TaxTMI 
TaxTMI 
2022 (4) TMI 1684
X X X X Extracts X X X X
X X X X Extracts X X X X
....i) of the ITA, 1961 of Rs. 50,39,162/- made by learned DCIT, Circle-1(1), Pune(hereinafter referred to as the learned AO). 2. The learned CIT(A)-1, and the learned AO erred in law and on facts in not appreciating that, share purchase transaction for which loan was availed was a business transaction i.e. after buying shares, Bitwise Inc., USA, became 100% subsidiary of the appellant company. 3. The learned CIT(A)-1 and the learned AO further 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 a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arning dividend. Bitwise Inc., is a sole work provider to assessee company. Assessee company since its beginning had only one customer i.e. Bitwise Inc., USA. To carry out offshore jobs, it is always essential to have a setup at customers optioned location. Acquisition of shares of Bitwise Inc., USA made Bitwise Inc., USA 100% subsidiary of assessee company. Thus, assessee has ensured continuous flow of business. The assessee relied on various case laws during the assessment proceedings. The AO disallowed the interest. Relevant part of the assessment order is as under: "In support of revenue's case reliance is placed on the judgment of Jurisdictional High Court in the case of CIT v. Amritaben R. Shah [1999] 238 ITR 777^1 (Bom.) and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....llowance 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 in turn, the work used to flow to BSPL, i.e. the Appellant company. This was seen as a concern for business. Had this issue been taken up further, appellant and the USA company would have suffered is some customers orders.. Appellant has submitted copy of contract entered with M/s Discover Card (biggest customer of Bitwise Inc) at Page no. 150 of Paper Book-1 of AY 2011-12. Attention is invited to Clause no. (2.5....
X X X X Extracts X X X X
X X X X Extracts X X X X
....any has large asset base in India. To expand the same, appellant company requires support of bank loan. New arrangement helps in getting bank finance for Indian Activity, as earnings of subsidiary gets considered in granting loans. d) Employee retention - In software activity, retention of key employees is a crucial aspect. To create confidence and peace in the minds of senior employees, holding - subsidiary relationship grants far more comfort in the minds of employees. Lien 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 w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sition of a company as a wholly owned subsidiary is a step to increase the numerical value of the group and thereby to earn popularity. As such, acquisition of shares has business expediency. The audited group figures demonstrate the same thing which is being thought of in the background. g) Valuation method benefits - With a CONSO accounts of the India and USA companies, Appellant can certainly command a much better price in future for any partnering, public offering, venture capitalist funding, etc. etc." 6. On the other hand, the ld. Departmental Representative(ld.DR) for the Revenue relied on the orders of Lower Authorities. The ld.DR vehemently argued that the amount borrowed was not for the purpose of business as investmen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y 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....