TaxTMI 
TaxTMI 
2019 (7) TMI 80
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....and 1.2 for both the assessment years are dismissed as "Not pressed‟. 3. Ground Nos.2, 2.1, 2.2, 2.3 and 2.4 for both the assessment years are similar in nature. In order to adjudicate the issues, we refer to the facts as appearing in ITA No.1539/PUN/2016 for assessment year 2012-13. ITA No.1539/PUN/2019 A.Y.2012-13 4. The facts in respect of these similar issues as appearing in ITA No.1539/PUN/2016 are that the assessee has declared income from house property, income under the head income from business and profession. The assessee has derived income from house property being rental income. The assessee has derived income from business and profession as the assessee is primarily engaged in the profession of providing technical consultancy and manufacturing of plastic fittings in the name and style of M/s. Garuda Plant Products Ltd. During the course of assessment proceedings, it was observed that the assessee had made investment of Rs. 1,75,00,000/- in equity shares of M/s. Kimplas Piping Systems Ltd. It was also observed that the investment was made out of borrowed funds from Bajaj Finance Ltd. The assessee was asked to explain why proportionate interest paid to ....
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....in the equity shares of M/s. Kimplas Piping Systems Ltd. 6.1 The Ld. AR of the assessee further submitted that the expression "for the purpose of the business‟ is wider in scope than the expression "for the purpose of earning profits‟. So long as the expenditure is incurred for the purpose of business, it is irrelevant whether it results in income. The phrase used in section 36(1)(iii) of the Act is "for the purpose of business‟. The Assessing Officer as well as the Ld. Commissioner of Income Tax (Appeal) grossly erred in interpreting the same as "for the purpose of earning profits‟. An expenditure in the form of interest is allowable so long as it is for the purpose of business and it is not relevant that the said expenditure should actually result in income or increase in profits. With regard to this contention, the Ld. AR of the assessee has placed reliance on the following decisions: i) CIT Vs. Malayalam Plantations Ltd. (1964) 53 ITR 140 (SC) ii) Sree Meenakshi Mills Ltd. Vs. CIT (1967) 63 ITR 207 (SC) 6.2 That further, the Ld. AR of the assessee has placed reliance on the decision of the Hon‟ble Bombay High Court in the ca....
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....of Section 36(1)(iii) of the Act and secondly, at this stage, it is just asking for some hypothetical evidences. The very fact that funds borrowed were invested in shares of an associate company itself demonstrates the business strategy of the assessee company. We find the Hon‟ble Apex Court in the case of Hero Cycles P. Ltd. Vs. CIT, 379 ITR 347 (SC) has held that where loans were advanced by the assessee to its various associate concerns as a part of business strategy, interest on such loans was allowable deduction u/s.36(1)(iii) of the Act. Extending this proposition to the facts of the present case, investments in shares of the associate concerns by the assessee is part of business strategy and therefore, interest on such loans are allowable deduction u/s.36(1)(iii) of the Act. 10. Furthermore, what is business strategy and what is commercial expediency has to be seen from a business man‟s point of view. The Revenue cannot put itself in the armchair of a businessman to decide the same. In this respect, we have taken guidance from the following judgments: i) S.A. Builders Ltd. Vs. CIT, (2007) 288 ITR 1(SC) ii) Hero Cycles P. Ltd. Vs. ....
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....ction 14A were not applicable in the present case. 2. The appellant craves leave to add, amend, alter, delete and modify all or any of the above grounds of appeal." The additional ground relates to the disallowance made by the Assessing Officer u/s.14A of the Act of Rs. 12,37,413/-. 16. When the matter travelled before the Ld. Commissioner of Income Tax(Appeal), he gave part relief and confirmed part of the disallowance to the extent of Rs. 1,92,844.28/-. 17. The Ld. AR of the assessee reiterated the submissions as made before the Sub-ordinate Authorities and contended that they have not earned any exempt income and therefore, disallowance u/s.14A is not warranted. The Ld. AR further submitted that in the order of the Ld. Commissioner of Income Tax(Appeal), he has accepted that no exempt income was earned. However, disallowance could be made as per Rule 8D(2) of the Income Tax Rules, 1962. The Ld. AR further submitted that when it is accepted that no exempt income has been earned by the assessee, there is no question of disallowance u/s.14A of the Act. 18. Per contra, the Ld. DR has placed strong reliance on the orders of the Sub-ordinate Authoritie....