TaxTMI 
TaxTMI 
2014 (1) TMI 75
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....g interest on the Inter Company Deposit u/s 36(2)(iii) of the Income Tax Act, 1961. 3. The Ld Assessing Officer has erred in disallowing Rs.94,900/- paid to Registrar of Companies towards expenses incurred for increasing the authorized share capital of the company. of the company. 4. The appellant neither concealed particulars of income nor furnished inaccurate particulars or acted in any manner which warrants initiation of penalty proceedings u/s 271(1)(c) of the Income Tax Act, 1961. 2. The brief facts of the case are that assessee company is a Non Banking Finance Company (for short NBFC) and had earned by way of commission, brokerage, interest dividend and sale & purchase of shares. It filed its return ....
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....put forth by the assessee was vague and it had not explained as and why under what circumstances interest had not been charged on ICD given by the company. In view of the above, the addition of Rs.14,22,219/- was made. 4. The Assessing Officer further observed that assessee had incurred an expenditure of Rs.94,900/- for enhancing its capital base and said expenditure was claimed as revenue expenditure. The Ld Assessing Officer relying upon the decision of the Hon'ble Supreme Court as reported in 225 ITR 792 & 225 ITR 798 disallowed the same. 5. Dissatisfied with the order, the assessee filed appeal before Ld CIT(A) and reiterated its submissions before Assessing Officer and further explained that amount of ICD was not paid out of inte....
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....terest - free loans when the borrowings are burdened with interest. In Metro Exporters Ltd. v. ITO (2009) 29 SOT 531 (Mum.) the assessee borrowed money from a company allowing to the same group. Interest paid on such borrowing was disallowed by the Assessing Officer for the reason that the assessee had given interest-free loans to an allied concern. It was held that so long as the amount borrowed is used for business, in such borrowing is eligible to be deducted while computing the income from business. It was held that the object of section 36(1)(iii) is not to enable the assessee to make large borrowings and create interest liability in the year of borrowal and in subsequent years and divert the borrowed sums by giving it ....
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....Industrial Corporation Ltd. v. CIT (1997) 93 Taxman 5/225 792 (SC) Brooke Bond Ltd. v. CIT (1997) 91 Taxman 26/225 ITR 798 (SC) as mentioned in the assessment order, the expenses is rightly disallowed by the assessee. Confirmed Rs.94,900/-" 7. Aggrieved with the order of Ld CIT(A), the assessee is in appeal before us. 8. At the outset, the Ld AR took us to page 25 of paper book and invited our attention to the fact that unsecured loan as on 31.3.2005 was of Rs.1,09,41,729/- which had reduced to Rs.43,66,729/- as on 31.3.2006, the reference of which was available at page 9 of paper book. In view of the above, the Ld AR argued that no fresh loans were raised during the year rather a part of old unsecured loans were repai....
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.... law of Brooke Bonds India Ltd. v. CIT relied upon by the Assessing Officer was not relevant as at that time section 35D was not available. Continuing his arguments he stressed that the expenditure was incurred as necessary business expenditure and can be allowed u/s 35D or section 37 of the Act. Reliance in this respect was placed on the following case laws:- 1. CIT v. Multi Metals Ltd. 188 ITR 151 2. Rakesh Singh v. ITO 139 ITD 128. 11. The Ld DR, on the other hand, submitted that assessee is a NBFC and it was in the business of lending and borrowings and it has paid interest on unsecured loans and there was no justification in not charging interest on advances made by it. In respect of second addition, ....
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....ree fund generated or available with the company, if the interest-free funds were sufficient to meet the investments and in this case this presumption is established considering the finding of fact both by the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal." 13. Therefore, following the above judicial ruling which had considered other rulings relied upon by the Ld AR, we are of the considered opinion that assessee was having a mixed pool of interest bearing funds and non interest bearing funds and since the unsecured loans were carried over from earlier years, it can safely be concluded that interest bearing funds raised in the earlier years and brought forward in the current year were for deployed in the busi....