INTEREST BEARING FUNDS FROM RIL THEN, AN AVERAGE METHOD OF CHANGING OF INTEREST HAS TO BE PUT INTO PLACE AND THUS, THE AVERAGE RATE OF BORROWING COMES TO 2.99% WHEREAS THE INTEREST CHARGED BY THE ASSESSEE IS 10.79% WITHOUT APPRECIATING THAT THE ASSESSEE IN ITS OWN SUBMISSION SUBMITTED DATE WISE CHART OF INTEREST BEARING LOAN TAKEN FROM RIL AND ITS ADVANCEMENT TO FOUR CONCERNS WHICH CLEARLY SHOWS THAT AMOUNT RECEIVED FROM RIL HAS BEEN GIVEN AS LOAN ON THE SAME DAY TO ANOTHER CONCERN AT A LOWER RATE OF INTEREST? 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED RESTRICTING THE DISALLOWANCE TO RS.2,13,159/ - AND IN HOLDING THAT THE ASSES SEE'S SUO - MOTO DISALLOWANCE U/S 14A IS REASONABLY FA IR WITHOUT APPRECIATING THE DECISION OF THE HON'BLE ITAT, AHMEDABAD BENCH IN THE CASE OF DC1T VS. KARSAN KANJI RAGHVANI 2019 - TIOL - 1393 - ITAT - AHM, WHEREIN THE TRIBUNAL HAS HELD THAT DISALLOWANCE SHOULD BE RESTRICTED TO THE TOTAL EXPENDITURE CLAIMED BY THE AS SESSEE? 4. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. AS EVIDENT, IN GROUND NOS.1 & 2, THE REVENUE IS AGGRIEVED BY DELETION OF INTEREST DISALLOWANCE WHICH WAS MADE BY LD. AO WHILE FRAMING THE ASSESSMENT. IN GROUND NO.3, THE REVENUE IS AGGRIEVED BY RELIEF GRANTED BY LD. CIT(A) ON THE ISSUE OF DISALLOWANCE U/S 14A. GROUND NO.4 IS GENERAL IN NATURE. 2. THE LD. CIT - DR ADVANCED ARGUMENT THAT THERE WAS ONE - TO - ONE NEXUS BETWEEN THE BORROWED FUNDS AND ADVANCES GRANTED BY THE ASSESSEE. THE ADVANCES WERE MADE AT LOWER RATE OF INTEREST AND IN THE ABSENCE OF ANY COMMERCIAL / BUSINESS EXPEDIENCY, THE INTEREST DISALLOWANCE AS MADE BY LD.AO WAS JUSTIFIED. THE LD. AR, ON THE OTHER HAND, SUBMI TTED THAT THERE WAS SUFFICIENT INTEREST FREE OWN FUNDS WITH THE ASSESSEE AND THE ADVANCES WERE OUT OF COMMERCIAL EXPEDIENCY. THE LD. AR CITED VARIOUS JUDICIAL PRONOUNCEMENTS AS ENUMERATED IN THE IMPUGNED ORDER GRANTING RELIEF TO THE ASSESSEE . M/S RELIANCE INDUSTRIAL INVESTMENT & HOLDINGS LTD. ASSESSMENT YEAR: 2013 - 14 3 3. WE HAVE C AREFULLY HEARD THE RIVAL SUBMISSIONS AND PERUSED RELEVANT MATERIAL ON RECORD INCLUDING THE DOCUMENTS PLACED IN THE PAPER - BOOK. WE HAVE ALSO DELIBERATED ON VARIOUS JUDICIAL PRONOUNCEMENTS AS CITED DURING THE COURSE OF HEARING BEFORE US. OUR ADJUDICATION TO THE SUBJECT MATTER OF APPEAL WOULD BE AS GIVEN IN SUCCEEDING PARAGRAPHS. ASSESSMENT PROCEEDINGS 4 . THE MATERIAL FAC TS ARE THAT THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE IS STATED TO BE ENGAGED IN THE BUSINESS OF MAKING INVESTMENT, ADVANCING LOANS AND TRADING IN PETROLEUM PRODUCTS. WHILE FRAMING ASSESSMENT U/S 143(3) , LD. AO MADE INTEREST DISALLOWANCE U/S 36(1)(III) & ANOTHER DISALLOWANCE U/S 14A. THE SAME ARE THE SUBJECT MATTER OF DISPUTE BEFORE US. 5 . INTEREST DISALLOWANCE U/S 36(1)(III) 5 .1 THE ASSES SEE DEBITED INTEREST EXPENSES OF RS.371.83 CRORES IN THE PROFIT & LOSS ACCOUNT WHICH WAS PAID TO ITS HOLDING COMPANY I.E. M/S RELIANCE INDUSTRIES LTD. (RIL) AGAINST FUNDS ADVANCED BY THE PARENT COMPANY. T HE ASSESSEE ALSO EARNED INTEREST INCOME OF RS.342.02 CRORES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, I T TRANSPIRED THAT THOUGH THE ASSESSEE PAID INTEREST @11.5% TO M/S RIL , HOWEVER, IT CHARGED INTEREST AT LOWER RATE S AS DETAILED BELOW : - NO. NAME OF THE CONCERN RATE OF INTEREST CHARGED BY THE ASSESSEE 1. RELIANCE HARYANA SEZ LTD. (RHSL) 10.79% 2. INFOTEL TELECOM INF. PVT. LTD. 9% 3. SHINANO RETAIL PVT. LTD 9% 4. RELIANCE POLYFINS LTD. 14% M/S RELIANCE INDUSTRIAL INVESTMENT & HOLDINGS LTD. ASSESSMENT YEAR: 2013 - 14 4 ACCORDINGLY, LD. AO PROCEEDED TO COMPUTE INTEREST DISALLOWANCE U/S 36(1)(III) AND THE ASSESSEE WAS ASKED TO JU STIFY CHARGING LESS E R RATE OF INTEREST AND ALSO SHOW COMMERCIAL EXPEDIENCY FOR GRANTING THE LOANS AT LESSER RATES. 5 .2 THE ASSESSEE, INTER - ALIA, SUBMITTED THAT AS PER THE PROVISIONS OF SEC. 36(1)(III), INTEREST ON BORROWINGS WOULD BE AN ALLOWABLE BUSINESS EXPENDITURE PROVIDED THE BORROWED FUNDS WERE USED FOR THE PURPOSE OF BUSINESS. SINCE THE GRANTING OF LOANS AND ADVANCES IS THE BUSINESS OF THE ASSESSEE AND BORROWED FUNDS HAVE BEEN USED FOR THE PURPOSES OF BUSINESS, NO DISALLOWANCE C OULD BE MADE U/S 36(1) (III) SINCE ALL THE CONDITIONS PRESCRIBED THEREIN WERE DULY FULFILLED BY THE ASSESSEE . IT WAS FURTHER SUBMITTED THAT MAJORITY OF FUNDS WERE ADVANCE D TO ITS SISTER CONCERN NAMELY M/S RELIANCE HARYANA SEZ LTD. (RHS L ) WHICH WAS SUBSIDIARY OF FELLOW SUBSIDIARY I.E. M/S RELIANCE VENTURE LIMITED (RVL) WHICH , IN TURN, WAS SUBSIDIARY OF M/S RIL. THE ASSESSEE WAS ALSO SUBSIDIARY OF M/S RIL . IN THE ABOVE BACKGROUND, THE ASSESSEE SOUGHT TO DEMONSTRATE THE COMMERCIAL EXPEDIENCY OF GRANTING THE LOANS AT LOWER RATE OF IN TEREST. 5 .3 IT WAS SUBMITTED THAT THE LOAN S WERE GRANTED FOR BUSINESS PURPOSES AS A MEASURE OF COMMERCIAL EXPEDIENCY SINCE M/S RHS L UTILIZED THE FUNDS FOR DE VELOPING THE SPECIAL ECONOMIC ZONE ( SEZ ) WHICH WAS EVIDENT FROM ITS FINANCIAL STATEMENTS. IT WAS AL SO SUBMITTED THAT M/S RHS L EARNED MIN I SCULE REVENUE SINCE IT WAS NEWLY INCORPORATED ENTITY AND THE PROJECT WAS AT UNDER - DEVELOPME NT STA GE. THAT ENTITY INCURRED LOSSES AND THE PROJECT WAS BEING FINANCED MAINLY BY THE LOAN FUNDS PROVIDED BY THE ASSESSEE COMP ANY. THEREFORE, TO PROTECT THE INTEREST O F THE GROUPS IN THE BUSINESS OF M/S RHSL AND AS A MEASURE OF M/S RELIANCE INDUSTRIAL INVESTMENT & HOLDINGS LTD. ASSESSMENT YEAR: 2013 - 14 5 COMMERCIAL EXPEDIENCY, LOANS WERE GRANTED AT CONCESSIONAL RATE. RELIANCE WAS PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF S.A. BUILDERS V/S CIT ( 288 ITR 1 ) WHICH HELD THAT MONEY COULD BE SAID TO BE ADVANCED TO A SISTER CONCERN FOR COMMERCIAL EXPEDIENCY. IF THE HOLDING COMPANY ADVANCES BORROWED MONEY TO SUBSIDIARY AND THE FUNDS WERE USED BY THE SUBSIDIARY FOR THE PURPOSES OF BUSINESS, THE A SSESSEE WOULD BE ENTITLED FOR DEDUCTION OF INTEREST ON BORROWED FUNDS. 5 .4 HOWEVER, LD. AO OPINED THAT THERE WAS ONE - TO - ONE CORRELATION BETWEEN THE INTEREST BEARING LOANS OBTAINED BY THE ASSESSEE AND THE ADVANCES GRANTED TO THE ABOVE ENTITIES. THE ASSESSE E COULD NOT DEMONSTRATE COMMERCIAL EXPEDIENCY OF GRANTING LOANS AT LOWER RATES AND THEREFORE, D ISALLOWANCE U/S 36(1)(III) WAS TO BE COMP UT ED. 5 .5 FINALLY, LD. AO A PPLYING BENCHMARKING RATE OF 11.5% COMPUTED INTEREST DISALLOWANCE OF RS.22.59 CR ORES U/S 36( 1)(III) AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. THE WORKING OF THE SAME H AS BEEN TAB ULATED IN PARA 5.6 OF THE ASSESSMENT ORDER. THE SAME IS ALSO EXTRACTED BELOW FOR THE SAKE OF READY REFERENCE: - NAME OF THE CONCERN RATE OF INTEREST CHARGED INTER EST INCOME EARNED DIFFERENTIAL RATE (11.5% MINUS INTEREST CHARGED) DISALLOWANCE U/ S 36(L)(III) RELIANCE HARYANA SEZ LTD. 10.7853% 337,29,82,960 0.7147 22,35,14,498 INFOTEL TELECOM INFRASTRUCTURE P. LTD. 9% 77,30,137 2.5 21,47,260 SHINANO RETAIL PVT. LTD . 9% 10,50,164 2.5 2,91,712 TOTAL 22,59,53,470 M/S RELIANCE INDUSTRIAL INVESTMENT & HOLDINGS LTD. ASSESSMENT YEAR: 2013 - 14 6 6 . DISALLOWANCE U/S 14A THE ASSESSEE EARNED EXE MPT DIVIDEND INCOME OF RS.259.26 LACS AND OFFERED SUO - MOTO DISALLOWANCE U/S 14A OR RS.2.13 LACS. THE SAME WAS COMPUTED ON THE BASIS OF 1/4 TH OF EXPENDITURE U NDER VARIOUS HEAD S . HOWEVER, LD. AO INVOKING RULE 8D, COMPUTED INDIRECT EXPENSE DISALLOWANCE U/R 8D(2)(III) FOR RS.1052.60 LACS, BEING 0.5% OF AVERAGE VALUE OF INVESTMENTS. SINCE THE ASSESSEE HAD CLAIMED EXPENSES OF RS.11 LACS O NLY, THE DISALLOW A NCE WAS R ESTRICTED TO THE EXTENT OF RS.11 LACS. APPELLATE PROCEEDINGS 7 .1 DURING APPELLATE PROCEEDINGS, THE ASSESSEE REITERATED THAT BORROWED FUNDS WERE UTILIZED FOR BUSINESS PURPOSES AND THEREFORE, INTEREST WOULD BE FULLY ALLOWABLE U/S 36(1)(III). RELIANCE WAS PLA CED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF HERO CYCLES (P.) LTD. ( 379 ITR 347 ) WHICH HELD THAT ONCE IT WAS ESTABLISHED THAT THERE WAS NEXUS BETWEEN THE EXPENDITURE AND THE PURPOSE OF THE BUSINESS, THE REVENUE CANNOT JUSTIFIABLY CLAIM TO PU T HIMSELF IN THE ARMCHAIR OF THE BUSINESSMAN OR IN THE POSITION OF BOARD OF DIRECTORS AND ASS UME THE ROLE TO DECI DE AS TO HOW MUCH IS REASONABLE EXPENDITURE HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE. NO BUSINESSMAN COULD BE COMPELLED TO MAXIMIZE HIS P ROFITS AND REVENUE MUST PUT TH EMSELVES IN THE SHOES OF THE ASSESSEE AND SEE HOW A PRUDENT BUSINESSMAN WOULD A C T. THE AUTHORITIES MUST NOT LOOK A T THE MATTER FROM THEIR OWN VIEW POINT BUT THAT OF A PRUDENT BUSINESSMAN . RELIANCE WAS ALSO PLACED ON SIMILAR O THER JUDICIAL PRONOUNCEMENTS TO SUPPORT THE FACT THAT INTEREST WAS FULLY ALLOWABLE U/S 36(1)( III) SINCE THE PRESCRIBED CONDITIONS AS ENUMERATED THEREIN WERE DULY FULFILLED BY THE ASSESSEE. IN MADHAV PRASAD J ATIA V/S M/S RELIANCE INDUSTRIAL INVESTMENT & HOLDINGS LTD. ASSESSMENT YEAR: 2013 - 14 7 CI T ( AIR 1979 SC 1291 ) , IT WA S HELD THAT THE EXPRESSION FOR THE PURPOSE OF BUSINESS WOULD BE WIDER IN SCOPE THAN THE EXPRESSION FOR THE PURPOSE OF EARNING INCOME, PROFITS OR GAINS . 7 .2 ALTERNATIVELY, THE ASSESSEE ALSO SUBMITTED THAT IT HAD OBTAINED INTEREST FREE FUNDS OF RS . 1394 CRORES FRO M M/S RIL WHICH WERE ALSO USED TO MAKE AD VANCE S AND THEREFORE, DISALLOWANCE U/S 36(1)(III) WAS TO BE COMPUTED BY TAKING AVERAGE RATE OF BORROWINGS. FOR THE SA ID POPOSITION , RELIANCE WAS PLACED ON THE DECISION OF HONBLE SUPREME COURT IN CIT V/S RELIANCE IN DUSTRIES LTD. ( 410 ITR 466 ) AND CIT V/S R ELIANCE UTILITIES & POWER LTD. ( 313 ITR 340 ) WHEREIN IT WAS HELD THAT IN CASE INTEREST FREE FUNDS WERE AVAILABLE THE ASSESSEE , IT COULD BE PRESUMED THAT THE INVESTMENTS WERE MADE FROM INTERE S T FREE FUNDS. 7 .3 THE L D. CIT(A) , AFTER GOING THROUGH ASSESSEES SUBMISSIONS, CONCURRED THAT THE LOANS WERE GIVEN OUT OF COMMERCIAL EXPEDIENCY AND OUT OF BUSINESS EXIGENCY , NAMELY TO DEVELOP A S PECIAL ECONOMIC Z ONE IN GURGAON. TH IS WAS AS PER THE RATIO OF DECISION OF HON BLE MYS ORE HIGH COURT IN CIT V / S UNITED BREWERIES ( 89 ITR 17 ) WHICH HELD THAT BUSINESS OF SUBSIDIARY COULD BE REGARDED AS THE BUSINESS OF THE PARENT COMPANY. FURTHER, IN THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF S.A. BUILDERS V/S CIT (288 ITR 1), IT WA S HELD THAT IT WAS ENOUGH TO SHOW THAT THE MONEY WAS EXPANDED NOT OUT OF NECESSITY AND WITH A VIEW TO DIRECT AND IMMEDIATE BENEFIT BUT VOLUNTARILY AND ON GROUNDS OF COMMERCIAL EXPEDIENCY AND IN ORDER TO INDIRECTLY FACILITATE THE CARRYING ON THE BUSINESS. T HE EXPRESSION COMMERCIAL EXPEDIENCY WAS OF WIDE IMPORT AND WOULD INCLUDE SUCH EXPENDITURE AS A PRUDENT BUSINESSMAN WOULD INCUR FOR THE PURPOSE OF BUSINESS. THE EXPENDITURE MAY NOT HAVE BEEN INCURRED UNDER ANY LEGAL OBLIGATION BUT YET IS ALLOWABLE A S BUSINE SS M/S RELIANCE INDUSTRIAL INVESTMENT & HOLDINGS LTD. ASSESSMENT YEAR: 2013 - 14 8 EXPENDITURE IF IT WAS INCURRED ON GROUNDS OF COMMERCIAL EXPEDIENCY. THEREFORE, THE IMPUGNED DISALLOWANCE AS MADE BY LD. AO WAS TO BE DELETED. 7 .4 H AVING HELD SO, LD . CIT(A) ALSO OBSERVED THAT THE ASSESSEE HAD OBTAINED INTEREST FREE FUNDS AS WELL AS INTE REST BEARING FUNDS FROM M/S RIL. CONSIDERING T HE COMBINED FUNDS, THE AVERAGE RATE OF INTEREST PAID BY THE ASSESSEE WAS MERELY 2.99% WHICH WAS MUCH LESS THAN THE INTEREST CHARGED FROM M/S RHSL. THE WORKING OF THE AVERAGE RATE HAS BEEN TABULATED ON PAGE NO S . 38 TO 41 OF THE IMPUGNED ORDER. THEREFORE, DISALLOWANCE WOULD NOT BE JUSTIFIED FROM THIS ANGLE ALSO. 7 .5 R EGARDING DISALLOWANCE U/S 14A, IT WAS OBSERVED BY LD. CIT(A) THAT OUT OF TOTAL EXPENDITURE OF RS.14.34 LACS AS CLAIMED BY THE ASSESSEE, THE ASSESSEE HAD SUO - MOTO DISALLOW ED RS.2.13 LACS U/S 14A AND ANOTHER DISALLOWANCE OF RS.5.77 LACS WAS ALSO MADE AS BALANCES WRITTEN OFF . AS AGAINST THIS, LD. AO DISALLOWED ENTIRE EXPENSES DEBITED TO PROFIT & LOSS ACCOUN T WHICH COULD NOT BE HELD TO BE JUSTIFIED. THE DISALLOWANCE OFFERED BY ASSESSEE U/S 14A WAS REASONABLE AND FAIR AND THEREFORE, THE DISALLOWANCE AS MADE BY L D. AO WAS TO BE DELETED. AGGRIEVED AS AFORESAID THE REVENUE IS IN FURTHER APPEAL BEFORE US. OUR FINDINGS AND ADJUDICATION 8 . FROM TH E FACTS ON RE CORD, IT COULD BE OBSERVED THAT THE ASSESSEE IS A SUBSIDIARY OF M/S RIL AND IS ENGAGED IN BUSINESS OF MAKING INVESTMENTS AND ADVANCING LOANS. UNDISPUTEDLY, THE I NTEREST INCOME AS WELL AS INTEREST OUTGO HAS BEEN ASSESSED AS BUSINESS INCOME ONLY . THE ASSES SEE IS A SUBSIDIARY OF M/S RIL AND OBTAINS LOANS FROM PARENT ENTITY ON REGULAR BASIS. THE LOANS ARE INTEREST FREE AS WELL AS INTEREST BEARING LOANS. DURING THE YEAR, IT HAS OBTAINED LOAN FROM M/S RIL M/S RELIANCE INDUSTRIAL INVESTMENT & HOLDINGS LTD. ASSESSMENT YEAR: 2013 - 14 9 @11.5% AND ADVANCED TO ITS VARIOUS GROUP ENTITIES, THE M AJOR PORTION BEING ADVANCED TO M/S RHSL AT RATE OF 10.79%. M/S RHSL IS A SUBSIDIARY OF M/S RVL , WHICH, IN TURN, IS ALSO SUBSIDIARY OF M/S RIL. IN OTHER WORDS, THE LOANS HAVE BEEN ADVANCED BUY THE ASSESSEE TO SUBSIDIARY OF A FELLOW SUB SIDIARY. IT IS EVIDENT THAT M/S RHSL HAS BEEN INCORPORATED AS A SPECIAL PURPOSE VEHICLE B ETWEEN M /S RVL AND M/ S HSIIDC (GOVT. AUTHORITY) FOR THE PURPOSE OF PROCURING THE LAND TO DEVELOP A SEZ. IT HAS ACQUIRED 1384 ACRES OF LAND FROM HSIIDC FOR THE SAID PURPOSE. M/S RVL HOLDS 92 .5% SHARES IN THIS ENTITY WHEREIN REMAINING 7.5% SHARES ARE HELD BY M/S HSIIDC. M/S RHSL HAS NO SOURCE OF FUND AND IT IS FULLY DEPENDENT ON OTHER GROUP ENTITIES. THE FUNDS HAVE ULTIMATELY BEEN PROVIDED BY THE PARENT ENTITY I.E. M/S RIL THOUGH ITS INVESTMEN T ARM I.E. THE ASSESSEE. THUS, THE MAIN OBJECTIVE WAS TO PROCURE THE LAND AND DEVELOP SEZ. ON THE GIVEN FACTS, IT COULD BE SEEN THAT THERE WAS COMMERCIAL EXPEDIENCY FOR THE ASSESSEE TO GRANT THE LOAN TO M/S RHSL SINCE THE SUCCESS OF RHSL WOULD IMPACT THE BUSINESS INTEREST AS WELL AS PROFITABILITY OF THE GROUP AS A WHOLE . THE MAIN OBJECTIVE WAS NOT TO EARN THE INTEREST BUT TO FURTHER THE BUSINESS INTEREST OF THE GROUP AS A WHOLE. HENCE, NO INFIRMITY COULD BE FOUND IN THE CONCLUSION OF LD. CIT(A) THAT THE FU NDS WERE ADVANCED OUT OF COMMERCIAL EXPEDIENCY / BUSINESS EXIGENCIES. THE CASE LAW OF CIT V / S UNITED BREWERIES ( 89 ITR 17 ), AS REFERRED TO BY LD. CIT(A) , DULY SUPPORT THE SAID PROPOSITION. THE SAME IS ALSO SUPPORTED BY THE DECISION OF HONBLE SUPREME COUR T IN THE CASE OF S.A. BUILDERS V/S CIT (288 ITR 1) WHEREIN IT WAS HE LD THAT IT WAS ENOUGH TO SHOW THAT THE MONEY WAS EXPANDED NOT OUT OF NECESSITY AND WITH A VIEW TO DIRECT AND IMMEDIATE BENEFIT BUT VOLUNTARILY AND ON GROUNDS OF M/S RELIANCE INDUSTRIAL INVESTMENT & HOLDINGS LTD. ASSESSMENT YEAR: 2013 - 14 10 COMMERCIAL EXPEDIENCY AND I N ORDER TO INDIRECTLY FACILITATE THE CARRYING ON THE BUSINESS. THE EXPRESSION COMMERCIAL EXPEDIENCY WAS OF WIDE IMPORT AND WOULD INCLUDE SUCH EXPENDITURE AS A PRUDENT BUSINESSMAN WOULD INCUR FOR THE PURPOSE OF BUSINESS. THE EXPENDITURE MAY NOT HAVE BEEN IN CURRED UNDER ANY LEGAL OBLIGATION BUT YET IS ALLOWABLE AS BUSINESS EXPENDITURE IF IT WAS INCURRED ON GROUNDS OF COMMERCIAL EXPEDIENCY. THEREFORE, WE CONCUR WITH THE CONCLUSIONS DRAWN BY LD. CIT(A), IN THIS REGARD. 9. HAVING HELD SO, WE FIND THAT THE ONLY R EQUIREMENT TO CLAIM INTEREST EXPENDITURE U/S 36(1)(III) IS THAT THE BORROWED FUNDS SHOULD HAVE BEEN EXPANDED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES. WE FIND THAT IT IS UNDISPUTED FACT THAT THERE IS ONE - TO - ONE CORRELATION BETWEEN THE BORROWED FUNDS AN D THE ADVANCES GRANTED BY THE ASSESSEE. THE FUNDS HAVE BEEN LENT FOR BUSINESS PURPOSES SINCE THE MAIN OBJECTIVE WAS TO DEVELOP THE SEZ. THEREFORE, IN OUR CONSIDERED OPINION, THE PRIMARY REQUIREMENT TO CLAIM DEDUCTION U/S 36(1)(III) W AS DULY FULFILLED BY TH E ASSESSEE. THE LD. CIT(A) HAS COMPUTED AVERAGE BORROWING RATE @2.99% WHICH WOULD FURTHER SUPPORT THE CASE OF THE ASSESSEE ONLY. THEREFORE, ON THE GIVEN FACTS AND CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER, IN THIS REGARD. GROUND NOS . 1 & 2 STAND DISMISSED. 10. SO FAR AS THE DISALLOWANCE U/S 14A IS CONCERNED, IT IS UNDISPUTED FACT THAT THE ASSESSEE HAS CLAIMED EXPENDITURE OF RS.11 LACS ONLY OUT OF WHICH IT HAS ALREADY OFFERED SUO - MOTO DISALLOWANCE OF RS. 2 . 13 LACS U/S 14A AND ANOTHER D ISALLOWANCE OF RS. 5.77 LACS AS BALANCES WRITTEN OFF . IT COULD BE SEEN THAT THE A SSESSEE IS A CORPORATE ENTITY AND IT WOULD N ECESSARILY BE REQUIRED TO INCUR ROUTINE EXPENDITURE TO MAINTAIN ITS M/S RELIANCE INDUSTRIAL INVESTMENT & HOLDINGS LTD. ASSESSMENT YEAR: 2013 - 14 11 CORPORATE PERSONALITY. THEREFORE , NO FURTHER DISALLOWANCE WOUL D BE WARRANTED ON THE GIVEN FACTS. BY CONFIRMING THE STAND OF LD. CIT(A) ON THIS I SSUE, WE DISMISS G ROUND NO.3 OF THE APPEAL. CONCLUSION 11. THE APPEAL STAND DISMISSED. ORDER PRONOUNCED ON 1 ST SEPTEMBER, 2021 SD/ - SD/ - (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) / VICE PRESIDENT / ACCOUNTANT MEMBER MUMBAI; DATED : 01/09/2021 SR.PS, DHANANJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE / BY ORDER, / (DY./ASSTT.R EGISTRAR) , / ITAT, MUMBAI.