2011 (6) TMI 912

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....n the facts and in the circumstances of the case, the ITAT was right in deleting the addition of Rs. 19,73,333/- being interest attributable to the borrowings made for investment of Rs. 3,70,00,000/- in Phil Photo Ltd., as the interest paid to Bank was related to the debit balance arising from diversion to its sister-concern which is not allowable under Section 36(1)(iii )? C. Whether on the facts and in the circumstances of the case, the ITAT was justified in holding that as the appeal against disallowance of provision for doubtful debts is withdrawn before the ITAT, the claim of assessee towards bad debts written off amounting to Rs. 94,00,000/- be allowed as bad debts, without verifying whether they fulfil the condition laid dow....

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....tions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28 (i) and (ii)** ** ** (iii) the amount of the interest paid in respect of capital borrowed for the purposes of the business or profession : Provided that any amount of the interest paid, in respect of capital borrowed for acquisition of an asset for extension of existing business or profession (whether capitalised in the books of account or not); for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, shall not be allowed as deduction. Explanation.-Rec....

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....is amount is treated as bad debts, particularly since the amount is shown by the assessee as an investment in its account as contended by the learned Counsel for the respondents. 8. The Commissioner of Income Tax (Appeals) thus confirmed the order of the Assessing Officer. 9. In appeal, however, the ITAT found that the assessee had invested the amount in question in subsidiary company Phil Photo Ltd., for the acquisition of its shares i.e. to have a control over majority shares but not to earn dividend on interest. Before ITAT, it was not disputed that such an investment is an integral part of the business. In these circumstances, ITAT, therefore, came to the conclusion that the assessee is entitled to the amount as deduction under Se....