Disallowance of interest on loan given to subsidiary unjustified as investment was purely for commercial expediency

Aban Offshore Limited Vs DCIT (ITAT Chennai)

ITAT Chennai held that disallowance of interest u/s 36(1)(iii) of the Income Tax Act on loans and advances given to subsidiary company unjustified as investment in subsidiary is purely for commercial expediency.

Facts- The assessee is a Public Ltd Company, engaged in the business of offshore drilling and production services to companies engaged in exploration, development of oil and gas, both in domestic and international markets.

The case of the assessee was reopened u/s. 147 of the Act and the assessment has been completed u/s. 143(3) r.w.s. 147 of the Act on 26.12.2018, and determined total income in the re- assessment was at Rs. 455,28,83,672/-, after disallowing Rs. 8,61,33,985/- u/s. 40(a)(ia) of the Act towards payment made outside India without TDS to M/s. Haledon International Corporation and Rs. 50,02,70,902/- u/s. 37(1) of the Act, on account of disallowance of foreign exchange loss.

CIT(A) partly allowed appeal filed by the assessee. Aggrieved by the CIT(A) order, the assessee has preferred the present appeal.

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