TMI Blog2013 (6) TMI 285X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee have not been controverted,thus it appears that the loans on which the interest was paid by the assessee were all used for the purpose of business and therefore no disallowance of interest could be made. It has not been demonstrated by the revenue that the borrowed funds on which interest was paid and claimed as deduction while computing the total income had not been used for the purpose of business of the assessee. In favour of assessee. - ITA No.451/Bang/2012 - - - Dated:- 18-1-2013 - N V Vasudevan and Jason P Boaz, JJ. For the Appellant : Shri Etwa Munda, CIT-III(DR) For the Respondent : Shri R Kesavadas, CA ORDER:- Per: N V Vasudevan: This is an appeal by the revenue against the order dated 31.01.2012 of the CIT(Appeals)-II, Bangalore relating to assessment year 2008-09. 2. Ground Nos. 1 to 4 raised by the revenue reads as follows:- 1. The order of the CIT(A) is opposed to the facts of the case. 2. The learned CIT(A) has erred in deleting the addition made by the Assessing Officer to the tune of Rs.1,89,42,139/- under the head legal and professional charges. 3. The learned CIT(A) has erred in not appreciating the fact that the expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l expenditure and cannot be allowed as revenue expenditure. In the absence of project wise classification, bills against which payments are made, services in specific obtained, the AO disallowed the expenditure on estimate basis. Accordingly the AO disallowed a sum of Rs.2,01,61,139 out of legal and professional charges. 5. On the aforesaid disallowance, the assessee submitted before the CIT(Appeals) that due to infusion of funds into the company by a private equity firm for expansion of its business activities, it was able to create pan India presence by setting up Cancer care centres at Nasik and Delhi in addition to a third centre in Bangalore. It was explained that the Assessee had to incur substantially increased expenditure in the initial period without commensurate returns resulting in Legal and professional charges to the extent of Rs.212 lakhs as compared to the increase in turnover. The schedule of legal and professional charges which was already submitted to the Assessing Officer was also filed before CIT (A). The Assessee explained the increase in expenses due to the following major items of expenses: Remuneration to medical doctors Rs.97.62 lakhs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out that taxes have been deducted at source on all these expenses and duly remitted to the credit of the Central Government. The Assessee thus explained increase of expenditure to the tune of Rs. 212 lakhs as compared to the AY 2007-08. 6. The assessee also submitted before the CIT(A) that the aforesaid payments were owing to commercial expediency and for the purpose of facilitating the assessee trading operations and for enabling the assessee to carry on its business more efficiently and more profitably. The assessee also submitted that it is for the businessman to decide on the question as to what are necessary expenses. The assessee placed reliance on the decision of the Hon ble Supreme Court in the case of M.K. Bros Pvt. Ltd. v. CIT, 86 ITR 38 (SC), Travancore Sugars Chemicals Ltd. v. CIT, 62 ITR 566 (SC) and Dalmia Jain Co. Ltd. v. CIT, 81 ITR 754 (SC). The assessee thus submitted that the expenditure was not capital expenditure and was revenue expenditure. The break-up of expenditure incurred under the head, Legal Professional Charges is given as Annexure-I to this order. 7. The CIT(A) on a consideration of the submissions of the assessee held as follows:- 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lakhs was paid to Dr. Vivek Sama. In the agreements between the assessee and Dr. Vivek Sama dated 17.07.2007, the payment of the aforesaid sum is made for the following purposes:- (ii) HUG hereby pays Dr Sama a total sum of Rs 80,00,000/- (Rupees Eighty lakhs only) minus Rs.9,06,400 as tax deducted at source for which a TDS Certificate shall be issued separately vide Draft No.081730 dated 17 July 2007 drawn on State Bank of India Overseas Branch Bangalore, payable at New Delhi for Rs. 70,93,600/- (Rupees Seventy lakhs ninety three thousand six hundred only) towards full and final settlement for implementation of SMH Curie Cancer Centre project and the spade work done for all other proposed projects, namely CMC Ludhiana, Punjab, Society of Unique Hospitals and Research Institute s proposed Hospital in Dwaraka, Delhi and Umkal Medical Institute Limited s proposed hospital in Gurgaon, Haryana. (iii) Dr Sama acknowledges receipt of the above amount, subject to realization, and thereupon for a period of 2 years from the date hereof, agrees not to be involved in any manner in the following ongoing projects or proposed projects of HCG. - Shami Mukand Hospital, Karkardo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,46,l9,990/-. 14. The AO in the order of assessment disallowed interest expenses of Rs.58,64,449 on the ground that interest expenses which were claimed as deduction on borrowings made for the purpose of business had been given as interest free loans to sister concerns. The assessee submitted before the CIT(A) the Assessee had advanced a sum of Rs.26 crores to sister concerns out of own capital and share premium, share application money pending allotment and reserves and surplus for the purpose of advancing a loan to its subsidiaries. The details of own funds as at 31st March, 2008 and 31st March 2007 as furnished by the Assessee before CIT(A) were as follows:- Particulars 31st March 2008 (Rs.) 31st March 2007 (Rs.) Increase (Rs.) Share Capital 19,50,35,410 4,71,80,720 14,78,54,690 Share Application Money 5,04,44,358 393 5,04,43,965 Reserves and Surplus 69,61,32,259 58,16,53,470 11,44,78,789 Total shareholders' funds 94,16,12,027 62,88,34,583 31,27,77,444 15. The Assessee also submitted that in addition to the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce with the business plan as approved by the investors. 17. On a consideration of the above submissions, the CIT(A) was of the view that the disallowance should be deleted and he held as follows:- 4.2 The appellant s submissions have been carefully considered. As regards interest expenses, the appellant has shown that it had its own funds by way of share application money, received during the year and sale of short term investments which have been further advanced and no interest is born on these advances to the sister concern. I am satisfied with the explanation of the appellant. As such, no disallowance is called for. The disallowance of Rs.58,64,449/- is, therefore, deleted. 18. Aggrieved by the order of the CIT(A), the revenue has raised grounds 5 6 before the Tribunal. 19. The ld. DR relied upon the order of the Assessing Officer, while the ld. counsel for the assessee reiterated the submissions as were made before the CIT(A). 20. We have considered the rival submissions and the orders of the lower authorities. The order of assessment is silent as to the basis on which the AO made the impugned disallowance. The submissions made before the CIT(A) by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Infogenia Analytics Pvt Ltd 1.93 Assistance in preparation of project reports 1.93 -0.00 Keynote Corporate Services Ltd 1.12 Management Consultants - ESOP 1.12 Dr. Dinesh Chandra Katiyar 1.10 Doctors fees 1.10 M/s Prashanth Deshpande Associates 1.07 Due-Diligence, agreement drafting etc 1.07 0.00 M/s ACME (India) Marketing Services Pvt Ltd 1.06 Marketing services 1.06 Murali C S 1.00 Project Consultants - for renovation work done in leased premises 1.00 Sun Designers 1.00 Architect fees - for renovation work done in leased premises 1.00 Meghraj S P Corporate Finance (Pvt) Ltd 0.86 Assistance in preparation project reports 0.86 0.00 Others (Several parties each below Rs. 70,000/-) 2.16 Various services 2.16 156.37 15.24 141.13 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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