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2013 (11) TMI 897 - ITAT MUMBAIPenalty levied by RBI the company entered into a loan agreement with one, M/s. N. B. Investment Ltd., Mauritius (the lender) for an external commercial borrowing (ECB) of USD - Held that:- delay for a few days in informing the RBI in respect of a foreign loan transaction carried out Following Haji Aziz & Abdul Shakoor Bros. vs. CIT [1960 (11) TMI 15 - SUPREME Court] Any expense which is paid by way of penalty for a breach of the law cannot be said to be an amount wholly and exclusively laid for the purpose of the business - The nature of levy is in respect of a contravention of a provision of law - The penalty is not compensatory in nature therefore not deductible u/s. 37(1) Fee paid to ROC Held that:- The nature of the expenditure, whether capital or revenue, would vary depending not on the purpose for which it stands incurred, but on its timing - Such expenditure is capital in nature Following Brooke Bond India Ltd. v. CIT [1997 (2) TMI 11 - SUPREME Court] - The amount is to form a part of the companys own capital, and there is no repayment obligation in its respect, so that it is toward providing an enduring benefit, a part of its capital structure - The deduction u/s.35D is allowed by the statute only for the reason that the said expenditure is capital in nature Decided against Revenue. Disallowance of interest on bank deposits Held that:- The interest on bank deposits is considered as assessable u/s.56 - The assessee could be allowed setting off of the interest income against the interest on borrowed capital Following Sanghvi Jewellery Mfg. Co. (P.) Ltd. v. ITO [2011 (11) TMI 514 - ITAT MUMBAI] - There is no definite finding in the matter on record as to the source of the capital invested in bank deposits, i.e., borrowed or otherwise The issue was restored for fresh decision.
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