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TMI Blog2020 (9) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... re. 2. The assessee in the present case is a non-banking finance company which filed its return of income for the year under consideration on 30.09.2013 declaring total income at Nil. In the Profit & Loss Account filed along with the said return, a sum of Rs. 2,65,87,704/- was debited by the assessee on account of interest expenditure. During the course of assessment proceedings, it was noticed by the AO that the said interest was paid by the assessee on Short Term Borrowings which stood at Rs. 28,14,87,977/- as at 31.03.2013. He also noticed that the said Short Term Borrowings were utilised by the assessee for payment of share application money to the extent of Rs. 4,72,10,000/- as at 31.03.2013. Since the said utilisation, according to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter examining the balance sheet of the assessee alleged that the borrowed capital had been utilised in making the share application of Rs. 4,72,10,000/- as the assessee had own funds of Rs. 4,98,84,904/- only and thus the interest expenditure had not been incurred for business purpose. Thus, the Ld. AO made the disallowance of interest amounting to Rs. 49,05,630/- u/s 36(1)(iii) of the Act. In connection to above, it is submitted that the assessee is a NBFC company registered with Reserve Bank of India and engaged in the business of investing and financing activities. Copy of NBFC registration certificate is enclosed at page 12-16 of Paper Book. Since, the investment and financing activities is also one of the main business of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatement at page 41 of Paper Book that the assessee had shown the interest income, dividend income and profit on sale of such investment as a part of revenue from operating activities. This is also evident from the copy of computation of ITR enclosed at page 60-90 of Paper Book. This very clearly shows that the share application given by the assessee is a part of its business activity being undertaken as a NBFC. The short term borrowings had been utilized for the purpose of business and therefore the interest paid on such borrowed fund were wholly and exclusively for the purpose of business only." In support of the submission as made above before the Ld. CIT(A), reliance was placed on behalf of the assessee company on the decision of H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has preferred this appeal before the Tribunal. 5. The learned counsel for the assessee submitted that the assesssee is a non-banking finance company and buying and sselling of shares as well as making investment in shares was part of its main business activity. He invited our attention to the balance sheet of the assessee company as placed at page no. 29 of the Paper Book as well as relevant schedule of short term loans and advances given at page no. 42 of the Paper Book to show that the share application money was included in the short term loans and advances and the same were reflected as current assets of the assessee company in its balance sheet. He also invited our attention to the submissions made before the Ld. CIT(A) as ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , relied on the orders of the authorities below in support of the revenue's case on the issue under consideration. He contended that investment made by the assessee in share application money was in the nature of capital investment and, therefore, interest paid on the borrowed funds to the extent utilised for making payment of share application money was not allowable u/s 36(1)(iii) as rightly held by the Ld. CIT(A). 7. We have considered the rival submissions and also perused the relevant material available on record. It is observed that the assessee is a non-banking finance company which is duly registered with the Reserve Bank of India and it is mainly engaged in the business of investing and financing. The share application money was c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in shares was allowable as deduction u/s 36(1)(iii) of the Act. To the similar effect is the decision of the Hon'ble Madras High Court in the case of Shriram Investments (Firm) Moogambika Complex (supra) cited by the learned counsel for the assessee wherein it was held that where borrowed capital was invested in shares and debentures for the purpose of business, interest paid thereon would be allowable u/s 36(1)(iii). 9. If the legal position emanating from the judicial pronouncements discussed above is applied to the facts of the present case, we find that the share application money was paid by the assessee company in the ordinary course of its business of making investment in shares and, therefore, interest expenditure incurred on the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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