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TMI Blog2016 (11) TMI 607X X X X Extracts X X X X X X X X Extracts X X X X ..... s had been utilized for the purposes of declaration of dividend, the payment of interest on such borrowings constitutes expenditure for the purpose of the business of the assessee and is an allowable deduction in terms of Section 36(1)(iii) of the Act. See CIT vs. Tingri Tea Company Ltd [1970 (2) TMI 25 - CALCUTTA High Court ]- Decided in favour of assessee - Tax Case Appeal No. 549 of 2016 - - - Dated:- 7-11-2016 - Nooty Ramamohana Rao And Anita Sumanth, JJ. For the Appellant : Mr.T.R.Senthilkumar For the Respondent : Mr. Vijayaraghavan for M/s Subbaraya Aiyar JUDGMENT ( Judgment of the Court was delivered by Dr. Anita Sumanth., J ) 1. This Tax Case Appeal at the instance of the Revenue, challenges an order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not constitute allowable deduction in terms of Section 36(1)(iii) of the Act. 4. The assessee pointed out that there had been adequate cash profits on the dates of declaration of dividend and in any event, the declaration of dividend was itself for the purpose of business. Thus, according to the assessee, expenditure incurred in connection therewith constituted an allowable deduction in terms of Section 36(1)(iii) of the Act. Overruling the objections of the Assessee, an order under Section 263 of the Act came to be passed on 22.03.2013 that was challenged in appeal before the Income tax Appellate Tribunal. 5. The Tribunal, vide order dated 04.02.2015, allowed the appeal filed by the assessee after consideration of various decisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of the Karnataka High Court in Kirloskar Electric Co. Ltd. vs. Commissioner of Income Tax (1997) (228 ITR 674). The Division Bench, in that case, was concerned with the allowability of expenditure incurred as dividend perse. The contention was that dividend paid to preference shareholders should be construed as interest paid in respect of capital borrowed for the purposes of business within the meaning of section 36(1)1(ii) of the Act. This was negatived by the Karnataka High Court holding that the provisions of section 36(1)(iii) cannot be stretched to include dividend in so far as preference share capital is a contribution by subscribers to the capital of a company and cannot be equated to a borrowing subject to payment of interest. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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