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TMI Blog2015 (12) TMI 1169X X X X Extracts X X X X X X X X Extracts X X X X ..... only confirms what stands stated above. That the loss stands incurred not with a view to earn a positive return – irrespective of its extent, but to contain the losses of the investee-company. The matter is to be looked at from the stand-point of the assessee in-as-much as it is the law as applicable to him that is to be seen. Reference to the decision in the case of Rajendra Prasad Moody (1978 (10) TMI 133 - SUPREME Court ) by the assessee is, again, misplaced. The same nowhere approves of premeditated losses. It has already been clarified that no other benefit enures to the assessee from the said loan/s. A company cannot oblige the shareholders to extend loans, much less at a concessionary rate of interest. It is only where the actual ear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim of these expenses against interest income, assessable u/s. 56 of the Act, resulted in a loss of ₹ 8,87,532/-; the assessee also earning some bank interest. It is the claim for deduction of this excess expenditure, which is u/s. 57(iii), which is the subject matter of dispute. The assessee claims that the nexus of the borrowed funds with that advanced to the lendee-company and, thus, the purpose for which the loans were undertaken and expenditure on interest (as well as brokerage) incurred in its respect, is not in doubt. The ld. CIT(A) is wrong in doubting the same, and which forms the basis of his confirmation of the impugned disallowance of ₹ 8.88 lacs. The Hon ble Apex Court has in CIT vs. Rajendra Prasad Moody [1978] 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same cannot govern the extent to which the expenditure incurred is to be allowed, being incurred in its totality for the stated purpose, i.e., earning of income. There is also no doubt with regard to the expenditure claimed being incurred bona fide. The concurrence with the assessee s argument, however, stops here. The answer is simple. The monies are borrowed, incurring brokerage charges for the purpose, only for lending the same to a company at a predefined, agreed rate of interest, i.e., 12% p.a. That is, the assessee, even prior to undertaking the arrangement, is conscious/aware that the same shall result in a loss in-as-much as the interest rate contracted on the borrowing/s is higher. Surely, the same (loss) has the same character as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee is, again, misplaced. The same nowhere approves of premeditated losses. It has already been clarified that no other benefit enures to the assessee from the said loan/s. A company cannot oblige the shareholders to extend loans, much less at a concessionary rate of interest. It is only where the actual earning of income is not certain, with the purpose of expenditure being toward earning the same, that the deduction in its respect cannot be denied. In the facts and circumstances of the case, the impugned expenditure is only to contain the losses of the borrower-company, by diverting it to the shareholders to that extent. The assessee s claim is without merit, and the Revenue s stand in disallowing the excess expenditure (refer para ..... X X X X Extracts X X X X X X X X Extracts X X X X
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