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2019 (4) TMI 767 - ITAT MUMBAIPreoperative expenditure allowability - Allowable expenditure u/s 37 - HELD THAT:- Since the expenditure has been capitalized in the books of accounts and claimed only in the computation of income, no deduction thereof including depreciation, in any manner, would be allowable to assessee against the same in any assessment year. The consequential depreciation of 15% as allowed by AO shall stand reversed. AO is directed to allow deduction of the impugned expenditure subject to verification of the fact that depreciation against the stated expenditure has not been allowed to the assessee in the computation of income either in impugned AY or in subsequent years. Disallowance u/s 36(1)(iii) - loan granted by the assessee to its subsidiary company - HELD THAT:- Where the funds were diverted for non-business purposes i.e. either to make investments or to advance interest free loans. Therefore, the lower authorities were not justified in disallowing the same particularly in view of the fact that fresh loans granted by the assessee to the said entity during impugned AY was only to the tune of ₹ 88.78 Lacs. Another factor is to be noted that the loan has been granted by the assessee to its subsidiary company and AO has rejected the stand of the assessee on the ground that the business of the subsidiary could not be considered in law as the business of the assessee without controverting the fact that the aforesaid subsidiary was also engaged in the business of running the restaurants and without appreciating the fact that the assessee would derive business benefits out of the same. In such a scenario, the ratio of decision of Hon’ble Apex Court rendered in S.A. Builders Vs. CIT [2006 (12) TMI 82 - SUPREME COURT] would also become applicable to the facts of the case. Therefore, viewed from any angle, the impugned disallowance, in our opinion, could not be sustained - Decided in favour of assessee.
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