9911796707
TMI Blog2006 (4) TMI 233X X X X Extracts X X X X X X X X Extracts X X X X ..... The member who joins the scheme is required to deposit funds with the assessee-company. The member may make purchases of consumer durables by using the credit card. The shop owners get their payment directly from the assessee-company. For using the credit card, the assessee-company collects from the credit card holders finance charges at 16 per cent per annum. At the same time, the assessee is paying interest on deposits to the credit card holders. Meanwhile, the assessee, in order to expand the credit card business, formed wholly owned subsidiary company called M/s Shoppers Investment Finance Co. Ltd., (hereinafter called SIFCO) and transferred all the amounts due from and to the credit card holders to M/s SIFCO. In return, M/s SIFCO has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directed by the CIT(A) and the arguments of the assessee in its letter dt. 24th March, 1995. Accordingly, the assessee's claim for deduction of interest is not entertained for the year ended 31st Dec., 1987 relevant to the asst. yr. 1988-89. Since royalty income is assessed on due basis for the assessment year from 1989-90, the assessee's claim for deduction of interest will be considered for the assessment years from 1989-90 onwards." Similarly, for the asst. yr. 1989-90, the assessee's claim of deduction for Rs. 3,22,000 was denied for the above reasons. On appeal, the CIT(A) deleted the addition holding that: "It would appear that on the analogy of the income being assessable on accrual basis, the expenditure relatable to appellant's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d subsidiary." Aggrieved, the Revenue is in appeal before us. 4. The learned Departmental Representative submitted that the assessee has transferred the entire assets and liabilities of credit card business for a consideration of royalty w.e.f. 1st July, 1987. After the transfer of the business, this business no longer is the business of the assessee. The assessee is entitled only for royalty income and the assessee cannot claim interest payment to the credit card holders because payment of interest to the credit card holders is the obligation of SIFCO and not the liability of the assessee-company. 5. The learned counsel for the assessee, on the other hand, submitted that SIFCO is a 100 per cent subsidiary of the assessee-company and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a separate agreement one year after the transfer of the credit card business with all assets and liabilities. The learned counsel for the assessee contended that the AO had confused the royalty and the interest allowable on the borrowals. Royalty was paid for using the emblem as it was the registered trade mark and none can use the said registered trade mark without proper authorization and this authorization was subsequently reached and hence the royalty was due from 1989-90 onwards, Royalty has nothing to do with the allowance of interest on borrowals transferred lock stock and barrel to the subsidiary company by the holding company even prior to the agreement on the emblem "Ready Money". 6. We have heard the rival submissions and perus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... records, the assessee is not entitled for payment of interest to the credit card holders. It is the onus of SIFCO. The only expenditure wholly and exclusively incurred by the assessee-company for the purpose of business is allowable as expenditure unless it is a capital expenditure or personal expenditure. 8. In the present case, the interest claimed to have been paid by the assessee was not for the purpose of business as the credit card business of the assessee was already transferred to SIFCO and the assessee was no longer in the business of credit card. It already ceased to be the business of the assessee. The relationship between the credit card holders and the assessee is not that of debtor and creditor. The money due to the credit c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he amount due from M/s SIFCO at Rs. 26,49,969 is allowable business expenditure. 11. The learned Departmental Representative submitted that the CIT(A) ought to have appreciated that the assessee-company and SIFCO are separate entities and that the ratio of the decision of the Allahabad High Court in the case of Triveni Engineering Works vs. CIT is applicable to the assessee's case. 12. The learned counsel for the assessee, on the other hand, submitted that the sum of Rs. 26,49,969 due from SIFCO to the assessee-company also arose on account of the transfer of the borrowed funds by the assessee. The relationship between the assessee and the SIFCO is a business relationship. Whether SIFCO paid the interest due on the sum or not, it is the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
