TMI Blog2020 (11) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... of fact as to whether the lower interest paid on the borrowings made by the assessee company from the sister concerns or the group companies is for the purpose of its business or not. Whether it is commercially expedient or not for the Assessee cannot be decided by the Revenue authorities and unless a decision taken in the usual course of business by the Assessee can be held to be arbitrary or motivated, deliberately taken to defeat the purpose of the Revenue, it cannot be held that the lower interest rate paid to the borrowers on the borrowings made by the assessee company is disallowable u/s 36 (1) (iii). Tribunal, in our opinion, rightly held that when the cash system of accounting was adopted by the Assessee, an Investment Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -13. 3. The appeal has been admitted on 20.11.2019 on the following substantial questions of law : (1) Whether on the facts and in the circumstances of the case, the Tribunal was right in deleting the disallowance made u/s.36(1)(iii) of the Income Tax Act especially when the Assessee had advanced interest bearing funds without charging any interest? And (2) Whether on the facts and in the circumstance of the case, the Tribunal was right in not considering the fact that the matching principle in terms of income and expenditure is not applicable when cash method of accounting is followed as the sine qua non for allowability of expenditure is the nexus between the income and expenditure reported for the year in question as ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 borrowed was used for business purpose in the relevant year of account and it did not matter whether the capital was borrowed in order to acquire a revenue asset or a capital asset.' It may be noted that in India Cements Ltd. v. CIT (1966) 60 ITR 52 (SC), the apex court was specifically pleased to observe that the object of the loan is an irrelevant consideration. In the State of Madras Vs. G.J.Coelho (1964) 53 ITR 186 (SC) , the Supreme Court was dealing with the deduction claimed under section 5 (e) of the Madras Plantations Agricultural Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ney 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 expenditure may not be allowed as a deduction under section 37 because the section specifically bars any deduction of expenditure of capital nature. But section 36 is differently worded. There is no bar in section 36 (1) (iii) to allowance of interest paid in respect of capital borrowed which has been utilised for purchase of a capital asset. The position of law in this regard was explained by the Supreme Court in the cases of India Cements Ltd. v. CIT (1966) 60 ITR 52 (SC) and State of Madras v. G.J.Coelho (1964) 53 ITR 186 (SC)' (emphasis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 other circumstances (which need not be enumerated here). However, where it is obvious that a holding company has a deep interest in its subsidiary, and hence if the holding company advances borrowed money to a subsidiary and the same is used by the subsidiary for some business purposes, the assessee would, in our opinion, ordinarily be entitled to deduction of interest on its borrowed loans.' 9. We are of the considered opinion, that, as a matter of fact, no substantial question of law arises in the present case, becaus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 only decided on similar facts earlier and dismissed the Revenue's Appeal, we do not find any reason to take a different view of the matter for the Assessment Years in question before us. 10. Therefore, this Appeal, filed by the Revenue, is also liable to be dismissed and it is, accordingly, dismissed. 6. Following the said decision, the above tax case appeal is dismissed and the substantial questions of law framed are answered in against the Revenue. No costs. - - TaxTMI - TMITax - Income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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