TaxTMI 
TaxTMI 
2022 (5) TMI 1028
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....her erred in law and on facts in not appreciating that appellant company benefitted from share purchase transaction in terms of direct control over Bitwise Inc., USA and assurance as to getting business in future years. 4. The learned CIT(A)-1 and the learned AO erred in law and on facts in holding that for qualification of interest expense u/s 36(1)(iii), appellant company ought to have engaged in the business of acquiring controlling interest in other companies and not otherwise. 5. The learned CIT(A)-1 and the learned AO further erred in law and on facts in sustaining the addition made on account of unrealized foreign exchange loss amounting to Rs.96,33,520/- on loan taken for purchase of shares in Bitwise Inc., USA on the analogy that the said loss was capital in nature since it is for purchase of shares. Additional Grounds of Appeal : 5. Learned CIT(A)-1, Pune and learned AO erred in law and on facts in disallowing contribution made to gratuity scheme amounting to Rs.35,85,131/- u/s 36(v) of the ITA, 1961 and thereby making addition of the same amount in the total income of appellant. 6. Appellant contends that, appellant is eligibl....
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....and exclusively for business. In the case of CIT vs Phil Corporation Ltd. (supra) it was never contended that investment in shares is not a business activity of the company. Hence, facts of both cases are not similar, as in this case it is clearly established that investment in shares is not a part of business activity of the assessee company. Hence interest of Rs.69,51,455/- is disallowed u/s.36(1)(iii) of the IT Act, 1961 and added back to the total income of the assessee company,." 3. Aggrieved by the order of the Assessing Officer, the assessee filed appeal before the ld.CIT(A). The ld.CIT(A) confirmed the disallowance. 4. Aggrieved by the order of the ld.CIT(A), the assessee filed appeal before this Tribunal. The ld.Authorised Representative(ld.AR) of the assessee submitted that additional Ground No.5 & 6 are not pressed. 5. Regarding disallowance of interest expenditure the ld.AR explained that the entire expenditure has been incurred for the business of the assessee. In support of his submission, the ld.AR submitted as under: "a) Customer relationship - In the pre-acquisition scenario, customers were extending the work to Bitwise Inc i.e. USA company, and i....
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....ien on employment could be easily retained in case, employees of respective companies are to be transferred to other jurisdictions. Bitwise group is able to retain more than 800 employee head count as on date. Employees increased comfort of a consolidated entity was another factor of commercial expediency. e) Employee morale - ESQP's and values - The key employees can be offered shares of the Indian company from the perspective of granting some partial ownership. For the record, appellant company has offered equity shares of Bitwise India to some of the key employees. Plans of ESOP allotment are under discussion and the ESOPs of the Indian company are planned to be offered even to the subsidiary company employees in USA. Such possible seamless offering of ESOPs to the employees adds to commercial expediency purpose. Further, at the time of retirement of such key employees, value per share on CONSO basis is paid by the appellant company. This increases employee's employee's morale to work relentlessly for the company and achieve higher growth. f) Futuristic opportunities - It is submitted that, all the promoters of the appellant are Indian and hence the....
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....erest expenditure incurred on loans taken for investment in acquiring controlled interest in a Company which was in the same line of business as that of the Respondent would be allowable expenditure under section 36(1)(iii) of the Act. In Srishti Securities (P.) Ltd, (supra) the interest expenditure under section 36(1)(iii) of the Act had been disallowed by the Assessing Officer on the ground that the primary object of acquiring shares was only to acquire controlling interest in the Company. Thus not for purposes of business. This the Tribunal negatived. Further in Appeal this Court has held that where an assessee claims deduction of interest paid on capital borrowed, all that an assessee has to show is that the borrowed funds were used for business purpose and if so then interest will have to be allowed as a deduction. The submission on behalf of the Revenue that the Petitioner is in the business of BPO and Call Centre activities and not in the business of investment means the prime business of the assessee is of running BPO and Call Centres and as recorded by the Tribunal the entire funds were borrowed so as to expand the business activities of BPO and Call Centres in Canada by a....