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2015 (11) TMI 793 - AT - Income TaxDisallowance of payment made by the assessee to the third parties - advances written off - case of the assessee is that it has established two companies, i.e., M/s. Malar Finance Pvt. Ltd. and M/s. Malar Gautham Hotels Pvt. Ltd. for the purpose of borrowing funds from the market to expand the hospital of the assessee - Held that:- The assessee has repaid the amount in excess to the amount borrowed from the two companies, namely, M/s. Malar Finance Pvt. Ltd. and M/s. Malar Gautham Hotels Pvt. Ltd. to third parties on behalf of the two companies. We find that the assessee Malar Hospital is a different legal entity and M/s. Malar Finance Pvt. Ltd. and M/s. Malar Gautham Hotels Pvt. Ltd. are two different legal entities. The amount disallowed by the Assessing Officer is not relating to the loan borrowed from the above two companies. The Assessing Officer has disallowed only the repaid amount to third parties on behalf of the two companies. Before us, learned counsel for the assessee has not been able to explain as to why the assessee has repaid the amounts to third party on behalf of the two companies. Learned counsel for the assessee says that the payment is made by the assessee in excess to the funds borrowed and therefore, there is an arbitration between the assessee and the two sister companies. When we specifically asked about the directors of the sister concern and the director of the assessee-company, learned counsel for the assessee has fairly accepted that both are one and the same. We find that the payment made by the assessee to the third parties on behalf of the two companies, i.e., M/s. Malar Finance Pvt. Ltd. and M/s. Malar Gautham Hotels P. Ltd. were not connected with the business of the assessee. Therefore, it is neither allowable under section 36(1)(vii) nor under section 37 of the Act. In view of the above, we find that the disallowance made by the Assessing Officer and confirmed by the learned Commissioner of Income- tax (Appeals) is correct and no interference is required. - Decided against assessee.
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