TaxTMI 
TaxTMI 
2017 (8) TMI 960
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....fficer raised various queries, one of them with respect to the assessee's claim of interest expenditure in respect of loans taken from various banks. The amount so obtained was invested in preferred stock of subsidiary company Hostmann and Steinberg Inc. USA to the tune of Rs. 48.81 crores. A sum of Rs. 2.36 crores (rounded off) was charged to the Profit and Loss account towards the interest and other finance charges. The Assessing Officer questioned the assessee with respect to such expenditure. In response to the queries, the assessee raised two fold contentions. First contention was that in order to expand the business in USA, the company had established a subsidiary company in USA to manufacture and sale the printing inks and its auxiliary products. This has resulted in multiple increase in sales of the assessee company from India. During the year under consideration, company had sold goods worth Rs. 75.43 crores to the said subsidiary company. Looking to the purpose of such investment, it can be stated that the expenditure was for the purpose of business and was therefore, claimed as a business expenditure. The alternative contention of the assessee was that if this stand ....
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....r deduction under the head 'income from other sources' has been considered. The ruling of the Hon'ble Apex Court relied upon by the assessee as quoted above has also been considered. Vide this decision the Hon'ble Court has reiterated its earlier decision and ruled that such expenses are allowable under the provision of section 57(iii) of the IT Act. Since the decision of the Apex Court is binding on all lower authorities, respectfully following the same, these expenses are allowed as expenses under the head 'income from other sources', (Allowance of Rs. 2,36,18,612/as expenses under the head 'income from other sources )." 4. In response to the draft order of assessment, the assessee raised objections. However, with respect to the treatment that should be given to the interest and finance charge expenses, the assessee raised no dispute, presumably because the assessee's alternative contention was accepted by the Assessing Officer and the assessee was not in a mood to pursue the main contention. Be that as it may, the draft order of assessment along with the petitioner's objections were considered by the DRP as required under subsection( 8) of sect....
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.... income falling under the head income from other sources. Therefore, the interest expenditure allowed by the A0 u/s. 57(iii) of the IT. Act is not in order." 6. This notice the petitioner has challenged in this petition primarily on two grounds. One, that the Assessing Officer had taken a view after proper inquiries which was a plausible view. This decision was therefore, not open to revision by the Commissioner. Second contention of the petitioner is that the order of assessment was passed after the draft order was placed along with the petitioner's objections before the DRP. The issue of interest and administrative expenditure was part of such consideration by the DRP. Final order of assessment, therefore, having been passed as per the guidelines of the DRP, was not open to revision at the hands of the Commissioner. (22.8.2017) 7. Elaborating such grounds, learned counsel for the petitioner submitted that the Assessing Officer had made proper inquiries with respect to the petitioner's claim for deduction. The petitioner had placed for consideration of the Assessing Officer full facts. According to the petitioner, the investment was made for the purpose of business s....
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....ad no occasion to examine this contentious issue. On this issue, therefore, there was no opinion by the DRP and the order passed by the Assessing Officer was not outside the purview of the revisional jurisdiction of Commissioner under section 263 of the Act. 9. From the materials on record, it can be seen that regarding the interest and other finance charges of Rs. 2.36 crores, the Assessing Officer had undertaken a detailed scrutiny during the assessment proceedings and called upon the assessee to justify the claim. The assessee's stand was two fold. Firstly, that the interest related to the borrowed amount which was invested in the stock of subsidiary company set up in USA. This company was set up to increase the assessee's sale. The expenditure was thus exclusively for the purpose of the business. In the alternative, the expenditure should be allowed under section 57(iii) of the Act since such investment would earn dividend income. Merely because no dividend was paid during the year under consideration would not be of any consequence. The Assessing Officer rejected the first contention but accepted the later. The assessee did not object to this proposal in the draft o....