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TMI Blog2018 (4) TMI 1520X X X X Extracts X X X X X X X X Extracts X X X X ..... uper Religare Laboratories Ltd. ("SRL") is engaged in the business of running state of the art diagnostic laboratories, which conduct tests meant for diagnosis of various ailments of human being. For the Asstt. Year 2009-10, they have filed their return of income on 30.9.2010 declaring a total taxable income of Rs. 3,16,02,510/- and by order dated 29.12.2011 passed u/s 143(3) of the Income-tax Act, 1961 ("the Act"), the learned AO made the following three additions: S. No. Nature of disallowance Amount (Rs.) 1 Disallowance of expenses u/s 40(a)(i) of the Act 2,19,86,179 2 Disallowance of expenses u/s40(a)(ia) of the Act 25,95,80,873/- 3 Disallowance of interest paid on loan taken for investment in foreign company 2,48,23 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of commission within the meaning of Section 194H of the Act and on that premise holding that since the assessee should have deducted tax at source on such amount but failed to do so, disallowed the same u/s 40(a)(ia) of the Act. So also assessee offered discount of Rs. 2,19,86,179/- to the international customers but the learned AO treated the same as foreign payment made without deducting the tax at source u/s 195 of the Act, as such, he disallowed such amount also. 5. Learned CIT(A) observed that the payments u/s 40(a)(i) of the Act were allowed by the CIT(A) for the Asstt. Year 2006-07 with the following observations: "For any amount on which tax has to be deducted u/s 195, one of the basic conditions is that the said amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fered by the assessee to the Collection Centers was in the nature of payment for work, on which tax was deductible u/s 194C of the Act. Since the claim of the assessee has been allowed as above, there remains no requirement to go into this aspect of the matter and we are not doing so . In the result, the appeal filed by the assessee is allowed." 7. Subsequently, for the Asstt. Years 2007-08 and 2008-09, learned CIT(A) held this issue in favour of the assessee vide order dated 11.2.2013 and 20.3.2013 respectively in appeal Nos.129 and 169/2010-11. 8. In so far as this fact recorded by the CIT(A) in respect of the deletion of the disallowance made u/s 40(a)(i) and 40(a)(ia) are concerned, absolutely, there is no dispute from the Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in shares of MHICL for the expansion of the business through MMCL, which is in the line of assessee's business, the same is business expenditure allowable u/s 36(1)(iii) of the Act. In the alternative, it is pleaded that even otherwise, inasmuch as such interest expenditure is incurred on the borrowed amounts meant for investment to earn taxable income and allowable u/s 57(iii) of the Act. 10. However, learned AO did not agree with the assessee and recorded a finding that MHICL in which the assessee made the investment is not in the business of assessee's line of business, as such, no business purpose is served in the year under consideration for which the assessee had made huge interest payment on borrowed capital, as such, interest paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve increased by Rs. 1,84,00,390/- as could be found from the consolidated balance sheet of the assessee for the year under consideration. 13. Assessee placed reliance on a decision reported in CIT vs. Phil Corporation and Anr., 244 CTR 226 (Bom) wherein the assessee borrowed the amounts from bank to invest the same in the sister concern for the purpose of acquisition of shares to have control over majority of shares, and claimed deduction u/s 36(1)(iii) of the Act in respect of the interest paid. No dividend was earned through such investment. AO disallowed the claim stating that the investment is out of borrowed funds and such finding was confirmed by the learned CIT(A). However, the Tribunal deleted the same and the Hon'ble Bombay High C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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