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2018 (11) TMI 793 - AT - Income TaxAllowable business expenditure - expenses claimed by the assessee has no relevance with the interest income earned - disallowance of expenditure because the assessee has not earned any profit from its business activity - Held that:- As not disputed that the fixed deposits made by the assessee was used for the purposes of obtaining SBLC. This in itself proves that the SBLC was issued by the bank for the business purpose of the assessee company. Promoting business of subsidiaries/group companies in itself is business activity. Expenses have to be incurred for the purposes of business of the assessee and not for the purposes of earning profit. The lower authorities have disallowed the expenditure because the assessee has not earned any profit from its business activity. The disallowance is on false premise. As mentioned elsewhere, the expenditure has to be incurred for the purpose of business and not for the purposes of earning profit. The expenditure has been incurred in furtherance of business activity of the appellant company and deserves to be allowed. Direct the Assessing Officer to allow expenditure. Taxing of interest earned on fixed deposits - “income from other sources” OR “Profits and gains of business or profession” - Held that:- The fixed deposits were purchased by the appellant company out of share application money received from group concerns and as mentioned elsewhere, the fixed deposits were used for obtaining SBLC of 10 million Euros in furtherance of business activity of the appellant company alongwith its group companies. In my considered view, interest earned on fixed deposit has a direct nexus with the business activity of the assessee and such interest bears the requisite characteristics of business income and has nexus with the business activities of the assessee, cannot be faulted with. Interest earned on fixed deposits would form part of profits of the business of the appellant company. See case of Universal Precision Screws [2015 (10) TMI 951 - DELHI HIGH COURT]. Thus direct the Assessing Officer to tax interest income under the head “Profits and gains of business or profession”. - Assessee appeal allowed.
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