TMI Blog2012 (6) TMI 131X X X X Extracts X X X X X X X X Extracts X X X X ..... is investment is more than interest incurred by the assessee towards loan from ICICI Bank. The investment in the shares by the assessee by borrowing money from ICICI Bank to be seen with saving of power cost. The assessee derived exorbitant benefit on the cost of power. Had the assessee not investment in the shares of APGPCL, the assessee should have incurred additional expenditure towards supply of power. - Decided in favor of the assessee - ITA No. 784/Hyd/2011, ITA No. 785/Hyd/2011 , ITA No. 786/Hyd/2011 and ITA No. 799/Hyd/2011 - - - Dated:- 12-10-2011 - G.C. Gupta, Chandra Poojari, JJ. S. Rama Rao for the Appellant M. Srinivasa Rao for the Respondent ORDER Chandra Poojari, Accountant Member 1. These four appeals preferred by the assessee are directed against the order of CIT dated 29.3.2011 passed u/s 263 of the Income Tax Act. Since issues involved in these four appeals are common in nature, they are clubbed, heard and disposed off vide this common order for the sake of convenience. 2. The common grounds raised by the assessee in these four appeals are as follows: 2. The learned CIT erred in holding that the order of the assessment made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /payable to ICICI Bank on the loan taken utilised for the purpose of investment in shares in APGPCL. Subsequently, these shares were sold and the resultant capital gains were claimed as exempt u/s 10(23G) of the Act. As such, the interest paid for the above assessment years which was incurred against the exempt income is to be disallowed u/s 14A of the Act. 3.2. The provisions of section 14A of the Act specify that any expenditure incurred in relation to income which does not form part of total income, was to be disallowed. Since the resultant capital gains on sale of shares of APGPCL were claimed as exempt u/s 10(23G) of the Act. According to CIT, the expenditure incurred in the form of interest in respect of loan availed from ICICI Bank for the purpose of purchase of shares of APGPCL needed to be disallowed as per section 14A of the Act. 3.3. However, it is observed by CIT that the assessing officer failed to disallow the expenditure claimed towards interest paid on loans taken against exempt income while completing the scrutiny assessments u/s 143(3) r.w.s. 153A of the Act for the assessment years 2001-02 to 2004-05. In view of the above fact, according to CIT, the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer to disallow the interest paid on loan taken from ICICI Bank which has been invested to acquire shares of another company. Against this the assessee is in appeal before us. 5. We have heard both the parties and perused the materials available on record. We have also gone through the judgement relied on by the learned counsel for the assessee in the case of ACIT vs. Choice Trading Corporation Ltd. (90 ITD 1) ((76 TTJ 892) (Cochin) wherein held that interest on money borrowed for acquisition of shares also is allowable as deduction u/s. 36(1)(iii) of the I.T Act, if such acquisition is for commercial purpose. Further, the AR also relied on the judgement of the Supreme Court in the case of S A Builders Ltd. vs. CIT (288 ITR 1) (SC) wherein it is held that once it established that there was nexus between the expenditure and the purpose of the business, the Revenue cannot justifiably claim to put itself in the armchair of the business man or in the position of the board of directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. No business man can be compelled to maximise his profit. What is relevant is whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the cost of power generated the company entered into an MOU with its shareholders. Thus, originally MOU was executed by APGPCL and APSEB (Transmission Corporation of Andhra Pradesh) and 23 other companies which include Sree Rayalaseema Alkalies and Allied Chemicals Ltd. in order to be entitled for supply of 7.20 MW electricity. The said Sree Rayalaseema Alkalies and Allied Chemicals Ltd., has disposed of its shares in the APGPCL and the assessee company bought the shares by raising a loan from ICICI Bank. By purchasing the shares of APGPCL the assessee got supply of power at concession rate. The cost per unit incurred by the assessee in this assessment year is much less than the cost of power supplied by APSEB. This fact is evident from the following table: AY Units purchased from APGPCL Unit cost APGPCL Amount (in Rs.) Unit cost APCPDCL Saving by opting APGPCL Amount of saving (in Rs.) 2001-02 42643806 2.82 120334673 6.59 3.77 160780755 2002-03 38478178 1.91 73627562 4.56 2.64 101757228 2003-04 54020067 1.80 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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