TaxTMI 
TaxTMI 
2013 (4) TMI 262
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....aimed in the Profit & Loss Account. 2. That the impugned disallowance was made by the learned Assessing Officer on the ground that borrowed funds have been utilized for making investments in group companies, whereas the learned CIT(A) has confirmed the same on the ground that interest expenditure has been incurred without any business activity carried out during the year. 3. That the learned CIT(A) erred in confirming the disallowance without considering the fact that the appellant has been regularly engaged in business activities for past several years and the borrowed funds in question were taken in earlier years for business purposes and a mere lull in business activity in one year does not disentitle the appellant to claim normal busi....
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..... The learned DR, on the other hand, relied upon the orders of authorities below. He stated that interest can be allowed only if the money is utilized for the purpose of business. From the balance sheet of the assessee, it is evident that the debtors and stock in trade are practically nil, while the borrowed money is as high as Rs.34.32 crores and payment of interest is more than Rs.3 crores. He also stated that none of the decisions relied upon by the learned counsel support the case of the assessee. He, therefore, submitted that the order of learned CIT(A) should be sustained. 5. We have carefully considered the arguments of both the sides and perused the material placed before us. The first point raised by the learned counsel was that t....
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....escribed, shall be deemed to be capital borrowed within the meaning of this clause;" 6. Thus, interest paid in respect of capital borrowed for the purpose of business is allowed as deduction under Section 36(1)(iii). Admittedly, the onus is upon the assessee to establish that the money has been borrowed for the purpose of business. Now, let us see the balance sheet of the assessee ending on 31st March, 2009 which is placed at page 8 of the assessee's paper book:- Schedule As at As at 31.03.09 31.03.08 Current assets, loans and E Advances Stock-in-trade 80,655 131,476 Sundry debtors 138,574 107,328 Cash and bank balances 37,882 147,225 Loans and advances 8,212 632,185 - 265,323 1,018,214 Less : Current liabilities and Provisions ....
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....d by the company over the last ten years. This necessitated the borrowings in order to run the business activities. Thus, there is no case for any disallowance out of expenditure claimed on account of interest on borrowings." (emphasis by underlining supplied by us) 8. As per the assessee's above explanation, the assessee is in the business of financing and investment. However, the assessee himself has stated that there is no nexus between the borrowing of funds and the investment in shares. Thus, the borrowed money, according to the assessee, has been utilized for the purpose of business of financing. However, from the balance sheet of the assessee, it is evident that the total loans and advances are only Rs.8,212/-. The sundry debtors i....
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....is intention to do further business. There may be a long period of inactivity but still the business may continue. However, we have already mentioned that in the case under appeal before us, the Assessing Officer has not disallowed the interest on the ground that the assessee had discontinued the business but he has disallowed the interest on the ground that the borrowed money has not been utilized for the purpose of business. Therefore, the above decision would be of no help to the assessee. 12. In the case of Bharat Nidhi Ltd. (supra) also, the dispute before the Hon'ble Punjab High Court was whether the business of the assessee ceased to exist or not. However, it is not the controversy in the case under appeal before us. Therefore, this....