Allowance of interest on bank loan is case of Advance to subsidiary & Loans to directors out of reserves

CA.V.Vivek Rajan Brief Facts AY-1988-1989 a. The assessee had advanced a sum of Rs.1,16,26,128 to its subsidiary company, Hero Fibers Limited and this advance did not carry any interest. The assessee had also borrowed money from the banks at the rate of interest of 18% and had claimed this interest as business expenditure. The claim of interest was Rs.20,53,120. b. The assessee had also given advances to its own directors for a sum of Rs. 34 Lakhs on which interest was charged at the rate of 10%. Question of Law a. Whether the advances given to the subsidiary falls within th...