Home Case Index All Cases Income Tax Income Tax + HC Income Tax - 2018 (12) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (12) TMI 332 - HC - Income TaxAllowance of interest expenditure under Section 37 - investment made by the partners in the sister concerns and the income derived by way of more interest - speculative computation of interest earned based on the investment made, but on different grounds - Held that:- A camouflage or not, the assessee had arranged the affairs in such a manner as no interest being earned directly by the assessee firms through the investments made by its partners. The assessee had accepted deposits from the public and also made advances to its partners. In any event, the partners were entitled to take advances from the firm on payment of interest, which cannot be taken to be a business carried on by the assessee-firms. The advances obtained by the partners were not in the nature of business carried on by the assessee and, hence, there could be no claim of business expenditure insofar as the interest paid to the depositors, the public. We, hence, answer the other questions of law framed against the assessee and in favour of the Revenue. We delete the order of the Tribunal insofar as the allowance of interest expenditure u/s 37. The order of the AO disallowing the expenditure on interest paid to the depositors is sustained on the grounds herein above mentioned as distinguished from the view taken by the AO. The appeals would stand partly allowed.
|