TaxTMI 
TaxTMI 
2001 (8) TMI 273
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....revious year, the assessee-company has paid Rs. 1,20,50,000 to Janapriya Hospitals Corporation Ltd. (now known as Duncan Goenka Hospitals Ltd.) towards contribution to their equity shares capital as co-promoters with its holding company Duncans Industries Ltd. During the year under consideration the allotment of aforesaid shares had not been made and accordingly the assessee-company had shown this amount under the head "Advances against Investments". The break-up of the funds utilized for this advance of Rs. 1,20,50,000 was as under: 1. Out of loan from the Peerless General Finance and Investment Co. Ltd. Rs. 45,00,000 2. Out of sale proceeds of shares a....
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....ained outstanding in the whole of the previous year relevant to the assessment year. From the scrutiny of the records, it is found that the assessee has advanced this sum partly out of the borrowed funds. A sum of Rs. 45 lacs had been taken on loan from Peerless General Finance & Investment Co. Ltd. which had been advanced to the above-mentioned party. The assessee has paid a sum of Rs. 7,20,000 to PGFI as interest on Rs. 45 lacs which has been advanced to Janapriya Hospital Corpn. Ltd. This interest has been debited to the P&L a/c as business expenses. In view of various Court judgments on this point, this interest of Rs. 7,20,000 paid on borrowed fund which was advanced as interest-free advance, is not allowable as business expenditure. I....
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....ssessee-company was "to carry on the business of investment company and for that purpose to invest money in and deal in shares, stocks, bonds, debentures, obligations or other securities of any company, association, trust, local authority or Government and to make advances upon, hold in trust .............. any of the securities .............. and to do all other things which can be usefully and beneficially done in the interest of the company or which conveniently be carried on along with the aforesaid business of the company." It was further argued that the CIT(A) erred in law and facts in disallowing the interest under s. 36(1)(iii) on the reasoning that no interest has been charged on money advanced to Duncan Goenka Hospitals Ltd., towa....
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....ious year is implicit in s. 36(1)(iii) itself. Therefore, it is not necessary, nor it is open to look beyond that, to find out any express statutory prescriptions to that effect. Thus, interest claimed on borrowing, effected for the purpose of the business can be claimed and allowed as a deduction/business expenditure only if the same was used for the purpose of the business in the previous year. The crucial question to be decided on the facts and circumstances of each case would always be whether the business carried on by the assessee is the business for the purpose of which the borrowings were effected. This would be a question of fact to be decided on the preponderance of evidence and the surrounding circumstances and by applying the te....
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....itals Ltd. (formerly known as Janapriya Hospital Corporation Ltd.) in token of confirmation in respect of allotment of 12,05,000 equity shares of Rs. 40 each in favour of assessee-company, further strengthen our proposition that the main object of the assessee-company had been fructified by allotment of shares worth Rs. 1,20,50,000. 11. The contention of the Revenue that the fund was not borrowed from the Peerless General Finance & Investment Co. Ltd. strictly for purpose of making interest-free advances to Janapriya Hospitals. Corporation Ltd. is of no help to the Department. The grievance of the diversion of funds borrowed from the Peerless Company, for different business purposes may give rise to a valid grievance to the Peerless Comp....