AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (10) TMI 1309
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....king disallowance of Rs. 48,82,192 , being 2/3rd of interest expenditure claimed of Rs. 73,23,288. The expenditure being a bona fide business expenditure incurred wholly and exclusively for the purposes of business is fully allowable u/s 36(1 ){iii) of the Income Tax Act, 1961. II. THAT under the facts and circumstances of the case, the disallowance of Rs. 48,82,192 out of total interest expenditure of Rs. 73,23,288, being disallowance made on a notional basis merely on the plea that the assessee has advanced loan at a rate of interest lower than the rate of interest paid by him, is incorrect and stands to be deleted. III. THAT under the facts and circumstances of the case, the Learned Income Tax Officer and the Learned, CIT (APPEALS) h....
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....ilver Line Technologies Ltd. in earlier years and showed the same as opening balance of Rs. 2.15 crores as on 01.04.1999. He further raised loan of Rs. 5.00 crores on 03.05.1999 at the interest rate of 15% and paid interest of Rs. 73,23,288/-. The interest paid was claimed in the profit and loss account. The loan so raised from M/s. Silver Line Technologies Ltd., a sum of Rs. 6.25 crores was given an ICD to M/s. Merlin Resources Pvt. Ltd. at the rate of 6% whereas the assessee has raised the same loan @ 15% and paid interest amounting to Rs. 73,23,288/- on it. In this regard a letter was issued to the assessee on 30.12.2002 for seeking explanation for doing so, which reads as under : "You have taken the unsecured loan from M/s. Silverline....
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.... were taken at a lower rate of interest. By the impugned order the Ld. CIT(A) confirmed the action of the Assessing Officer by observing that prudent businessman would not like to run into losses and make such investment which prima facie are not profitable. We have considered the rival contentions and found from the record that assessee has claimed huge interest expenditure on the loan allegedly taken for the purpose of business, at the very same time, the same loan was advanced for shorter period at a lower rate of interest. There is no dispute to the fact that businessman is the best judge in the matter of his business affairs, but in case of any loss or expenses, he is required to demonstrate that same was incurred in the course of busi....
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....wer of Attorney and sought a copy of the questionnaire which had already been sent along with the notice u/s 143(2) dated 23.07.2008. However, no details were filed by the assessee company as such vide a notice u/s 142(1) dated 01.10.2008, it was asked to file its written submissions along with the necessary evidence in support of its contention in the light of the directions given by the Hon'ble ITAT in order dated 29.06.2007. This notice too remained un-complied with. Finally, another notice u/s 142(1) dated 22.10.2008, fixing the case was issued for 31.10.2008, which too remained un-complied with. I am therefore, constrained to believe that the assessee has no evidence to prove contrary to the findings given by the A.O. in his orde....
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....so furnished by the appellant in regard to the reply furnished by the Assessing Officer in response to the Remand Report, reiterating its position and explaining the allowably of the expenditure u/s 36(i)(iii). The acceptance of 1/3rd of the interest expenditure on the loan as an allowable business expense is in itself acceptance of the fact that the said interest relates to capital borrowed for the purposes of the business of the assessee company and is acceptance of the nexus between the expenditure and the business of the appellant, and is thus an allowable expenditure u/s 36(1)(iii). The said nexus having being accepted in allowing 1/3rd of the interest expenditure, the disallowance of 2/3rd of the interest on the same loan is complet....
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....on 36(1)(iii) of the Act and in the attending facts and circumstances of the case. In fact, the assessee was to justify the business expediency under which he had to pay interest on the borrowed funds at the rate more than the interest received on the same funds advanced by the assessee. Several opportunities were given by the Assessing Officer by issuing notices u/s. 143(2) along with questionnaire in terms of Tribunal's directions but the assessee did not bother to comply with the notices issued to him. One of the submissions of the assessee has been that the loan was advanced at lower rate to Merlin Resources Pvt. Ltd. for a long period whereas the loan raised from Silverline Technologies Pvt. Ltd. was repaid in a short period. However, ....