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2016 (5) TMI 267 - AT - Income TaxDepreciation on Goodwill - Held that:- When the AO has not disputed the fact that the assessee has no goodwill to claim the depreciation, disallowance made by the AO and affirmed by the CIT (A) is not sustainable in the eyes of law. Moreover, in assessee’s own case qua the AYs 2008-09 and 2009-10, has already held that the assessee is entitled to claim depreciation on goodwill which is an asset u/s Explanation (3b) to section 32(1) of the Act - Decided in favour of assessee Disallowance of expenditure on account of interest on prorata basis - Held that:- AO has not disputed that the loan was advanced to M/s. Bharti Infotec Ltd. as per Memorandum and Articles of Association to promote business of its subsidiary, the interest claimed by assessee thereon cannot be disallowed. Moreover, it was commercial expediency of the assessee company to advance the loan to promote business of its subsidiary company. So, we are of the considered view that the advances made to the subsidiary companies are to be treated as business advances. Moreover, when the assessee company was carrying out its business activities through its subsidiaries and the assessee company was having interest free funds to the tune of ₹ 99.27 crores and ₹ 101.11 crores available with the assessee company in the beginning and end of the financial year respectively under consideration as per balance sheet not disputed by the AO when the assessee has claimed to have paid loan amount to its subsidiary from the mixed fund, then, it should be assumed that payment was made out of interest free funds. So, when the AO has not disputed the fact that the assessee company has used interest free funds only for advancing money to M/s. Bharti Infotec Ltd., the question of making disallowance on prorata basis does not arise. Following the ratio of the judgment in the case of Hero Cycles Pvt. Ltd. (2015 (11) TMI 1314 - SUPREME COURT OF INDIA), we are of the considered view that when the assessee has made investment for business expediency to promote the business of its subsidiary, the interest paid thereon has to be allowed and as such, AO as well as CIT (A) have erred in making disallowance of assessee’s claim of deduction on account of interest on prorata basis - Decided in favour of assessee
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