TMI Blog2018 (12) TMI 638X X X X Extracts X X X X X X X X Extracts X X X X ..... iness income for the assessee - tax planning is legitimate provided it fell within the four corners of law and it is permissible under the law provided the same is not a colorable device and not done so as to merely defraud the exchequer - no such attempt by the assessee in the present case - the genuineness of the unsecured loans or interest expenditure was not under doubt. The only condition envisaged by Section 36(1)(iii) to grant deduction of interest expenditure is that the funds were used by the assessee for the purpose of business and nothing more - no infirmity in the stand of first appellate authority. Our view is fully supported by the analogy of the decision rendered in S.A.Builders Vs. CIT [2006 (12) TMI 82 - SUPREME COURT] - Decided in favour of assessee. - I .T.A. No.5150/Mum/2017, I.T.A. No.5151/Mum/2017 - - - Dated:- 11-12-2018 - Shri Mahavir Singh, JM And Shri Manoj Kumar Aggarwal, AM For the Assessee : M.Subramanium, Ld. AR For the Revenue : Ashish Kumar, Ld. DR ORDER PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. Aforesaid appeals by revenue for Assessment Years [AY] 2013-14 2014-15 agitate separate orders of first appellate author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... linked with the contractual terms entered into by the assessee with its sister concern. However, keeping in view the fact that the assessee reflected loss during the impugned AY and claimed interest expenditure of ₹ 131.35 Lacs, the deposit, in the opinion of Ld. AO, was excessive and not a genuine transaction and also not carried out at Arm Length Price. It was noted that the deposits were approx. 10 times of annual income and approx. 4 times of annual receipts. The Ld. AO attempted to substantiate this fact by comparing the quantum of security deposits required in tenders floated by Air India and SIDBI for facility management contract and found that the security deposits required in those cases were 5% of the contract value per year. 2.3 The Ld. AO also examined the source of interest free deposit in AY 2012-13 being unsecured loans of ₹ 686.35 Lacs taken by the assessee from various lenders who, in turn, received immediate credit from M/s Ashray properties and other group concerns of M/s Ashray group before advancing the same to the assessee. In AY 2012-13, Ld. AO had observed that the unsecured loans in the hands of M/s Ashray Properties were transferred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r business purposes and therefore, the interest expenditure claimed by the assessee against unsecured loans could not be allowed u/s 36(1)(iii). Since the assessee had claimed interest expenditure of ₹ 131.35 Lacs against unsecured loans of ₹ 12.78 Crores, the proportionate interest disallowance on excess deposit of ₹ 10.50 Crores worked out to ₹ 107.88 Lacs, the adjustment of which was made while determining the income of the assessee. 3. Aggrieved, the assessee reiterated the contentions with success before Ld. CIT(A) vide impugned order dated 16/05/2017 wherein Ld. first appellate authority, relying upon the order of its predecessor in assessee s own case for AY 2012-13 deleted the impugned additions by making following observations: - 6. The facts remain the same during the current AY 2013-14. The appellant has filed clarificatory letter dated 20/09/2010 with the AO during the course of the assessment proceedings which was rejected by the AO for the reason that it has not been executed on stamp paper and it was an after thought as the same was not filed during assessment proceedings for AY 2012-13. The AO is not justified to impose a condition tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to collect the maintenance charges from the licensees which generated business income for the assessee. Therefore, the same was inextricably linked with contract generating business income for the assessee. It is trite law that tax planning is legitimate provided it fell within the four corners of law and it is permissible under the law provided the same is not a colorable device and not done so as to merely defraud the exchequer. We do not find any such attempt by the assessee in the present case. It is also noteworthy that the genuineness of the unsecured loans or interest expenditure was not under doubt. The only condition envisaged by Section 36(1)(iii) to grant deduction of interest expenditure is that the funds were used by the assessee for the purpose of business and nothing more. Keeping in view all these factors, we find no infirmity in the stand of first appellate authority. Our view is fully supported by the analogy of the decision of Hon ble Apex Court rendered in S.A.Builders Vs. CIT [2006 288 ITR 1] where Hon ble Court has observed as under:- 34. w e agree with the view taken by the Delhi High Court in CIT Vs. Dalima Cement (Bharat) Ltd. (2002) 254 ITR 377 that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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