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2015 (5) TMI 1211 - ITAT MUMBAIDisallowance of interest paid to Star India Pvt. Ltd. - Addition of interest as loan transactions have not been declared in Form 3CEB and, therefore, escaped addition of Transfer Pricing officer - assessee is engaged in business of trading in rights of cinematographic films and television programme software etc. - as per AO held that advance was not taken as business expediency, but was to evade taxable income in the hands of the assessee - CIT-A deleted the addition - HELD THAT:- As found from the record that the financial statements of assessee evidenced utilization of borrowed funds for procuring rights in respect of various genres of films from third parties for sale to SGL Entertainment. As such borrowed funds on which interest has been paid were utilized for purpose or business entitling assessee to claim deduction u/s 36(1)(iii). Regarding A.O.’s observation that the act of borrowing funds from SIPL is not in business expediency and with a view to avoid taxability in the hands or the assessee, we found that funds were borrowed from SIPL for business purpose, the expenses being wholly and exclusively for the purpose of business based on commercial expediency. Interest expenses were incurred for purpose of assessee's own business, profits of which are chargeable to tax under the provisions of the Act. Whether a particular expenditure is necessary considering commercial expediency has to be decided from the point of view of businessman alone and not by the Revenue authorities. As per the finding recorded by the CIT(A), M/s Star India Pvt. Ltd. is not coming within the purview of Section 40A(2), therefore, it cannot be said that interest so paid to a related party so as to avoid burden of tax on the assessee. The detailed findings of the CIT(A) recorded at para 2.3 and 2.3.1 has not been controverted by department by bringing any positive material on record. No reason to interfere in the order of CIT(A) deleting disallowance on interest. - Decided against revenue.
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