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2016 (9) TMI 599 - BOMBAY HIGH COURT

2016 (9) TMI 599 - BOMBAY HIGH COURT - TMI - Addition u/s 41 - whether Tribunal was justified in holding that the amount raised by the assessee by way of loan and interest expenditure pertaining thereto is for the purpose of business of the assessee being in nature of commercial expediency? - Held that:- It is not disputed before us in the present facts that issue of debenture was a loan and discount, was in the nature of interest / expenditure for the loan. We find that the decision of the Apex .....

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line of business having business connection with each other. - Disallowance u/s 14A read with Rule 8D - Held that:- The issue stands concluded against the Revenue by the decision of this Court in Godrej & Boyce (2010 (8) TMI 77 - BOMBAY HIGH COURT ). In the above case, this Court has held that disallowance under Section 14A of the Act on application of Rule 8D of the Rules would only apply from A.Y. 2008-09, prior thereto it has to be by a reasonable method. - Income Tax Appeal No. 390 of 20 .....

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ions of law for our consideration : (i) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that the amount raised by the assessee by way of loan and interest expenditure pertaining thereto is for the purpose of business of the assessee being in nature of commercial expediency in view of the decision of Hon'ble Supreme Court in case of S.A. Builders Ltd. whereas the factual matrix of the case makes it very clear that the entire amount r .....

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hich has been challenged by the revenue before the Hon'ble Supreme Court? 3. Regarding Question (i) : (a) In the previous year relevant to A.Y. 200708, the respondent assessee had issued 1,32,50,000 Zero Coupon Secured optionally convertible redeemable debentures (debentures) of the face value of ₹ 1,000/each at a discount of ₹ 400/per debenture. These debentures were redeemable in 2011 at a face value of ₹ 1,000/each. The difference of ₹ 400/was amortised by the asse .....

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the Act to the income. (b) Being aggrieved, the respondent assessee carried the issue in appeal. The first Appellate Authority after holding that Section 41(1) of the Act would have no application nor is it capital expenditure, disallowed the claim of expenditure on the ground that the deduction of discount claimed was in the nature of interest free advances given to sister concern and, therefore, not wholly and exclusively expended for purposes of its business under Section 37 of the Act. On f .....

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r of Income Tax (Appeals), 288 ITR 1 to render a finding of fact that the amounts of discount given on issue of debentures was for the business / commercial expediency and allowable as an expenditure. The impugned order also holds that investment is one of its objects, therefore, a part of its business activity. (c) The grievance of the Revenue before us is that the decision of the Apex Court in S.A. Builders Ltd. (supra) calls for reconsideration as noted by the Apex Court in its order dated 30 .....

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at the decision of the Apex Court in S.A. Builders (supra) still holds field as its operation has not been stayed. Therefore, the Tribunal was justified in relying upon a binding decision of the Apex Court in S.A. Builders (supra) to examine the case of the respondent assessee before it to determine whether the expenditure was on account of commercial expediency and on facts held it to be so. This on account of undisputed position that the debentures were issued to a sister concern in the same l .....

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