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TMI Blog2022 (2) TMI 862X X X X Extracts X X X X X X X X Extracts X X X X ..... urposes only. 5. The Assessing Officer totally ignored the agreement between the assessee and Matrix Cellular International Services Ltd. For waiver of interest up to F.Y. 2013-14" 3. The facts of the case are that return of income was filed on 29.09.2015 declaring total loss of Rs. 78,80,671/-. The assessee company was engaged the business of renting out of handsets and SIM cards. 4. The Assessing Officer noted that during the year under consideration, the assessee company had shown short-term borrowing amounting to Rs. 31,33,22,873/- as on 31.03.2015 and Rs. 16,87,01,831/- as on 31.03.2014 and had paid interest expenses of Rs. 96,98,713/- which was claimed to be paid to Matrix International, a group concern. The loan was from group concern and was interest-free advance in earlier years as claimed by the assessee and the assessee had not claimed any interest on financial charges in the earlier year also. Copy of the loan agreement was submitted to the AO in which Matrix Cellular Services International had agreed to waive an amount of Rs. 6,19,08,754/- on condition that the balance of Rs. 17.70 crores would be paid back to them subjected to conditions. The assessee submitted ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... djusted through book entry. Hence, disallowance of Rs. 96,98,713/- was made u/s. 36(1)(iii). 7. Relying on the provisions of section 36(1)(iii) and the decision of the Hon'ble Gujarat High Court in the case of Sarabhai Sons Pvt. Ltd. vs. CIT (201 ITR 465) and the decision of the Hon'ble Madras High Court in tire case of CIT vs. Sujani Textiles Pvt. Ltd. ( 151 ITR 653), the AO held that the assessee was not eligible for deduction under section 36(1)(iii). 8. The ld. CIT(A) confirmed the addition holding that the assessee failed to establish any direct nexus between own funds vis-a-vis interest free loans and advances given. 9. During the arguments before us, the ld. AR relied on the submissions made before the revenue authorities. The relevant part is as under: Matrix Cellular Serviced Pvt. Ltd. was formed on 17.11.1999 to carry on the business of services provider to essar Vodafone by getting new mobile connections manage their complaint, collect mobile usage payment from its customers and pay to Vodafone for the connection made through it irrespective of whether customers pays his bill or not. In a way they were acting as del credit agent. Over the period Matrix Cel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire escrow shares or the investor decided not to purchase the escrow shares for any reason whatsoever, then the investor shall have the right to require the existing shareholder to transfer the escrow shares to a third party buyer as determined either by the; (a) investor; or (b) existing shareholders and as acceptable to the investor. Accordingly, Rs. 17.39 Crores Mn (Being the estimated realizable amount on sale of escrow shares) has been considered good of recovery and balance Rs. 6,61,34,424/- Mn has been provided as doubtful of recovery in the financial year 2011-2012. (As on 5th June 2013 another agreement was made between Matrix Cellular International Services Ltd. and the assessee where the assesses was to pay Rs. 17,70,00,000/- plus interest compounded @ 10% but due to no business by the assessee, the interest was waived till March 2014.) In Financial year ended 31st March 2015, the assessee company paid of Rs. 11,21,00,000/- to Matrix Cellular International Ltd. which included interest of Rs. 96,98,713/- and Rs. 6,61,34,424/- was waived by Matrix Cellular International Services Ltd. to square up the balance. ..... The Assessing Officer has failed to apprecia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s allowable u/s. 36(1)(ii). 10. The matter before us has two folds. 11. The assessee contended that by paying interest of Rs. 96,98,713/-, the assessee got a waiver of Rs. 6,61,34,424/-. The revenue disallowed the interest on the grounds that whether the loan received was for the purpose of business, if so, the proofs and evidences thereof to support the utilization of such loan so that the interest paid can be treated as an eligible deduction and since the assessee failed to prove, the interest is disallowable. While the assessee's contention is that the entire transactions should be viewed holistically, the revenue's contention was that every expense claimed to be allowed has to be utilized for the purpose of business. It was also held that the assessee had failed to demonstrate the utilization of the fund and its nexus with loan for the purpose of business. The assessee has submitted that payment of interest was beneficial to the company since it got waiver of loan of Rs. 6,61,34,424/-. 12. We have considered the assessment order and the submissions of the assessee. As was the case during assessment proceedings, even during the appellate proceedings the assessee has f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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