2012 (8) TMI 481

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....ntract manufacture of industrial chemicals, had claimed these amounts as interest incurred on borrowed funds. Assessee had made investments of Rs.5,34,38,000/- in wholly owned subsidiary companies. Assessing Officer during the course of assessment required the assessee to explain as to why pro-rata interest on borrowed funds should not be disallowed. Reply of the assessee was that these were all loss making companies where investments were made and they never intended to declare any dividend. Assessee had borrowed funds from Indian Syntans Investments Pvt.Ltd. for making such investments. Assessing Officer was of the view that investments were not directly for business purpose of the assessee and thus he disallowed the claim. 3. On ap....

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....ient purpose. As per the CIT(A) the assessee did not discharge its onus to show that the expenditure incurred was wholly and exclusively for the purpose of business. In this view of the matter, he confirmed the additions made by the Assessing Officer. 4. Now, before us, the authorized representative strongly assailing the order of the CIT(A), submitted that investments made in wholly owned subsidiary was based on a commercial expedient decision taken by the assessee for expansion of its business. According to him, in view of the decision of the Hon'ble Apex Court in the case of S.A.Builders Vs. CIT (supra) the claim was allowable. Reliance was also placed on the decision of the Hon'ble Bombay High Court at Goa in the case of CIT Vs. Phil....

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....esently carrying out manufacturing of industrial chemicals for a European MNC's wholly owned subsidiary Lanxess India Pvt.Ltd & wanted to explore the possibilities of getting similar opportunities from other chemical company in Europe and for this purpose had formed a 100% subsidiary in Switzerland. The assessee has borrowed funds for investing in wholly owned subsidiary and interest thereon amounted to Rs.2,248,961/- which was claimed as Revenue Expenditure. You have required the assessee to show cause why the said amount should not be allowed u/s.36(1)(iii) read with section 14A. In this connection, we submit that the Dividend if any received in India from foreign company is not exempt from tax as it will not be a Dividend covered u/s.115....