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2017 (5) TMI 1514 - AT - Income TaxRaising of funds through SPN - business expenditure allowability - whether capital borrowed on which interest was paid related to same business or not and if the answer is NO, then claim cannot be allowed. - Held that:- The transaction which has taken place in this manner, according to the AO, was not in accordance with law. But he failed to point out which provision of the Income Tax Act has been violated by the assessee or which guidelines of the SEBI has not been adhered to. According to the assessee, treatment made by the investor is of no consequences as far as allowance of expenditure in the case of assessee-company is concerned. As far as fact that this capital was raised for the purpose of business is concerned, nobody has denied it because in earlier years, this fact has been approved by the Hon’ble High Court, the AO has not discovered any new facts. He considered this exercise at the end of the assessee as a colourable exercise only under the impression that the assessee has claimed deduction of interest expenditure, whereas corresponding equal amount was not offered for tax in the hands of the applicants. To our mind, it cannot be reason for disallowing the claim of the assessee. If earning of equal amount of income is considered as basic principle for allowance of expenses, then no assessee would suffer any loss. Incidence of taxability has occurred in the hands of the applicants in a different manner. They were investors. They have shown capital gain on their investment. Therefore, if incidence of interest income not resulted to them cannot be a ground to doubt the business expenditure of the assessee. Other reasons assigned by the AO would indicate that the AO tried to take business decision in the case of the assessee. He was of the view that there was no necessity of issuing any instrument like SPN, because other associate companies of the assessee had their own surplus funds from which they can finance Bhavnagar project. Similarly, according to the AO, claim of issuance of SPN should not be formulated in this manner. To our mind both these reasons are contrary to the principle laid down by the Hon’ble Supreme Court in the case of Hero Cycles Pvt.Ltd. [2015 (11) TMI 1314 - SUPREME COURT OF INDIA] as well as Taparia Tools Ltd (2015 (3) TMI 853 - SUPREME COURT). Thus, steps at the end of the AO amounts to interference in taking business decision, which is not permissible to him. AO cannot contend that how much finance and at which rate would be sufficient for the assessee for running its business. His area would be whether the assessee has incurred any undue expenditure, which was not required for the purpose of business or not. Thus in our view, there is no disparity of facts from the earlier years, which can persuade ld.Revenue authority to take a different view. Issue in dispute is squarely covered in favour of the assessee
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