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2015 (12) TMI 1169 - ITAT MUMBAIDisallowance of excess expenditure - Interest expenditure on borrowed capital not generating adequate revenue - Held that:- The assessee as well as the lendee-company being only aware of the going interest rate (in the market), the same (arrangement) only amounted to the assessee bearing the interest burden (of the company) to that extent (i.e., to the extent of difference), or the company diverting – by way of curtailing, its losses to that extent. The ld. AR would, upon this, submit that the company having incurred losses, an arrangement limiting the interest rate which it would allow to its shareholders (12% p.a.) was put in place. This, rather, only confirms what stands stated above. That the loss stands incurred not with a view to earn a positive return – irrespective of its extent, but to contain the losses of the investee-company. The matter is to be looked at from the stand-point of the assessee in-as-much as it is the law as applicable to him that is to be seen. Reference to the decision in the case of Rajendra Prasad Moody (1978 (10) TMI 133 - SUPREME Court ) by the assessee is, again, misplaced. The same nowhere approves of premeditated losses. It has already been clarified that no other benefit enures to the assessee from the said loan/s. A company cannot oblige the shareholders to extend loans, much less at a concessionary rate of interest. It is only where the actual earning of income is not certain, with the purpose of expenditure being toward earning the same, that the deduction in its respect cannot be denied. In the facts and circumstances of the case, the impugned expenditure is only to contain the losses of the borrower-company, by diverting it to the shareholders to that extent. The assessee’s claim is without merit, and the Revenue’s stand in disallowing the excess expenditure is, for the fore-going reasons, is upheld. - Decided against assessee
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