TaxTMI 
TaxTMI 
2021 (10) TMI 795
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....rief, are that the assessee is a company engaged in the business of providing IT support services to clients online basis outside India. It filed its return of income on 30th September, 2015 declaring loss of Rs. 10,88,271/-. The case was selected for limited scrutiny under CASS to examine the interest expenses claimed during the year. 4. During the course of assessment proceedings, the AO noted that the assessee company has claimed expenditure of Rs. 31,92,450/- under the head 'Finance cost' in the Profit & Loss Account. The AO, therefore, asked the assessee to explain as to why the interest expenses should not be disallowed to the extent of interest free loans and advances given. It was explained by the assessee that it has not given a....
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.... that the opening balance of unsecured loan of Rs. 2,81,43,838/- taken by the appellant is to earn interest income and during the last year end, part of the loan was returned, which was Rs. 1,75,00.000/- redeployed on 13/05/2015. Ld. AR has stated that the details of loan taken and loan given as well as the interest earned and interest paid is given vide submission dated 04/10/2018 as per paper book page no 9 to 11. Ld.AR has stated that the AO was not justified in making an addition of Rs. 30,00,000/- as the investment has been made in equity shares out of owned capital & reserves. Ld, AR has clarified that the appellant has not taken bank loan during the year. At the time of investment there was only vehicle loan and unsecured loan from o....
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....er years it is held that no genuine business activity has been carried out. He submitted that the opening balance of unsecured loan of Rs. 2,81,43,836/- taken by the assessee is to earn interest income since the assessee is in the business of finance and investment. The interest paid on loan is exclusively for earning interest income from further financing. During the last year, part of the loan was returned which was Rs. 1,75,00,000/- re-deployed on 30th May, 2015. He submitted that the assessee has not taken any bank loan during the year. At the time of investment, there was only vehicle loan and unsecured loan from other parties. However, the assessee has earned interest income of Rs. 30,27,571/- against the interest expenses of Rs. 31,9....
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....y income. Since the assessee could not prove the genuineness of the claim of interest expenses for business purpose, the AO disallowed the interest of Rs. 30 lakhs paid to the DJ Group Holdings Pvt. Ltd. I find, the ld.CIT(A) upheld the action of the AO, the reasons for which have already been reproduced in the preceding paragraphs. It is the submission of the ld. Counsel that the assessee is in the business of finance and investment and the interest paid is exclusively for earning interest income. Further interest has been included in the taxable income and no such disallowance has been made in the past. 10. I find some force in the above arguments of the ld. Counsel for the assessee. I find the name of the assessee is AKT Investments P....
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....wholesale disallowance of the expenditure, particularly on the grounds which had been given by the Transfer Pricing Officer was not contemplated or authorised. Even on the merits the disallowance of the entire brand fee/royalty payment was not warranted. The assessee had furnished copious material and valid reasons as to why it was suffering losses continuously. Full justification supported by facts and figures had been given to demonstrate that the increase in the employees cost, finance charges, administrative expenses, depreciation cost and capacity increase had contributed to the continuous losses. There was no material brought by the Revenue to show that these were incorrect figures or that even on the merits the reasons for the losses....