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2014 (12) TMI 889 - AT - Income TaxDisallowance of Interest – inter-corporate deposit - currency swap arrangement with the Bank to reduce the burden of the interest cost - impact the overall interest claim - Held that:- The assessee borrowed a loan of ₹ 81.30 Crores from JP Morgan Chase Bank on 18.12.2006 for the purpose of construction of ‘Forum Value Mall’ at Whitefield, Bangalore on which interest was payable on a monthly basis @ 12.25% per annum - assessee then entered into a currency swap arrangement with ABN Amro Bank to reduce the burden of interest cost and for hedging the interest rate risk - interest paid on the loan of ₹ 81.30 Crores for the period 1.4.2007 to 31.3.2008 totally amounted to ₹ 8,49,32,272 - Out of this interest amounting to ₹ 5,32,82,402 was determined as interest cost relatable to the inter-corporate deposit and the same was debited to the profit and loss account - the finding of the AO that the currency swap arrangement was only in respect of unutilised funds is factually erroneous - the currency swap arrangement and the resultant income therefrom amounting to ₹ 1,75,28,315 was in respect of the entire loan and the same was linked to the loan borrowed for the purpose of reduction of interest cost. The interest debited to the profit and loss account amounting to ₹ 5,32,82,402 was incurred for earning income from the inter-corporate deposit and the currency swap arrangement and in the regular course of business carried on by the assessee and the interest so debited to the profit and loss account is admissible as a deduction u/s 57(iii) of the Act or alternatively u/s 37(1) - an amount of ₹ 3,16,47,870 was capitalised as part of the funds were used for the ongoing construction of ‘Forum Value Mall’ and the balance sum of ₹ 3,57,54,087 (Rs.6,74,01,957 less ₹ 3,61,47,870) only could have been charged to the profit and loss account - while the AO has computed the interest cost pertaining to the intercorporate loan at ₹ 3,85,49,961 @ 12.25% on the day to day balance, the net interest paid charged to the profit and loss account as per the working at ₹ 3,57,54,087 is lower than the interest cost computed at ₹ 3,85,49,961 by the AO - the assessee has not made any excess claim on account of interest – Decided against revenue.
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