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2013 (11) TMI 676 - ITAT BANGALOREAllowability of interest relatable to the borrowed funds given by the company to its directors and its sister concerns - On the total borrowed funds of Rs.622,47,92,446/-/-, the assessee has paid interest of Rs.39,80,73,293/- during the year. The total amount of funds given by the assessee to the directors and the sister concerns,(amounts) amounting to Rs.259,06,79,783/-. The proportionate interest relatable to this borrowed fund amounts to Rs.16,56,73,063/-. Therefore, out of the total interest of Rs.39,80,73,293/- claimed by the assessee, interest of Rs.16,56,73,063/- is disallowed – Held that:- The main purpose of the assessee's business was to carry on real estate operations. In the process of acquiring and dealing with properties, monies were advanced to its sister concerns and individuals for acquiring properties which at that relevant time were categorised as agricultural lands. The assessee being a company was prevented by the State law to buy any agricultural lands for exploitation of the same for non-agricultural purposes. To outsmart such restrictions imposed by the State Government, the assessee had indulged by roping in the individuals by advancing monies to buy agricultural lands on its behalf and get them converted into non-agricultural purposes etc. Assessee had entered into agreement on 3.5.2002 with Shri Raja Bagmane, Managing Director of the assessee, his wife Smt Vasundhara Raja and Shri V Veerappa [father-in-law of Shri Raja Bagmane] to purchase the agricultural lands in their names, convert them for non-agricultural use and subsequently transfer them to the assessee – Reliance has been placed on the judgment of the Hon'ble Supreme Court in the case of S.A. Builders v. CIT reported in [2006 (12) TMI 82 - SUPREME COURT], wherein it was held that "the interest-free loan was given to the sister company (which is a subsidiary of the assessee) as a measure of commercial expediency, and if it was, it should have been allowed. The expression "commercial expediency" is an expression of wide import and includes such expenditure as a prudent businessman incurs for the purpose of business. The expenditure may not have been incurred under any legal obligation, but yet it is allowable as business expenditure if it was incurred on grounds of commercial expediency – Also, reliance has been placed on the Delhi High Court judgment in the case of CIT vs. Dalmia Cement (Bharat) Ltd. [2001 (9) TMI 48 - DELHI High Court] – Decided against the Revenue. Allowability of deduction of bribes - Expenditure of Rs.15.5 lakhs entered in its cash book and paid as alleged bribes – Held that:- For the current year, the P &L account was not completed as on the date of search and the assessee did not take into consideration the said sum of Rs.15.5. lakhs as deduction while computing the taxable income. On a perusal of various expenses, it is very evident that the said sum has not been claimed as a deduction and was not debited in the P & L account. Under the head 'Misc. expenses', the amount debited in P & L account was only a sum of Rs.52,932/- on a total turnover of Rs.52,78,53,632/- and, therefore, the impugned amount of Rs.15.5 lakhs was not an expenditure that was claimed as an expenditure - Thus, the disallowance of Rs.15.5 lakhs will not arise while computing the assessee's taxable income
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