TMI Blog2016 (6) TMI 976X X X X Extracts X X X X X X X X Extracts X X X X ..... 016 - Shri Jason P. Boaz, Accountant Member And and Shri Sandeep Gosain, Judicial Member For the Appellant : Shri G.M. Doss For the Respondent : Shri Shailesh S. Shaw ORDER Per Jason P. Boaz, A.M. This appeal by the Revenue is directed against the order of the CIT(A)- 7, Mumbai dated 26.04.2013 for A.Y. 2008-09. 2. The facts of the case, briefly, are as under: - 2.1 The assessee-company, engaged in the business of manufacture and trading of consumer electronics and home appliances, exploration of crude oil, gas, investment in shares, securities and properties, lease and finance and other incidental activities, filed its return for A.Y. 2008-09 on 30.09.2008 declaring total income of ₹ 622,26,94,667/-. The case was selected for scrutiny and the assessment was completed under section 143(3) of the Income Tax Act, 1961 (in short 'the Act') vide order dated 31.03.2011 wherein the income of the assessee was determined at ₹ 647,55,09,642/-. Subsequently, vide order under section 154 of the Act, the income of the assessee was revised to ₹ 588,02,16,620/-. 2.2 Subsequently, the AO, based on information received from the Investigati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essary. 4. The grounds at Sr. Nos. 3 4 being general in nature, no adjudication is called for thereon. 5. Grounds 1 and 2: Disallowance of Interest Expenditure claimed under section 36(1)(iii) - ₹ 12,87,36,636/- Disallowance of Upfront Fee - ₹ 1,25,00,000/- paid to Central Bank of India 5.1 In these grounds, Revenue assails that impugned order of the learned CIT(A) as being erroneous in deleting the disallowance of ₹ 12,87,36,636/-, out of interest expenditure claimed, under section 36(1)(iii) of the Act without appreciating that the interest bearing funds were given to subsidiary company as interest free deposits in the guise of share application money. It was further contended that the impugned order was erroneous in view of the deletion of the disallowance of ₹ 1,25,00,000/- being upfront fees paid to Central Bank of India without appreciating that the fees were paid for obtaining the loan not for the assessee s own business but was given to the subsidiary company without any consideration, ostensibly for the purpose of investing in share capital of the subsidiary which was not allotted and the money returned a year later. The learned D.R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts of the matter, as emanate from the record, are that in the course of assessment proceedings, the AO noticed that the assessee had taken a term loan of ₹ 500 crores from Central Bank of India which it advanced on 27.12.2007 to its subsidiary Datacom Solutions P. Ltd. (now known as Videocon Telecommunications Ltd.) as share application money. The AO observing that shares were not allotted to the assessee, but the amount was refunded to the assessee on 29.12.2008, disallowed the interest of ₹ 12,87,36,636/- and upfront fee of ₹ 1,25,00,000/- paid on the said loan to Central Bank of India for the reason that interest bearing funds taken from the Bank had been diverted for non business purposes. 5.3.2 On appeal, the learned CIT(A), after considering the finding of the AO and the submissions of the assessee (reproduced at para 6.3 of the impugned order), went on to hold that the amount of ₹ 500 crores advanced to VTL as share application money by the assessee was for the purpose of the assessee s business and therefore the disallowance of ₹ 12,87,36,616/- out of interest expenditure claimed by the assessee under section 36(1)(iii) of the Act was u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Data Com is a subsidiary company of the appellant company. Any transaction with it will be for the purpose of the appellant s business and advance given will be for business expediency. The above transaction was approved and authorized by the Board of Directors in the normal course of business activities. Hence, the said advance towards share application money given to Data Corn is for the purpose of business and any interest paid on the funds utilized for the purpose of such business activity is allowable expenditure u/s 36(1)(iii) of the Income Tax Act, 1961. (iii) Further, the appellant company is also engaged in the business of investment in shares, securities, properties along with other activities, which fact is also mentioned by the ld. AO in the reassessment order passed u/s. 148 of the Act. Relevant extract of the Memorandum of Association was enclosed. Therefore, interest expenditure incurred on loan taken to subscribe to shares of a company is incurred for one of the business purpose of the appellant, i.e. investment. Thus, the same cannot be treated as having been incurred for non-business purpose and disallowed. This view is also supported by the decision of Vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication. To make investments in shares/securities in the companies and/or to enter into joint venture / partnership with the companies carrying on the business of telecommunication is one of the main objects of the appellant company. The appellant company in this case has not purchased shares of Data Com for earning dividend but to promote its business of telecommunication. Thus the investment made by the appellant company in Data Com is for furtherance of its business of telecommunication and therefore the purpose of its business. This view is also in accordance with the decision of the Bombay High Court in the case of CIT v. Reliance Communication Infrastructure Ltd. 207 Taxman 219 (Bom.), Calcutta High Court in the case of CIT v. Rajeeva Lochan Kanoria [1994] 208 ITR 616 (CAL) and the decision of the Karnataka High Court in the case of CIT v. Anand Technology Resource Park (P.) Ltd. 202 Taxman 654 (KAR). (vi) The share application being advanced by the appellant company for the purpose of business and commercial expediency, the interest expenditure on loan taken for the said purpose is allowable as per the decision of the Supreme Court in the case of S.A. Builders, 288 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advances utilised for the purposes of the assessee s business is allowable expenditure under section 36(1)(iii) of the Act. In coming to the above findings of fact, we concur with the well reasoned and judicious findings in the impugned order of the learned CIT(A) (supra). We also draw support from the ratio of the decision of the Hon'ble Apex Court in the case of S.A. Builders Ltd. (288 ITR 1) (SC), the Hon'ble Bombay High Court in the case of Reliance Infrastructure Ltd. (207 Taxman 219) (Bom) and Srishti Securities P. Ltd. (2010) 321 ITR 498 (Bom). 5.3.4 In the factual and legal matrix of this case as discussed above from para 5.1 to 5.3.3 of this order (supra), we are of the considered view that no interference is called for in the impugned order of the learned CIT(A). We, therefore, sustain and confirm the decision of the learned CIT(A) in holding that since the amount advanced to VTL as share application money was done in the normal course of its business, for purposes of its business and was made on grounds of commercial expediency, the disallowance of ₹ 12,87,36,636/- out of interest claimed under section 36(1)(iii) of the Act was not warranted and in delet ..... X X X X Extracts X X X X X X X X Extracts X X X X
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