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TMI Blog2019 (4) TMI 570X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee, an Investment Company, whose business is only to borrow and lend or invest, the same cannot be said to be not in the business interest or commercially expedient for the purpose of business and the concept of 'Matching Principles', which has been applied by the Assessing Authority and the CIT (A) in the present case, was not really applicable. It is not for the Revenue authorities to substitute their own wisdom or notion about the rate of interest agreed to between the parties, including the group companies and, as such, the finding of fact about commercial expediency or absence thereof is a finding of fact, out of which, no substantial question of law can be said to be arising, requiring our consideration under Section 260A - Decided against revenue. - T.C.A.No.166 of 2019 - - - Dated:- 21-2-2019 - Dr. Justice Vineet Kothari And Mr. Justice C.V. Karthikeyan For the Appellant : Mr.T.Ravikumar, Senior Standing Counsel. For the Respondent : Mr.R.Sivaraman JUDGMENT DR.VINEET KOTHARI, J . Revenue has filed this Appeal under Section 260-A of the Income Tax Act, in short, 'Act', aggrieved by the order passed by the learned Income Tax Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04.2012. 5. On the other hand, learned counsel for the Assessee submitted that applying of 'Matching Principles' by the Assessing Authority as well as CIT (A) in the present case was incorrect and not sustainable, as the Assessee company, being an Investment Company, had applied cash basis of accounting and the actual amount of interest paid and received was recorded by it. He reiterated the findings of the learned Tribunal in Para 7 in this regard and the same are quoted below for ready reference : 7. We have considered the rival contentions and perused the orders of the authorities below. Assessee had debited in its profit and loss account, only the actual interest paid and credited only the actual interest received , since it was following the cash system of accounting . In our opinion in a cash basis of accounting system, there is no question of applying any matching principle . Interest is credited as income at point of receipt and debited as expenses at the point of payment. According to the disparity in the period for which interest is received and paid, there could be difference. That apart, copy of the partners current account placed at paper book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Revenue are rejected''. Thus assessee has been considered as an investment company and making investments was part of its business. Hon'ble Jurisdictional High Court also in the case of CIT vs. Shriram Investments (Firm ), (2015) 54 taxmann.com 15 also held that deduction u/s.36(1) (iii) of the Act had to be allowed in respect of interest paid, if capital was borrowed for the purpose of business or profession. As already mentioned by us, there is no finding by any of the lower authorities that disparity between interest receipts and payments arose on account of charging of lower rate of interest on loans advanced when compared to interest paid on loans received. In the circumstances, we are of the opinion that ld. Assessing Officer was not justified in making a disallowance for the difference between interest received and interest paid by the assessee. Disallowance of ₹ 1,65,81,384/- stands deleted. 6. We have heard the learned counsel for the parties and also gone through the order impugned of the learned Tribunal. 7. A Co-ordinate Bench of this Court, in the case of Assessee itself, for the previous Assessment Years in T.C.A.No.265 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the issue, the court was pleased to observe that in principle there is no distinction between interest paid on capital borrowed for the acquisition of a plantation and interest paid on capital borrowed for the purpose of an existing plantation. Both are for the purpose of the plantation. The court further observed that the payment of interest on the amount borrowed for the purpose of the plantations when the whole transaction of purchase and the working of the plantations was viewed as an integrated whole was so closely related to the plantations that the expenditure could be said to be laid out or expended wholly and exclusively for the purpose of the plantations. 8. We may also gainfully refer to the judgment of the Calcutta High Court in CIT v. Rajeeva Lochan Kanoria (1994) 208 ITR 616 . The learned court was considering section 36 (1) (iii) and was pleased to observe as under (page 620) : 'The only enquiry that is to be made is whether the payment of interest was in respect of capital borrowed for the purpose of the assessee's business or profession. There is no dispute that the capital was borrowed in the instant case and interest was paid on the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respective case . For instance, if the Directors of the sister concern utilize the amount advanced to it by the assessee for their personal benefit, obviously it cannot be said that such money was advanced as a measure of commercial expediency . However, money can be said to be advanced to a sister concern for commercial expediency in many other circumstances (which need not be enumerated here). However, where it is obvious that a holding company has a deep interest in its subsidiary , and hence if the holding company advances borrowed money to a subsidiary and the same is used by the subsidiary for some business purposes, the assessee would, in our opinion, ordinarily be entitled to deduction of interest on its borrowed loans. 9. We are of the considered opinion, that, as a matter of fact, no substantial question of law arises in the present case, because, it is essentially a finding of fact as to whether the lower interest paid on the borrowings made by the assessee company from the sister concerns or the group companies is for the purpose of its business or not. Whether it is commercially expedient or not for the Assessee cannot be decided by the Revenue authorities and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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