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TMI Blog2019 (6) TMI 1537X X X X Extracts X X X X X X X X Extracts X X X X ..... erns of Shriram Group. While making the assessment for AY 2012-13, the Assessing Officer (AO), inter alia, disallowed Rs. 7,80,98,638/- u/s. 36(1)(iii) of the Income Tax Act, 1961 (in short 'the Act'). Aggrieved that order, the assessee filed an appeal before CIT(A). The ld. CIT(A) following the decision of this Tribunal in ITA No.995/Chny/2017 for AY 2013-14 dated 19.07.21018 allowed the appeal. Aggrieved against that order, the Revenue filed this appeal with the following grounds: "1. The order of the Ld. CIT(A) is contrary to law, facts and circumstances of the case. 2. The Ld. CIT(A) erred in allowing the claim of expenditure under section 36(1)(iii) of the Act without appreciating that there was no evidence produced by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , as applicable in terms of section 36 and 37 of the Act. 6. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the Ld. CIT(A) be set aside and that of the AC restored." 3. The ld. Departmental Representative presented the case on the lines of grounds of appeal. Per contra, the ld. Authorised Representative of assessee submitted that the order of the Hon'ble ITAT in ITA No.994/Chny/2017 for AY 2013-14 dated 19.07.2018 in the assessee's case was subject matter of appeal before the Hon'ble Jurisdictional High Court of Madras, which in its order in TCA No.166 of 2019 dated 21.02.2019, dismissed the Revenue's appeal. Therefore, he pleaded that the Revenue's appeal be dismissed. 5. We h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the claim for deduction under section 36 (1) (iii) of the Act, the nature of the expense~whether the expense was on capital account or revenue account~ was irrelevant as the section itself says that interest paid by the assessee on the capital borrowed by the assessee was an item of deduction. That the utilization of capital was irrelevant for the purpose of adjudicating the claim for deduction under section 36 (1) (iii) of the Act. (see the judgment of the Bombay High Court in the case of Calico Dyeing & Printing Works v. CIT (1958) 34 ITR 265. In that judgment, it has been laid down that where an assessee claims deduction of interest paid on capital borrowed, all that the assessee had to show was that the capital which was borr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'The only enquiry that is to be made is whether the payment of interest was in respect of capital borrowed for the purpose of the assessee's business or profession. There is no dispute that the capital was borrowed in the instant case and interest was paid on the borrowed capital. It is to be established that the amount was borrowed for the purpose of business or profession. The amount borrowed may be utilized for the 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 confirmed to expenses incurred on revenue account. Capital expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the interest paid thereon by the borrower Assessee cannot be disallowed under Section 36 (1) (iii) of the Act. Para 36 of the said judgment is quoted below for ready reference : ""36. We wish to make it clear that it is not our opinion that in every case interest on borrowed loan has to be allowed if the assessee advances it to a sister concern. It all depends on the facts and circumstances of the respective case. For instance, if the Directors of the sister concern utilize the amount advanced to it by the assessee for their personal benefit, obviously it cannot be said that such money was advanced as a measure of commercial expediency. However, money can be said to be advanced to a sister concern for commercial expediency in many o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r invest, the same cannot be said to be not in the business interest or commercially expedient for the purpose of business and the concept of ;Matching Principles;, which has been applied by the Assessing Authority and the CIT (A) in the present case, was not really applicable. It is not for the Revenue authorities to substitute their own wisdom or notion about the rate of interest agreed to between the parties, including the group companies and, as such, the finding of fact about commercial expediency or absence thereof is a finding of fact, out of which, no substantial question of law can be said to be arising, requiring our consideration under Section 260A of the Act. Moreover, since in the case of Assessee company itself, this Court has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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