TMI Blog2012 (8) TMI 481X X X X Extracts X X X X X X X X Extracts X X X X ..... ase. Except for making arguments the funds borrowed are for commercial expediency and incurred for the purpose of business of the assessee, no evidence whatsoever was produced by the assessee before the lower authorities - remit the issue of allowance of expenses back to the file of the AO to decide the matter afresh in accordance with law - in favour of assessee for statistical purposes. - ITA Nos.166 & 167/Mds/2012 - - - Dated:- 28-6-2012 - SHRI ABRAHAM P.GEORGE, AND SHRI VIKAS AWASTHY, JJ. Appellant by : Mr. B. Ramakrishnan, CA Respondent by : Mr. K.E.B. Rangarajan, Jr. Standing Counsel O R D E R PER ABRAHAM P.GEORGE, ACCOUNTANT MEMBER: These are appeals filed by the assessee challenging interest disallowanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iary. As per the assessee, it was a successful concern in the line of contract manufacture of industrial chemicals and therefore by establishing a wholly owned subsidiary in Switzerland it could harness its ability in this field and expand its operations. Thus, as per assessee, expenses have to be allowed since this was part of its business expansion programme. Reliance was placed on the decision of the Hon ble Apex Court in the case of S.A.Builders Vs. CIT.,( 280 ITR 1) and CIT Vs. Dalmia Cements Bharat Ltd., (254 ITR 377). However, the CIT(A) was not impressed. According to him, for allowing interest paid on borrowed funds, it was necessary that commercial expediency of the advances were established. As per the CIT(A) except for putting a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investments were made for the purpose of business expansion. 6. We have perused the orders and heard the rival contentions. Submission of the assessee before the Assessing Officer was that investments made in wholly owned subsidiary company did not result in any income taxable in India since such companies were registered abroad. Since there was no dividend income possible which could be taxed in India, as per the assessee, interest payment for funds borrowed for making such investments could not be disallowed. Assessee filed a letter dated 10.11.2009 before the Assessing Officer wherein its explanation for the investments were given read as under:- The assessee invested Rs. 5,34,38,000/- in its fully owned subsidiary Vetrival Mineral ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 288 ITR 1 and also the decision of the Delhi High Court in Dalmia Cement Bharath Ltd. dated 24.07.2009, a copy of which is enclosed for your ready reference. Before the CIT(A) also, its contentions were more or less the same but it brought in another line of argument that these were all commercially expedient investments for the business purpose of the assessee. No doubt, in the case of S.A.Builders, the Hon ble Apex Court held that investments in subsidiaries where such investments were commercial expedient would not automatically warrant disallowance of pro-rata interest paid on borrowed capital. As noted by the CIT(A), in the same decision, the Hon ble Apex Court held that it depends upon the facts and circumstances of the case and t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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