2018 (2) TMI 442 - HC - Income Tax

Claim for deduction u/s 10A - Tribunal allowed partial claim - Held that - The conclusion arrived at by the Tribunal regarding the claim of the assessee under section 10A of the Act is based upon concurrent findings of fact recorded by it after appreciating the material on record. Under the circumstances, the said ground of appeal being based purely upon the findings of fact recorded after appreciation of the evidence on record, in the absence of any perversity being pointed out in the impugned order, does not give rise to any question of law. Disallowance of interest expenses - Held that - The assessee had obtained secured loans of ₹ 2,20,80,792/-, whereas it had reserve surplus of ₹ 9,63,57,283/-, share capital of ₹ 10,30,45,000/- and share application money of ₹ 2,17,75,000/-. Thus, the assessee had considerable surplus funds in proportion to the secured loans. Under the circumstances, since the assessee had advanced interest-free loans out of its surplus funds, the question of disallowing the expenditure in respect of interest incurred on the borrowed funds did not arise, inasmuch as, no part of the borrowed funds had been advanced by the assessee to the concerned parties. Under the circumstances, the Tribunal was wholly justified in upholding the deletion of disallowance of interest expenses of ₹ 15,21,790/-.

Summary

Issues Involved:
1. Challenge to order under section 260A of the Income Tax Act, 1961
2. Claim for deduction under section 10A of the Income Tax Act
3. Disallowance of interest expenses

Analysis:

1. Challenge to order under section 260A of the Income Tax Act, 1961:
The appellant revenue challenged the order of the Income Tax Appellate Tribunal regarding deduction and disallowance of interest expenses. The Tribunal confirmed the order passed by the Commissioner (Appeals) in favor of the assessee. The issues raised were considered substantial questions of law.

2. Claim for deduction under section 10A of the Income Tax Act:
The appellant claimed a deduction under section 10A amounting to &8377; 5,82,65,233/- for the assessment year 2007-08. The Assessing Officer disallowed the claim due to non-compliance with conditions and lack of evidence. The Commissioner (Appeals) allowed the claim to the extent of &8377; 5,30,76,095/- after considering additional evidence submitted by the assessee. The Tribunal upheld the findings of the Commissioner (Appeals) based on the material on record.

3. Disallowance of interest expenses:
The Assessing Officer disallowed interest expenses of &8377; 15,21,790/- due to interest-free loans advanced by the assessee. The Commissioner (Appeals) deleted the disallowance, considering it a business necessity. The Tribunal agreed with the Commissioner (Appeals) based on the surplus funds available with the assessee and the absence of adverse effects on business prudence.

In conclusion, the Tribunal's decisions on both issues were upheld as they were based on concurrent findings of fact and material on record. The Tribunal found no legal infirmity in the orders passed by the lower authorities, dismissing the appeal against the appellant revenue.