2012 (10) TMI 817

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..... r Section 260A of the Income Tax Act, 1961 (hereinafter referred to as "the Act") challenges an order dated 10/11/2010 of the Income Tax Appellate Tribunal (hereinafter referred to as the "Tribunal") in ITA No.4249/Mum./2007 relating to Assessment year 2002-03. 2. Being aggrieved, the revenue has formulated the following questions of law for the consideration by this Court. (i)  Whether on .....

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..... ble income ignoring the fact that the interest payment was made to the share holders of the assessee with the debt equity capital ratio of 248:1 and which can be considered as payment to self covered by the provisions of Article 7(3)(b) of the DTAA and, therefore, not allowable expenditure? 3. The appeal is admitted on Question (ii) and (iii). Re Question (i) : 4. The respondent-assessee is a c .....

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..... debt equity ratio worked out is to 248:1. 5. The respondent assessee paid interest of Rs. 5.73 crores on the aforesaid borrowing of Rs.57.09 crores and Rs.37.01 crores from NV Basix SA and Kier International (Investments) Limited respectively. However, the Assessing Officer disallowed the payment of interest in view of the Reserve Bank of India's approval letter dated 3/11/1998 granting approval .....

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..... rest paid to the head office by permanent establishment in India as a deduction. Further, the payment of interest also directly violates the conditions imposed by RBI in its letter dated 3/11/1998. Therefore, the order of the Assessing Officer was upheld. 7. However, the Tribunal allowed the respondent-assessee's appeal. During the course of the proceedings before the Tribunal the revenue contend .....

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..... he above observations of the Tribunal. There were at the relevant time and even today no thin capitalization rules in force. Consequently, the interest payment on debt capital cannot be disallowed. In view of the above, the question (i) raises no substantial question of law and is therefore, dismissed. 9. Appeal is admitted with regard to Question (ii) and (iii).
Case laws, Decisions, Judgeme .....

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