Bombay High Court
The Pr.Commissioner Of Income Tax-9 vs M/S E-City Investments & Holdings ... on 22 April, 2019
Author: Sarang V.Kotwal
Bench: Akil Kureshi, Sarang V.Kotwal
Priya Soparkar 1 15 itxa 213-17-o
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
INCOME TAX APPEAL NO.213 OF 2017
The Pr.Commissioner of Income Tax-9 ... Appellant
V/s.
M/s E-City Investments & Holdings ... Respondent
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Mr.Tejveer Singh for the Appellant.
Mr.Ravi Savana with Mr.Aman Gahlot with Ms.Divyasha Mthur
i/by M/s PDS Legal for the Respondent.
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CORAM : AKIL KURESHI AND
SARANG V.KOTWAL, JJ.
DATE : APRIL 22, 2019.
P.C.:-
1. Revenue has filed this appeal against the judgment of the Income Tax Appellate Tribunal. Following question is presented for our consideration:-
"Whether on the facts and circumstances of the case and in law, the ITAT erred in not upholding the decision of the Ld.CIT (A) in allowing assessee's claim for deduction of interest on borrowed fund when the same is utilised to give interest free loan/share application money to subsidiary companies?"::: Uploaded on - 24/04/2019 ::: Downloaded on - 24/04/2019 22:30:52 :::
Priya Soparkar 2 15 itxa 213-17-o 2. Respondent-assessee is a private limited company and is engaged in the business of financing. During the scrutiny
assessment of the assessee's return for the assessment year 2008- 09, Assessing Officer noticed that the assessee had claimed expenditure of interest paid on borrowed funds. The assessee had also funded its sister concern without charging interest. The Assessing Officer therefore disallowed the interest expenditure.
The issue eventually reached the Tribunal. The Tribunal by the impugned judgment held in favour of the assessee. The Tribunal referred to and relied upon the decision of the Supreme Court in case of S.A. Builders Ltd. Vs. CIT1 and concluded as under :-
"If the aforesaid ratio laid down by Hon'ble Apex Court is analyzed by keeping the same in juxtaposition with the facts of the present appeal, firstly, we find that there is no finding by the Assessing Officer that the funds were not utilized for business purposes and secondly, we note that advancing loan to the sister-concern was for the purposes of "Commercial Expediency", thus, we find merit in the contention of the ld. counsel for the assessee. So far as, the issue of commercial expediency is concerned, the decision has to be taken by the assessee and the Assessing Officer is not expected to sit in the chair of the assessee and to decide the business interest. The assessee is to watch its business interest well. Once it is established that there was nexus between the 1 288 ITR 1 (SC) ::: Uploaded on - 24/04/2019 ::: Downloaded on - 24/04/2019 22:30:52 ::: Priya Soparkar 3 15 itxa 213-17-o expenditure and purpose of the business (which need not necessarily be the business of the assessee itself) the Revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the board of directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. No businessman can be compelled to maximize his profits."
3. We do not find any error in view of the Tribunal. The entire issue is squarely covered in favour of the assessee in case of S.A.Builders Ltd. (supra). The Tribunal correctly held that the assessee's decision to fund its subsidiaries driven by business exigency.
4. In the result, no question of law arises. Income Tax appeal is dismissed.
(SARANG V.KOTWAL,J.) (AKIL KURESHI,J.) ....
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