TMI Blog2021 (8) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... by the ld. AO to ascertain the key executives of M/s. Hindustan Appliances Ltd., which is holding company of M/s. Jogindra Exports Ltd., is for F.Y.2015-16 which is much later to the year under appeal. The decision of not charging interest from M/s. Jogindra Exports Ltd., during the year under consideration was made on account of commercial expediency and to protect atleast the principal portion of the dues by understanding the financial sickness of the borrower company. In any case, there is absolutely no provision in the statute to allow interest payment on loans only to the extent of interest income earned by the assessee and disallow the remaining interest portion thereon, as is case before us in the impugned appeal. Facts stated by the assessee company with regard to borrower company becoming sick were not disputed by the Revenue before us. As stated earlier, once it is held that borrowings are used for the purpose of business, interest paid on such borrowing becomes an allowable deduction u/s.36(1)(iii) - we hold that the ld. CIT(A) was not justified in confirming the disallowance of interest - Decided in favour of assessee. - ITA No.1094/Mum/2019 - - - Dated:- 2-8-20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 3.83 Crores ₹ 3.81 Crores ₹ 1.63 Crores 4.2. The lending made by assessee to aforesaid two parties in its ordinary course of business of financing and resultant interest income derived thereon, which was sought to be set off against the interest paid on loan, was accepted to be income from business by the ld. AO in the earlier years i.e. A.Yrs. 2011-12 and A.Y.2012-13. When this fact was confronted to ld. DR, he stated that the year under consideration was the first year of scrutiny assessment for the assessee and that assessments for A.Yrs 2011-12 and 2012-13 were completed u/s.143(1) of the Act and not u/s.143(3) of the Act. For this argument, the ld. AR stated that the assessments for A.Y.2011-12 and 2012-13 were not subsequently subjected to any revision proceedings by the ld. Pr. Commissioner of Income Tax u/s.263 of the Act or subjected to any re-opening proceedings by the ld. AO u/s.147 of the Act. In view of this fact, we hold that it could be safely concluded that the transactions of lending to M/s. Jogindra Exports Ltd., and M/s. Anchor Leasing Pvt. Ltd and interest derived thereon from them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed between borrower company and assessee company demanding for payment of interest, board resolution of assessee company wherein the decision not to charge interest on the loan given to M/s. Jogindra Exports Ltd. was taken, copy of MCGM stop work notice, audited financial statements of borrower company etc., were duly furnished by the assessee before the lower authorities to substantiate its contentions of not charging interest on the loans / advances to M/s Jogindra Exports Ltd., 4.4. We find that assessee being engaged in the business of leasing had admittedly given loans and ICD to M/s. Jogindra Exports Ltd., in earlier years in the ordinary course of its business. It is not in dispute that the interest income earned from M/s. Jogindra Exports Ltd., had been duly offered to tax by the assessee as business income and assessed as such by the Revenue, be it u/s.143(1) or u/s.143(3) of the Act (which is totally irrelevant). Moreover, it is not in dispute that the borrowed funds from HDFC Bank had been utilized by the assessee for advancing monies to M/s. Jogindra Exports Ltd., in the ordinary course of its business of financing. Once the borrowed funds were indeed utilized by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at case were as under:- 3. The assessee ran a jewellery business. It then commenced business also in the exhibition of cinematographic films. In 1961 it obtained loans for building a cinema theatre. The said theatre was built in 1962 and was run by the assessee until 31-7-1965 when it was transferred to another firm. For the years during which the assessee exhibited films in the said theatre the interest paid on the loans obtained for constructing it were allowed by the revenue as a deduction under the provisions of section 36(1)(iii) of the Income-tax Act, 1961, that is to say, as being the amount of interest paid in respect of capital borrowed for the purpose of the assessee's business. For the years in question, however, the ITO declined that deduction on the ground that the business of exhibition of films in the said theatre was no longer in existence; therefore, the interest on borrowings attributable to this particular business could not be allowed as a deduction in computing the profits of the other business of the assessee. In appeal the AAC allowed the deduction as claimed by the assessee. 4.5. The Hon ble Supreme Court has held as under:- 7. The f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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