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TMI Blog2019 (2) TMI 1323X X X X Extracts X X X X X X X X Extracts X X X X ..... ree funds to make the investment in shares of Hyderabad based companies. Assuming, yet not accepting, the borrowed funds have been utilised for purchase of shares for getting controlling interest in the land owned by the companies so that it can construct malls/multiplexes at Hyderabad. This strategic investment clearly shows that the borrowed funds, if any, have been utilised for expansion of the business and is for the business purposes. The Hon'ble High Court of Delhi in the case of Reebok India Company [2018 (10) TMI 439 - DELHI HIGH COURT has held that once it is established that there was a connection and nexus between the interest paid and claimed by the assessee as expenditure and the purpose of business which need not necessarily be business of the assessee itself, the revenue cannot assume role and occupy the arm chair of a business man to decide whether expenditure was reasonable. In assessee’s sister concern, DLF Brand Limited, the Tribunal had the occasion to consider a similar issue and has allowed the claim of interest expenditure on the amount borrowed for investment in subsidiary companies. Charging interest upto the cut off - non exclusion of interest inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ater pumping station, AC plant, Lift etc. The basement area is also the foundation of the building. The assessee incurred cost in making the foundation of the building. The assessee has charged cost of parking area to the cost of project. However, the Assessing Officer was of the opinion that the same should be capitalised. 4. The Assessing Officer, accordingly, made addition of ₹ 6,28,52,182/-, which included ₹ 54,79,059/- pertaining to exclusion of hotel project cost from the budgeted cost and remaining ₹ 5,73,73,123/- pertaining to reduction in budgeted cost on account of parking area. 5. Aggrieved, the assessee carried the matter before the ld. CIT(A) and explained that the parking area is mandatory for any commercial complex and, more so, in the case of a Mall and, therefore, the Assessing Officer has grossly erred in disallowing ₹ 5,73,73,123/-being reduction in the budgeted cost on account of parking area. It was further explained that as per the description of the project, parking is to be constructed and maintained and it consists of 721 lots for car parking and 68 slots for scooters. It was strongly contended that the Assessing Officer erred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y error or infirmity in the findings of the CIT(A). Ground No. 1 in both the appeals is dismissed. 11. Ground No. 2 in A.Y 2006-07 relates to the deletion of addition of ₹ 50,99,086/- being interest paid to DLF Ltd on borrowed capital. 12. While making this addition, the Assessing Officer observed that the assessee has paid advances for purchase of shares of certain companies. These companies were owners of land at Banjara Hills, Hyderabad and advances for purchase of shares were disclosed in the balance sheet as share application money. As the amount paid was made on account of investment, the Assessing Officer was of the opinion that proportionate interest paid to DLF Ltd on the funds utilised out of unsecured loans needs to be capitalised as there is a direct nexus between the borrowed capital and investment in shares. The Assessing Officer, accordingly, disallowed interest of ₹ 50,99,086/-. 13. Before the CIT(A), the assessee strongly contended that it had interest free funds and interest bearing funds available with it. It was brought to the notice of the CIT(A) that interest free funds available were far in excess of the investment made by the assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orrowed funds, if any, have been utilised for expansion of the business and is for the business purposes. 19. The Hon'ble High Court of Delhi in the case of Reebok India Company 259 Taxmann 199 has held that once it is established that there was a connection and nexus between the interest paid and claimed by the assessee as expenditure and the purpose of business which need not necessarily be business of the assessee itself, the revenue cannot assume role and occupy the arm chair of a business man to decide whether expenditure was reasonable. In assessee s sister concern, DLF Brand Limited, the Tribunal had the occasion to consider a similar issue in ITA No. 4760/DEL/2012 and has allowed the claim of interest expenditure on the amount borrowed for investment in subsidiary companies. Considering the facts of the case in totality, we do not find any reason to interfere with the findings of the CIT(A). Ground No. 2 is accordingly dismissed. 20. Ground no. 3 relates to deletion of addition of ₹ 4,45,425/-. 21. During the course of scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has recognised interest on delayed payment from customers ..... X X X X Extracts X X X X X X X X Extracts X X X X
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