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TMI Blog2015 (2) TMI 716X X X X Extracts X X X X X X X X Extracts X X X X ..... the loan given to its subsidiary company. The Tribunal was not justified in disallowing the interest. - Decided in favour of assessee. Disallowance of expenses claimed towards guarantee commission - Held that:- The expenditure incurred by the assessee in obtaining an asset on deferred payment basis is a revenue expenditure and that the Tribunal committed an error in holding such expenditure to be a capital expenditure.- Decided in favour of assessee. - Income Tax Appeal No.77 of 2003 - - - Dated:- 8-7-2014 - Tarun Agarwala and Dinesh Gupta, JJ. For the Appellant : R. S. Agarwal For the Respondent : R. K. Upadhayay JUDGEMENT Tarun Agarwala J.- This appeal relates to the assessment year 1983- 84. The assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... side by the appellate authority in appeal filed by the assessee and the matter was remitted for reconsideration to the Assessing Officer. The Assessing Officer, while completing the assessment, again made a disallowance of ₹ 9,54,000. The Assessing Officer found that out of ₹ 61 lakhs only ₹ 8 lakhs was paid by the company to the financial institution and, therefore, was eligible for deduction of interest on the amount of ₹ 8 lakhs under section 36(1)(iii) of the Income-tax Act, 1961 (hereinafter referred to as the Act ). The Assessing Officer held that the balance amount of ₹ 53 lakhs did not qualify for deduction of interest. The assessee also claimed the expenses towards guarantee commission as a revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Assessing Officer was restored. The Tribunal set aside the finding on the issue of interest-free advance on the ground that the assessee could not establish that it had sufficient profits available for payment as advance to its subsidiary company and, consequently, since the issue of availability of funds out of the profits from business stood uncorroborated, the order of the Commissioner of Income-tax deleting the addition of ₹ 9,54,000 being disallowance on account proportional interest-free loans could not be entertained. On the issue of disallowance of the guarantee commission, the Tribunal held that generating sets were imported from the USSR and that the purchase of the generating sets was for the purpose of the assets a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC) and in the case of CIT v. Sivakami Mills Ltd. [1997] 227 ITR 465 (SC) ? We have heard Sri R. S. Agarwal, the learned counsel for the appellant and Sri R. K. Upadhyay, the learned counsel for the Revenue. Deductions has been claimed under section 36(1)(iii) of the Act. For facility, the said provision is extracted hereunder : 36.(1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28-. . . (iii) the amount of the interest paid in respect of capital borrowed for the purposes of the business or profession. The aforesaid provision deals with the deduction on the profit of interest pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loans. In the instant case, we find that the assessee had deep business interest in the existence of its subsidiary company and discharge its legal obligation by repaying the instalments of loan to the financial institutions. Such loans were given for the purpose of business. It is not even the Department's case that the amount given by the assessee was not for business purposes or that the capital borrowed was not utilised for the purpose of business. In the light of the aforesaid, we are of the opinion that the assessee was entitled to deduction of interest amounting to ₹ 9,54,000 on the loan given to its subsidiary company. The Tribunal was not justified in disallowing the interest. Question No. 1 is answered accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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