AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (5) TMI 1630
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....On facts and circumstances of the case, the CIT(A) has erred In restricting the alternative addition of interest paid u/s 36(1)(iii) to Rs. 14,76,678/- only against proposed disallowances of Rs. 99,44,878/- by the Assessing Officer. 3. On facts and circumstances of the case, the CIT (Appeals) has erred in restricting the disallowances of foreign education expenses of Rs. 42,89,759/- to Rs. 7,32,177/- only without appreciating that this expenditure was personal in nature and should have been disallowed in full. 4. On the facts and circumstances of the case and in law, the Ld. CIT (Appeals) has erred in directing to compute the disallowances u/s 14A Rule 8D by excluding the interest expenses of Rs. 50,60,179/- in respect of term loan and car loan. 5. The appellant craves leave, to add, alter or amend any ground of appeal raised above at the time of the hearing. " 3. The assessee has raised the following grounds of appeal :- " 1. The order is passed by the learned Commissioner of Income Tax (Appeals) is against the law and facts of the case. 2. The learned Commissioner of Income Tax (Appeals) has erred in dissolving an amount of Rs. 14,76,678/- u/s 36(1) (iii) of the I....
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....3. Addition on account of Interest free loans given to its sister concern From the detail and information furnished by the assessee company it is noted that the assessee has given huge interest free loans to its subsidiaries and sister concerns. Party wise detail and loan given is summarized as under :- S. No. Name of the party Capital Opening balance of loan Closing balance of loan Interest charge 1. Triumph Property Ltd. 7,47,500/- 12,45,00,000/- 12,48,50,000/- Nil 2. e Financial Consultant Ltd. 5,00,000/- 93,00,000 91,00,000/- Nil 3. Cypriot Consulting Ltd. 5,00,000/- 1,85,04,722/- 1,81,04,722/- Nil 4. ne Pharmacies (India) Ltd 5,00,000/- 1,95,70,900/- 1,93,66,500/- Nil 5 RTC Restaurants (India) Ltd. 1,00,00,000/- 7,58,17,499/- 10,69,77,814/- Nil 6. Durant India Ltd. 21,55,584/- 21,66,259/- Nil 7. arro Restaurants (India) Ltd. 1,80,00,000/- 4,48,932/- 4,48,932/- . Nil 8. RR Properties (P) Ltd. 5,00,000/- 2,40,00,000/- 2,40,00,000/- &nb....
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....i.e. wholly owned subsidiary companies have to be attributed to the own funds. Stand of the assessee company is fully supported by various judgments as under:- i) Commissioner of Income Tax Vs. Bharti Televenture Ltd. ii) CITVs. Dalmia Cement Bharat Ltd. (2009) 183 Taxman 422 (Delhi) iii) CIT Vs. South India is Corpn. (Agencies) Ltd. 209 CTR (Mad) 233. iv) CIT Vs. Steri Sheets Ltd. (2007) 106 TTJ 460 (Delhi). Perusal of the above cases show that three of the judgments out of the four judgements pertained to Delhi High Court i.e. jurisdictional High Court. " 3.4 The above submission of the assessee has been gone through and considered carefully, but found unsatisfactory. None of the case laws cited by the assessee is pertaining to the Non Banking Financial Company, thus, facts of the cases quoted by the assessee are quite different from the facts of the case under reference. Hence, the judgments referred by the assessee do not apply in this case. 3.5 The assessee company is suffering huge loss which is due to not charging any interest against the funds given to other parties. As per memorandum of article of the company one of the main objects is lending money in....
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....ase laws the gist of which was that the funds / advance to wholly owned subsidiary companies have to be attributed to own funds. The Id. AO on examination of the reply of the appellant held that these decisions did not apply to the NBFC. However, no finding was given on the source of funds given to the subsidiary companies. I also find that during the year the appellant had given new loans of Rs. 3.08 crores only to its subsidiary companies. 6.3 Under the above circumstances, since the appellant had used its own funds to its 100% subsidiary companies, there was no reasonable ground on the part of the AO of holding that the appellant should have charged interest thereon, it is a settled law that the AO cannot sit it the shoes of the business-man. Moreover, reliance of the appellant on the decision in the case of CIT vs Bharti Televenture Ltd, (spura), CIT vs Dalmia Cement Bharat Ltd.(supra), CIT vs South India Corporation (supra) and CIT vs. Steri Sheets ltd.(supra) was on similar facts and in similar circumstances, based on which the Hon'ble jurisdictional High Court had held that the funds / advance to sister concerns have to be attributed to the own funds of the assessee c....
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..... In nutshell, out of the total interest disallowance of Rs. 94,44,877/- the learned CIT (Appeals) sustained the disallowance of Rs. 14,76,619/-. 9. The learned authorized representative vehemently contested the sustenance of disallowance raising the following issues :- i. He submitted that no opportunity was given to the assessee by the learned Assessing Officer while disallowing the sum of Rs. 94,44,878/-. He relied on the decision reported in 192 ITR 165 and 176 ITR 179 to buttress his claim. He also submitted a detailed note contesting the above addition; ii. He further stated that no addition on account of notional interest was made in the hands of the assessee from assessment year 2004-05 to assessment year 2012-13 where except the impugned year in which assessee is in appeal. He submitted that all the assessments were passed under section 143(3) of the Act; iii. He submitted that assessee has surplus fund of Rs. 151 crores and, therefore, assessee should be granted benefit of the same; iv. He further stated that the advances were given in earlier years; v. He stated that assessee is a NBFC and, therefore, giving of the loan is the business of the assessee. 10. Th....
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....thorized representative become academic in nature in view of our above decision. Therefore, at this moment they do not merit our consideration as assessee has been granted relief on other contentions. 15. The second issue involved in the ground No. 3 of the appeal of the Revenue and ground No. 3 of the appeal of the assessee is with respect to allowance of deduction of foreign education expense of Ms. Sheetal Jain amounting to Rs. 42,89,759/-. The learned Assessing Officer noted that assessee has debited Rs. 42,89,759/- as staff education expense in profit and loss account. The learned Assessing Officer disallowed the above expenditure vide para No. 7 of his order as under :- " 7. Disallowance of expenses incurred on account of staff education. 7.1 On perusal of profit & loss account, it is noted that the assessee has claimed a sum of Rs. 42,89,759/- on account of staff education. A perusal of copy by the assessee, it is noted that most of the expenses has credit card and no bills and vouchers could be produced in of Rs. 25,91,194/- claimed stating it as prepaid expenses transferred to expenditure account. The assessee has submitted that a sum of Rs. 25,91,914/- was incurred ....
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....atisfactory. The case laws quoted by the assessee is irrelevant and based on quite different facts. The assessee by any means could not prove the business expediency of expenses incurred in connection to foreign education of its director. The assessee could not establish that how that education of the director is helpful for the business of the company. Moreover, the assessee could not substantiate the expenses incurred in respect of foreign education of the director by furnishing supporting evidences and documents. Further, more and most importantly, the education being provided to the staff/director of the company is not directly related to day to day business of the assessee for the year under reference, hence; it could not be treated as a revenue expenditure incurred for business purposes. 7.4 Expenditure made by the company on foreign education expenses of a director/staff has nothing to do with the business of the assessee and such type of education very much available in the Country. The expenditure incurred is absolutely personal in nature and not for the purpose of business. Reliance placed on the following judgements:- i) Mac Explotec P. Ltd. Vs. CIT (Kar) 286 ITR 3....
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....he AO was absence of bills and vouchers. The debit advices issued by the ABN Amro Bank clearly evidence that foreign remittance was made to INSEAD for the tuition fee of Ms. Sonali Jain. This is a sufficient proof for payment of fees to a foreign institution, for which money is generally paid by wire transfer. Further, the copy of letter by the company to INSEAD confirms that the company was sponsoring the director's education. Similarly declaration for FCRA and bill of INSEAD regarding tuition fee, application fee and a copy of document in support of transfer of money to the bank account of INSEAD also prove the bonafide of the transaction. Based on above, I hold that the evidences furnished by the appellant are strong enough to hold that the payment was actually made to INSEAD for MBA course for Ms. Sonali Jain, which, as I have held, has direct business connection. Under the circumstances, the objections of the AO lack merit. 6.6.3 The appellant furnished break-up of education expenses incurred for this purpose as under :- Staff Education Expenses 1. 14.05.09 136.50 Pounds Internet 10,682 2. Amex Credit Card 1,28,625 3. Citi B....
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....ence of any details, element of personal nature therein cannot be ruled out. Accordingly 40% of such expenses are also disallowed. 6.6.5 In view of this, the appellant is allowed full claim of tuition fee of Rs. 25,91,194/-, LMP Housing Services for residence of the said director amounting to Rs. 4,91,013/-, and to & fro air travel expenses of Rs. 59,670/- and 60% of living expenses amounting to Rs. 4,15,705/-. In view of this, the total claim is allowed to the extent of Rs. 35,57,582/- only. " 17. Therefore, in nut shell out of the total disallowance made by the learned Assessing Officer of Rs. 42,89,759/-, the learned CIT (Appeals) allowed the claim of the assessee to the extent of Rs. 35,57,582/-. Therefore, the Revenue is in appeal against the deletion of disallowance of Rs. 35,57,582/- and the assessee is in appeal against the confirmation of disallowance of 40% of living expenses and air-ticket expenditure of Rs. 1,28,610/-. 18. The learned Departmental Representative vehemently submitted that expenditure incurred by the assessee is capital expenditure in nature, it has nothing to do with the business of the assessee, and such education is available in the country. It w....
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....panding the export business of the company in long run. The learned CIT (Appeals) has considered the Resolution passed by the company and the business expediency. It is undisputed that the assessee was Director of the company and was working with the company. Therefore, in nutshell this expenditure is in the nature of training expenditure of the Director herself. The learned CIT (Appeals) also noted the details of the programme and held that it has direct business relevance to the assessee. In view of this, we do not find any infirmity in the order of the learned CIT (Appeals) in allowing the claim of the assessee to the extent of full tuition fee of Rs. 25,91,194/-. 23. The Reliance Placed up on by the ld DR on the decision of the coordinate bench in case of 88 taxmann.com 185 is misplaced as the facts in that case was quite different. In that case In that case It was not shown by the assessee what are the roles, responsibility and job profile of director being performed for the assessee company and on what terms and conditions he was brought in as Director of the assessee-company. There was no business conducted by the assessee during the year as revenue from operations are '....