TaxTMI 
TaxTMI 
2020 (7) TMI 303
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....ee company was incorporated on 20.07.2010 with main object, inter alia, to carry on the business of production, generation, storage, transmission distribution, supply of electricity, to promote, own, acquire, erect, construct, establish, operate, maintain, take over power companies and to hold shares in power companies. 4. On scrutinising the return of income, the Assessing Officer noticed that the assessee has shown a sum of Rs. 2,50,000/-being earned by the assessee from professional consultancy charges. The Assessing Officer also noticed that interest income of Rs. 38,356/- has also been shown under the head "other income". The total revenue was shown at Rs. 2,88,356/-, against which the assessee claimed the following expenses: i) Employee benefit expenses Rs. 2,53,091/- ii) Finance cost Rs. 82,51,230/- iii) Other expenses Rs. 11,18,729/- 5. The Assessing Officer further observed that the only activity the assessee has carried out in the year under consideration is making investment in subsidiaries. The Assessing Officer further observed that professional consultancy charges which were charged to Maruti Clean Coal& Power Ltd. towards power consul....
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...., d transmission, and supply of electrical energy.... During the year under assessment, the Assessee Company has received towards Share capital, Share Application Money and same were inv< subsidiaries and group companies to fulfil the objective of being a Holding to have better management of companies involved to Power production and commercial objectives as stated by MOA A AOA by subscribing to the She of subsidiaries and group companies. A brief note on subsidiaries and group companies, in which the Investments have been made during the year under assessment is enclosed evidencing their nature of business, wherein the Assessee Company has in previous years and current year. The subsidiaries and groupcompanies have entered into MOU Implementation agreements with the Govt Authorities. Long Term Open Access has been granted to the subsidiaries and group companies and Bulk Power Transmission Agreements, have been entered into by the Assessee Company. It is one of the objective of the Assessee Company, to promote, own erect, construct, establish, operate, maintain, takeover power companies, ho in power companies or turnover, acquire, operate, mainta....
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....other companies by the assessee" We rely on the Hon'ble Supreme Court judgment in the case of SA Builders vs CIT 288 ITR 1 - SC, where in the Apex court has held as under: "where it is obvious that a holding company has a deep interest in its subsidiary, and hence if the holding company advances borrowed money to a subsidiary and the same is used by the subsidiary for some business purposes, the assessee would, in our opinion, ordinarily be entitled to deduction of interest on its borrowed loans..." Particulars Amount as on 31.03.2012 (In crores) Amount as on 31.03.2011 (In crores) INFLOW OF FUNDS Shareholder funds 547.47 273.70 Share Application Money Pending allotment - 27.45 Short Term Borrowings - 57.03 Total Funds Available with 547.47 358.18 OUTFLOW OF FUNDS Non-Current Investments 418.83 358.18 Share Application Money pending allotment with subsidiaries & group companies 128.60 Total Funds invested 547.43 358.18 From the above chart, it is very clear that the borrowed funds were invested into....
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....e Assessing Officer himself has observed at para 5.1 of his order that the assessee has paid interest on the borrowings as on 01.04.2011. The ratio laid down by the Hon'ble Supreme Court in the case of SA Builders 288 ITR 1 squarely applies on the facts of the case wherein the Hon'ble Supreme Court has held as under: Where it is obvious that the holding company has deep interest in is subsidiary and hence if the holding company advances borrowed money to a subsidiary and the same is used for some business purpose of the assessee would, in our opinion, ordinarily be entitled to deduction on interest of its borrowed loans." 15. The facts of the case in hand are on stronger footing in as much as in the case in hand, the appellant did not advance any loan to its subsidiaries but has invested in the shares of subsidiary companies. As mentioned elsewhere, subsidiary companies of the appellant are engaged in the same business as that of the assessee which is also evident from the main object clause in the Memorandum of Association. 16. The decisions relied upon by the ld. DR are totally on different set of facts. In case of Punjab Stainless Steel, the Hon'ble De....