9911796707
TMI Blog2021 (7) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... wance of Rs. 5,35,90,353/- out of interest expenses 2.1 Aggrieved, the assessee filed an appeal before Ld. CIT (A) who found substantial merit in the claims made by the assessee. The appeal was allowed on both the above issues. 2.2 Now, the revenue is in appeal before us and has raised the following grounds of appeal: "1. That on the facts and in the circumstances of the case, the Ld. CIT (A) has erred in law and on facts in deleting the addition of Rs. 2,73,209/- made on account of disallowance of 20% of total travelling expenses without appreciating the fact that the onus was on the assessee to establish the genuineness of expenses u/s 37(1) which the assessee failed to discharge. 2 That on the facts and in the circumstances of the case, the Ld. CIT (A) has erred in law and on facts in deleting the addition of Rs. 2,73,209/- made on account of disallowance of 20% of total travelling expenses without appreciating the fact that similar additions were confirmed by ld. CIT (A) in earlier assessment years. 3. That on the facts and in the circumstances of the case, the Ld. CIT (A) has erred in law and on facts in deleting the addition of Rs. 5,35,90,353/- made on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf of the assessee, it is considered reasonable to disallow the claim of the assessee under this head to the extent of Rs. 2.73 lacs (being 20% of total travelling expenses). Accordingly, an addition of Rs. 2,73,209 is made on this account to the total income declared by the assessee company." 3.1 Before the Ld. CIT (A), it was submitted by the assessee that during the course of assessment vide letter dated 14th November, 2011 the assessee had submitted all the requisite details before the AO. It was submitted that in the details filed, the assessee had clearly mentioned the names of persons who had travelled, cost of tickets, boarding and lodging expenses, conveyance and other expenses, period of travel, places of visit and purpose. It was also clarified by the assessee that the expenses were incurred solely on travelling of the employees of the assessee concern. The Ld. CIT (A) has recorded the purpose of visit of the employees at pages 6 & 7 of the impugned order. Finding substantial merit in the claim made, the Ld. CIT (A) deleted the disallowance by observing as under:- "I have gone through the above submissions of the appellant and have considered the facts and evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is not opened for the AO to consider any such expenditure as excessive, especially looking to the facts and circumstances of this case and the law as relied upon in various judgments. In view of the discussions in the foregoing paragraphs and looking to the case laws relied upon by the appellant, which is found applicable in the case of appellant, the addition on account of travelling expenditure on estimate basis is directed to be deleted. The appellant gets a relief of Rs. 2,73,209/-. The appeal is allowed on this ground." 3.2 Before us, the Ld. DR has relied upon the order of assessment and has submitted that the Ld. CIT (A) was not justified in deleting the disallowance. 3.3 On the other hand, the Ld. AR has vehemently supported the impugned order. 4.0 We have carefully considered the facts of the case and the material on record. The Ld. DR has not brought on record any justifiable reason requiring any interference with the conclusions recorded by the Ld CIT (A) in the impugned order on this issue. As noted above, the assessee has filed requisite details of travel expenses not only before the AO but also before Ld. CIT (A). We find no merit in the case of the AO for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r companies becomes the business of the company. The AR has submitted in his reply that "entering into a joint venture and promoting an infrastructure company and holding substantial equity stock therein is itself a business which has been done by the assessee company in pursuance of its object duly mentioned in the object clause of the memorandum." It would be pertinent to mention here that had this been the case, the assessee would have been required to classify the shares of investee companies as its stock or as trade investments and not simply as investment as shown in the balance sheet. It needs to be asserted here that that business purpose in relation to an expenditure needs to be direct and proximate and not indirect and distal. In the case at hand the purpose for incurring the loan is too distanced from the actual business of the assessee to be allowed as genuine business expenditure. On the issue of giving out loans from the borrowed funds, the assessee has not offered any explanation and it is safely presumed that the assessee has nothing to prove that these loans were given for any business purpose. From the foregoing discussion it is concluded that - i) Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has taken loan from its 100% holding company M/s Uflex Ltd. @ 10% per annum on interest. During the year under consideration the appellant has disclosed interest and other income, whereas claimed various expenditures including interest on borrowed funds and other financial charges amounting to Rs. 5,35,90,353/-. This amount includes the bank charges of Rs. 5,08,161/- and interest paid of Rs. 5,30,82,192/- on borrowed funds. Addition has been made by the AO on the basis that there is no business activity by the appellant during the year, the appellant has borrowed funds from outside and incurred interest expenses, however there is no nexus between the utilization of borrowed funds and the business activities of the appellant. As submitted in detail, as reproduced earlier, it is contended by the appellant that though there is no revenue shown during the year from the business activity, however there has been business operations in the last two years and subsequent years. The appellant having dealings in development and sales in real estate business cannot be stated to be having no business activity during the year, simply because there is no revenue receipts shown in the profit a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrowed funds and the business activity of the appellant, it has been duly demonstrated by the appellant that the funds borrowed has been deployed/invested for various business projects of the appellant such as Rs. 10 crores utilized for getting bank guarantee for bidding the allotment of lease hold rights from Rail Land Development Authority, Rs. 25.50 crores for aggregation of land to develop residential/commercial complex-which is main business of the company, Rs. 6.05 crore for payment of interest and other expenses, Rs. 22 crores paid to AKC Developers Ltd. as equity contribution in JV of Municipal Solid Waste Project Rs. 7.35 crores to Qcell Ltd. Gambia as its contribution for JV of IT enabled services etc. It is noted that one of the object and business of the appellant is to enter joint venture and forming SPV to carry out real estate and infrastructure business. In order to carry out its business, the appellant has to enter into various joint ventures or become part of consortium, bringing financial and technical resources together with co-participants in various projects in the real estates. This type of arrangement is very common, especially with the Government and semi G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inventory of 53.87 crores of traded goods in the form of apartments which was ready for sale and which were also sold subsequently in the future years. The assessee had also participated in joint venture projects outside India. These activities of the assessee were in consonance with its Memorandum of Association. During the year under consideration, the assessee had made fresh borrowings of Rs. 78.82 crore from its holding company. The assessee had submitted details of utilization of this sum which is on record and noted by the Ld CIT (A) at pages 27 to 30 of the impugned order. Once these details are perused, the obvious conclusion is that there is a clear connection between the money borrowed and its utilization for purposes of business of real estate and infrastructural development carried on by the assessee. We, therefore, find no merit in the disallowance made by the AO and the impugned order is therefore upheld. Ground No.3 is, therefore, dismissed. 7.0 Grounds 4, 5 & 6 are general in nature and no specific grievance has been addressed by the Ld. DR in this regard. These grounds are also dismissed. 8.0 In the final result, the appeal of the Department stands dismissed. O ..... X X X X Extracts X X X X X X X X Extracts X X X X
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