Sherla v. Ita.489.2017_27.Doc

IN THE HIGH COURT OF JUDICATURE AT BOMBAYO.O.C.J. INCOME TAX APPEAL NO.489 OF 2017 The Pr. Commissioner of Income Tax - 9 … Appellant VsM/s.E-City invesgtments & Holdings Company … RespondentPrivate Ltd. Mr.Tejveer Singh for the AppellantMr.Ravi Sawana i/b PPS Legal for the Respondent CORAM: AKIL KURESHI & S.J. KATHAWALLA, JJ. DATED: JULY 22, 2019 P.C.: 1.This Income Tax Appeal is filed by the Revenue challengingthe order of the Income Tax Appellate Tribunal. The followingquestion is presented for our consideration: i)Whether on the facts and circumstances of the caseand in law, the ITAT erred in not upholding the decision of thelearned CIT (A) in allowing assessee’s claim for deduction ofinterest on borrowed fund when the same is utilised to giveinterest free loan/share application money to subsidiarycompanies? 2.We notice that a similar issue had come up for ourconsideration before this Court in the case of the very sameassessee in Income Tax Appeal No.213 of 2017 and the appealwas dismissed making following observations: “2.Respondent-assessee is a private limited company andis engaged in the business of financing. During the scrutinyassessment of the assessee’s return for the assessmentyear 2008-09. Assessing Officer noticed that the assesseehad claimed expenditure of interest paid on borrowed funds.The assessee had also funded its sister concern withoutcharging interest. The Assessing Officer thereforedisallowed the interest expenditure. The issue eventuallyreached the Tribunal. The Tribunal by the impugnedjudgment held in favour of the assessee. The Tribunalreferred to and relied upon the decision of the SupremeCourt in case of S.A. Builders Ltd. Vs.CIT[1]and concludedas under: - “If the aforesaid ratio laid down by Hon’ble Apex Courtis analyzed by keeping the same in juxtaposition withthe facts of the present appeal, firstly, we find that thereis no finding by the Assessing Officer that the fundswere not utilized for business purposes and secondly,we note that advancing loan to the sister-concern wasfor the purposes of “Commercial Expediency”, thus, wefind merit in the contention of the ld. Counsel for theassessee. So far as, the issue of commercialexpediency is concerned, the decision has to be takenby the assessee and the Assessing Officer is notexpected to sit in the chair of the assessee and todecide the business interest. The assessee is to watchits business interest well. Once it is established thatthere was nexus between the expenditure and purposeof the busienss (which need not necessarily be the business of the assess3ee itself) the Revenue cannotjustifiably claim to put itself in the arm-chair of thebusinessman or in the position of the board of directorsand assume the role to decide how much is reasonableexpenditure having regard to the circumstances of thecase. No businessman can be compelled to maximizehis profits.” 3.We do not find any error in view of the Tribunal. Theentire issue is quarely covered in favour of the assessee incase of S.A. Builders Ltd. (supra). The Tribunal correctlyheld that the assessee’s decision to fund its subsidiariesdriven by business exigency. 4.In the result, no question of law arises. Income TaxAppeal is dismissed.” 3.In the result, this Appeal is also dismissed. (S.J. KATHAWALLA, J.) (AKIL KURESHI, J.)