Itxa 674 Of 2007 .Doc v. S.j. Kathawalla, Jj

1 ITXA 674 OF 2007 .doc IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTIONINCOME TAX APPEAL NO.674 OF 2007 The Commissioner of Income Tax, Mumbai …City - VAppellant versus M/s. Rishikesh Finlease & Inv. Pvt. Ltd. …Respondent Mr. Suresh Kumar, for Appellant. Mr. Nishit Gandhi with Mr. Vipul Joshi I/by Mr. Sameer G. Dalal, for Respondent. CORAM: AKIL KURESHI & S.J. KATHAWALLA, JJ. th JUNE, 2019 DATE: 17 P.C.: 1.Record is not clear whether this Appeal was admitted or when admitted. In any case, there is no order admitting the Appeal and framing substantial question of law. 2.Under the circumstances, we have heard learned Counsel for the parties for admission of the Appeal. It is unfortunate that such exercise is being done severalyears after the Appeal was instituted. 3.This Appeal is filed by the Revenue to challenge the Judgment of the Income Tax Appellate Tribunal (“The Tribunal” for short). The following question ispresented for our consideration : (i) Whether the interest amounting to Rs.3,31,19,323/- incurred on borrowings utilized for getting control over the management of Bhart Pulverising Mill SSP 1/3 Ltd., is to be treated as capital expenditure and not the revenue expenditure eligible fordeduction u/s 36(1)(iii) of I.T.Act, as claimed by the Assessee ? 4.The Respondent-Assessee had utilized interest bearing borrowed funds forpurchasing shares of a subsidiary company and claimed interest as its expenditureunder Section 36(1)(iii) of the Income Tax Act, 1961, which the Assessing Officerdenied. The Tribunal by the impugned Judgment allowed the claim of the Assesseeinteralia on the ground that the said expenditure was incurred in the course of itsbusiness adventure. Some what similar issue was discussed by this Court in an orderdated 11th June, 2019 in Income Tax Appeal No.556 of 2017. The question consideredby the Court was as under : “(b)Whether on the facts and in the circumstances of the case and in law,the ITAT is right in deleting the disallowance of interest on the borrowed funds whenthe Assessee had not demonstrated whether the purpose for which advance weremade is covered by the principle of commercial expediency and also the investmentwas made for acquiring the controlling interest in the associate concern ?” 5.In relation to this question, the Court observed as under : “6.Quetion No.b arises in following manner : Assessee had borrowed funds and invested the same for purchase ofshares of subsidiary company. On the borrowing, the Assessee had paidinterest of Rs.38.22 Crores and claimed it as business expenditure.Assessing Officer was of the opinion that such expenditure shall not SSP 2/3 allowable. The Tribunal by the impugned Judgment held that theexpenditure incurred for gaining controlling interest of a subsidiarycompany is a business expenditure. We notice that this Court in the case of Commissioner of Income Tax,Panaji Goa V/s. Phil Corpn. Limited, 202 Taxmann 368 (Bombay) heldthat the Assessee was entitled to deduction of interest on overdraft underSection 36(1)(iii) of the Act when the investment was made by theAssessee in shares of subsidiary of the company to have control over thesaid Company. Madras High Court in the case of Commissioner ofIncome Tax, Chennai V/s. Shriram Investments (Firm) MoogambikaComplex, Chennai, (1994) 208 ITR 616 (1995) 80 Taxmann 572(Cal.), has taken similar view. Similar opinion is expressed by CalcuttaHigh Court in CIT V/s. Rajeeva Lochan Kanoria, 233 Taxmann 285(Delhi). Similar view was also expressed by Delhi High Court in caseof Eicher Gooderath Limited V/s. Commissioner of Income Tax, (2007)156 Taxmann 74 (SC). Under the circumstances, no question arises inthis respect.” 6.A similar view has been taken by the Division Bench of this Court in thecase of Commissioner of Income Tax – 8 V/s. Srishti Securities (P) Ltd.1 7.Under the circumstances, no question of law arises. The Income TaxAppeal is dismissed. ( S.J.KATHAWALLA, J.) ( AKIL KURESHI, J. ) 1[2010] 321 ITR 498 (Bombay) SSP 3/3