of the assessee company to one of its subsidiary companies. The Assessing Officer considered this interest-free loan as a diversion of borrowed funds, since the cash credit account of the assessee showed a huge debit balance. Proportionate interest relating to the said amount was disallowed out of the total interest paid to the bank. While the first appellate authority granted some relief, the Tribunal upheld the disallowance as made by the Assessing Officer. The High Court also dismissed the appeal, recording the finding of fact of the Tribunal, that on the date on which the amount was advanced, there was no credit balance in the bank account of the assessee. The Supreme Court held that the approach of the Tribunal and the High Court was from an erroneous angle. The High Court and the Tribunal had considered the issue on the basis of the facts available with respect to the dates when advances were made and the credit balance available in the assessee's account with the bank. According to the Hon'ble Supreme Court, the test in such cases should be as to whether the advances were as a measure of commercial expediency. Noticing the difference between the expressions “for the purpose of business” and “for the purpose of earning income, profits or gains”, the Hon'ble Supreme Court considered various decisions and
