TaxTMI 
TaxTMI 
TaxTMI 
2013 (7) TMI 693
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....d. Remaining grounds of appeal read as under:- "1. The appellant company is a fully owned subsidiary of NHAI for carrying out the National objective of road development in the country. 2. Return of income was filed at an income of Rs.11999390/-, being the interest on deposits with banks of surplus funds; since the company was under pre-operation stage, all expenditure and income was capitalized under the head 'Capital Work-in-progress'. 3. The regular assessment in this case was completed at an income of Rs.18269450/- u/s 143(3); making the following additions to the returned income:- a) Interest of Rs.5744498/- (calculated @6.5% on Rs.88376886/-) on the ground of intermingling of interest bearing debts taken by the assessee and the int....
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....ards financial advisory fees shown as current liability in the final accounts of the assessee. Now, the assessee is again in second appeal before this Tribunal with the ground as mentioned hereinabove. Ground no.1 & 2 4. We have heard rival arguments of both the parties and carefully considered submissions, contentions, legal propositions and perused the material placed before us. Apropos ground no. 1 & 2, the assessee's representative submitted that the amount of Rs.8,83,76,886.95 was in the nature of amount recoverable from NHAI and was not in the nature of loan or advance. He further submitted that as per terms and conditions settled with NHAI, interest was not chargeable on this amount and from the observations of the auditors, it is ....
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.... Schedule-2 of the final accounts, the assessee has taken sub-debt from NHAI of Rs. 3.64 crores. We also observe that as per Schedule - B, current assets, loans and advance, the assessee company has shown recoverable amount of Rs.8,83,76,886/- from parent organization NHAI. This is the contention of the AR that this amount is a part of continuous day to day business activity with parent organization as per accounts and per contra, an amount of sub-debt on nominal interest was given by NHAI to assesee company on nominal 6.5% per annum interest rate as a part of unsecured loan to facilitate seed capital to the assessee company. The AR has placed his reliance on the judgment of Jurisdictional High Court in the case of C.I.T. vs Dalmia Cement B....
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....e of interest generally applicable in the commercial transactions. In this situation, observations of the auditors as well as authorities below are perverse and against the factual matrix of the case. 8. In view of above, we set aside the impugned order and hold that the interest payable by the assessee company on sub-debt to NHAI was given under business expediency and the same is allowable u/s 36(1)(iii) of the Act. We, therefore, allow ground no. 1 and 2 of the assessee with a direction that the addition be deleted by allowing interest paid to NHAI on sub-debts. Ground No. 3 9. Apropos ground no. 3, the assessee's representative submitted that the auditors pointed out in item no. 2(vii) that current liability of Rs.4,37,638/- pertaini....
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....to establish current liability being shown as amount payable to financial advisory fees. The DR further submitted that it is the duty of the assessee to show that the expenditure was capitalized and never claimed as revenue expenditure coupled with confirmation from the creditor. 11. From the above contentions and submissions, we clearly observe that the addition was made on the basis of auditor's remarks in item no. 2(vii) in the auditor's report. The auditor's remarks clearly stipulate that the current liability shown as amount payable towards financial advisory fees was not doubted but it was observed that the same was subject to confirmation from the creditors. From the orders of the authorities below, we clearly observe that no effort....