9911796707
TMI Blog2013 (12) TMI 1003X X X X Extracts X X X X X X X X Extracts X X X X ..... per provisions of it can be inferred that the intent of legislature is to disallow the payment like protection money, extortion, hafta, bribe, etrc. when it was claimed as business expenditure - It is immaterial whether the money was borrowed in personal capacity or not – Decided against Revenue. - ITA No.248/Coch/2012 - - - Dated:- 22-3-2013 - N R S Ganesan and B R Baskaran, JJ. For the Appellant : Smt Susan George For the Respondent : Shri T M Sreedharan, Sr. Counsel ORDER:- Per: N R S Ganesan: This appeal of the revenue is directed against the order of CIT(A), Trivandrum dated 13-08-2012 and pertains to assessment year 2009-10. The taxpayer filed the cross objection. 2. Smt. Susan George Verghese, the ld.DR submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om). 3. On the contrary, Shri T.M. Sreedharan, the ld.senior counsel for the taxpayer submitted that the taxpayer is doing money lending business in the name and style Kannattu Arun Finance . No money was borrowed in the name of ` Kannattu Arun Finance . According to the ld.senior counsel, the taxpayer borrowed money in his individual capacity. RBI does not prohibit borrowal in individual capacity. Since the money was borrowed in individual capacity, according to the ld.senior counsel it was not shown in the books of account of the business concern. The ld.senior counsel further submitted that the depositors were identifiable and tax was also deducted on interest payment at applicable rates. Since the receipt and repayment of deposit was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence as provided in Explanation to section 37(1) of the Act. According to the ld.senior counsel, the interest paid by the taxpayer is only for employing capital for the business and not for the purpose of incurring expenditure. Therefore, according to the ld.senior counsel, Explanation 1 to section 37(1) may not be applicable. 5. We have considered the rival submissions on either side and also perused the material available on record. We have also carefully gone through the provisions of section 37(1) of the Income-tax Act which reads as follows: 37(1) Any expenditure not being expenditure of the nature decribed in sections 30 to 36 and (not being in the nature of capital expenditure or personal expenses of the assessee), laid out o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct is amended to provide that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purposes of business or profession and no deduction or allowance shall be made in respect of such expenditure. This amendment will result in disallowance of the claims made by certain assessees in respect of payments on account of protection money, extortion, hafta, bribes, etc. as business expenditure. It is well decided that unlawful expenditure is not an allowable deduction in com putation of income. From the above explanation, the legislature intended to disallow the payment like protection money, extortion, hafta, bribe, etrc. when it was claimed as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt was made as secret commission. In Amarjeet Kaur (supra), deposit linked incentive scheme was found to be money circulation scheme. The relevant expenditure in both cases was allowable u/s 37(1) of the Act. Therefore, the High Court found that expenditure would fall under Explanation to section 37(1) of the Act. In this case, the expenditure / interest is allowable under section 36(1)(iii), therefore, the Explanation to section 37(1) is not applicable. This bench of this Tribunal in taxpayer s own case for the assessment year 2008-09 in ITA No.115/Coch/2012 CO No.10/Coch/2012 vide order of even dated has already upheld the decision of the CIT(A) deleting the disallowance for the detailed reasons as stated above. Therefore, consistent wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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