TMI Blog2016 (9) TMI 1322X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment allowed the same claim of the assessee for deduction of interest u/s 36(1)(iii) of the Act. Thus even on the principle of consistency, this claim of the assessee has to be allowed. In view of the above discussion we direct the A.O. to allow the claim of the assessee for deduction u/s 36(1)(iii) of the Act. - Decided in favour of assessee. - ITA No. 2821/Del/2014 - - - Dated:- 23-9-2016 - SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER, AND SHRI KULDIP SINGH, JUDICIAL MEMBER For The Appellant : Sh. Gautam Jain, C.A. For The Respondent : Sh. Anil Kr. Sharma, Sr.D.R. ORDER PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER This is an appeal filed by the assessee directed against the order of the Ld.CIT(A)-XXVIII, New Delhi dated 14.02.2014 pertaining to the Assessment Year (A.Y.). 2. Facts of the case: - The assessee is an individual. He filed his return of income on 26.9.2008 declaring total income of ₹ 87,30,210/-. The Assessing Officer (AO) completed the assessment u/s 143(3) of the Income Tax Act, 1961 (the Act) on 20.12.2010 determining the total income at ₹ 1,50,80,939/- inter alia, disallowing the claim of ₹ 63,50,729/-, which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of M/s Galabon Hotels P.Ltd. is property owned by it in Safdarjang Enclave. The appellant has purchased shares of this company mainly for getting ownership of this property. Had the loan been taken by the company, interest expense would have been an admissible expense in the hands of the company, but in the case of the appellant the same is not an admissible deduction. He dismissed the case of the assessee. 3 . Aggrieved the assessee is in appeal before us on the following grounds. 1. That the learned Commissioner of Income Tax (Appeals)- XXVIII, New Delhi has grossly erred both in law and on facts in upholding disallowance of sum of ₹ 63,50,729/- representing expenditure incurred on interest by the appellant in the instant assessment year. 2 That the learned Commissioner of Income Tax (Appeals) has upheld the disallowance by failing to appreciate the fact and circumstances of the case of the appellant, statutory provisions of law and evidence on record, including the submissions filed by the appellant. 2.1 That the learned Commission of Income Tax (Appeals) has failed to appreciate that borrowed funds had been utilized by the appellant for acquir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) (iii) CIT vs. Phil Corpn. Ltd. 244 CTR 226 (Bom.) (iv) CIT vs. Srishti Securities (P) Ltd. 321 ITR 498 (Bom.) (v) CIT vs. Panaji Goa vs. Phil Corpn. Ltd. 244 CTR 526 (Bom.) He argued that, the finding of the Ld.CIT(Appeals) that acquiring controlling interest in a hotel cannot be considered as business of the assessee is against the propositions of law laid down by various Hon ble Courts. (c ) He submitted that even if the Ld.CIT(A) was wrong in denying the claim of deduction of the assessee on the ground that the assessee does not have any income from M/s Galabon Hotels Pvt.Ltd. by relying on the judgement of Hon ble Apex Court in the case of CIT vs. Rajeeva Lochan Kanoria(supra). He also relied on certain other judgement for the proposition that interest should be allowed though there is no income during the year. 5. The Ld.D.R. on the other hand relied on the order of the Ld.CIT(A) and submitted that the assessee does not have any business or income. He argued that the assessee s claim that it has acquired controlling interest in M/s Galabon Hotels Pvt.Ltd., cannot be accepted as the business of the assessee, as the assessee is not in the business of pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. The amount borrowed may be utilised for purpose of acquisition of stock-in-trade or for the purpose of acquisition of capital assets. But so long as the money is utilised for business purposes the interest will have to be allowed as deduction. It is well-settled that business expenditure is not confined to expenses incurred on revenue account. Capital expenditure may not be allowed as a deduction under s. 37 because the section specifically bars any deduction of expenditure of capital nature. But s.is differently worded. There is no bar in s. 36(1) (iii) to allowance of interest paid in respect of capital borrowed which has been utilised for purchase of a capital asset. The assessee was admittedly a director of several controlling companies. Even otherwise, the activity of controlling, managing, administering and financing companies is nothing but a business/professional/vocational activity. The Revenue has not challenged as perverse the finding of Tribunal that the assessee's business activity consisted of acquiring shares for managing, controlling rehabilitating different companies. A businessman like the assessee in this case does not purchase shares of different compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t case, that principle, in the opinion of Court, would squarely apply. If indeed the assessee had invested and subscribed to the rights issue in order to retain the control, it originally did in HS Tractors Ltd, it can still be said that the expenditure was towards promotion of business, and, therefore, properly entitled to be treated as such u/s 36(1)(iii) of the Act. This Court, therefore, is of the opinion that the law declared by Supreme Court in such cases if the expenditure is incurred for the purpose of promotion of business and more specifically as in facts of this case to retain the control or part of the strategic investment of the assessee/company such expenses can by way of interest outgo would have to be treated u/s 36(1)(iii) and not u/s 56 of the Act. 8. Applying the propositions laid down in the above referred cases, to the facts of the present case, we have to necessarily to uphold the claim of the assessee for deduction of interest paid on loan borrowed to acquire controlling interest in M/s Galabon Hotels P.Ltd. This should be allowed u/s 36(1)(iii) of the Act. The finding of the Ld.CIT(A) that the assessee is not in the business of purchasing hotels and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is true that the language of section 37 (1) is a little wider than that of section 57(iii), but we do not see how that can make any difference in the true interpretation of section 57(iii). The language of section 57(iii) is clear and unambiguous and it has to be construed according to its plain natural meaning and merely because a slightly wider phraseology is employed in another section which may take in something more, it does not mean that section 57(iii) should be given a narrow and constricted meaning not warranted by the language of the section and in fact, contrary to such language. This view which we are taking is clearly supported by the observations of Lord Thankerton in Hughes v. Bank of New Zealand where the learned Law Lord said: Expenditure in the course of the trade which is unremunerative is none the less a proper deduction, if wholly and exclusively made for the purposes of the trade. It does not require the presence of a receipt on the credit side to justify the deduction of an expense. 10 . The contentions of the assessee that, he is in the business of real estate and has controlling interest in a number of companies and that if the Ld.CIT(A) s factual fi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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