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TMI Blog2019 (11) TMI 804X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/-. During the year under consideration, assessee has declared income only under the Head "Income from Business and Profession". The assessee has shown income of Rs. 1,56,959/- and claimed finance cost of Rs. 30,35,945/- and other expenses of Rs. 2,78,737/-. There were not any business activities done by the assessee during the year under consideration. The A.O. asked the assessee to explain the interest claimed in the P & L A/c. The A.O. found that assessee has taken unsecured loan from 05 parties namely (1) M/s Flex International Pvt. Ltd., (2) M/s AR Leasing Pvt. Ltd., (3) M/s Anshika Consultants Pvt. Ltd., (4) M/s Apoorva Extrusion Pvt. Ltd. and (5) M/s AR Infrastructure & Projects Pvt. Ltd., that these loans were utilized for investm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on business. The A.O. noted that on one hand assessee paid interest to these related parties for the loans taken and on the other hand assessee has invested in share of M/s. Minor Hotels Pvt. Ltd., and no taxable return shown by the assessee company. It was, therefore, inferred that this is not business expenditure and the same was disallowed. 3. The assessee company challenged the addition before the Ld. CIT(A) and same submissions were reiterated. It was submitted that assessee company was incorporated on 11.11.2005 with the object to carrying on business as owners, builders, colonizers, developers, promoters, proprietors, lessor, civil contractors, maintainers of residential, commercial and industrial buildings, colonies, hotels, mill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct could not have been taken-up in due course of time. However, efforts are being made towards starting of the stated project. It was, therefore, submitted that it was business purpose of assessee, therefore, interest is allowable. 4. The Ld. CIT(A) noted that assessee company assessee company is doing the business of financing and investment as opposed to the activities mentioned in the MoA of the company. The AO was correct in interpreting that there was no business activity as contemplated in MoA except the receipt of loans from entities and investment in the equity shares of the company involved in the hotel project. The Ld. CIT(A), therefore, upheld the addition. 5. I have heard the Learned Representative of both the parties and peru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . On the other hand, Ld. D.R. relied upon the Orders of the authorities below and submitted that there is no nexus with the payment of interest and business activities of the assessee, therefore, addition was correctly made. 8. I have considered the rival submissions. The conditions for getting deduction under section 36(1)(iii) of the I.T. Act, 1961, in respect of the interest are - (1) money must have been borrowed by the assessee (2) it must have been borrowed for the purpose of business (iii) the assessee must have paid interest on the said amount and claim it as deduction. 8.1. The Hon'ble Calcutta High Court in the case of CIT vs., Rajeeva Lochan Kanoria [1994] 208 ITR 616 (Cal.) in which it was held as under : "Held, that directo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellate authority." 8.3. The Hon'ble Madras High Court in the case of CIT vs., RPG Transmissions Ltd., [2013] 359 ITR 673 (Mad.) held as under : "(iv) That the CIT(A) and the Tribunal found that the investments made in shares by the assessee by utilising borrowed capital were for strategic business purposes because the companies were promoted as special purpose companies to strengthen and promote its existing business by combining different business segments and, therefore, the claim was fully allowable under section 36(1) (iii). The Revenue did not adduce any material to show that the borrowed capital was utilised by the assessee for non-business purposes." 8.4. Considering the facts of the case in the light of above decision ..... X X X X Extracts X X X X X X X X Extracts X X X X
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