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TMI Blog2020 (9) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. CIT(A) out of interest expenditure and allow this appeal of the assessee. - I.T.A. No. 2368/Kol/2019 - - - Dated:- 17-7-2020 - Shri P.M. Jagtap, Vice President (KZ) And Shri A. T. Varkey, JM Shri S.K. Tulsiyan, Advocate appearing on behalf of the Assessee Shri Supriya Pal, Addl. CIT, Sr. DR appearing on behalf of the Revenue ORDER PER P.M. JAGTAP, VICE-PRESIDENT (KZ) This appeal filed by the assessee is directed against the order of Ld. CIT(Appeals) - 5, Kolkata dated 20.08.2019 and the solitary issue involved therein relates to the disallowance of ₹ 49,05,630/- made by the AO and confirmed by the Ld. CIT(A) on account of interest expenditure. 2. The assessee in the present case is a non-banking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tent utilised for payment of share application money. 3. The disallowance of ₹ 49,05,630/- made by the AO out of interest expenditure was challenged by the assessee in the appeal filed before the Ld. CIT(A) and the following submission was made on behalf of the assessee company in support of its claim that the said disallowance made by the AO was not sustainable: The assessee during the year had claimed finance cost of ₹ 2,65,87,704/-. The short term borrowing outstanding in the books of assessee as on 31.03.2013 was ₹ 28,14,87,977/-. The total owned funds of the assessee as on 31.03.2013 was ₹ 4,98,84,904/- and the assessee had made share application of ₹ 4,72,10,000/-. The Ld. AO after examining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e: ₹ 33,13,72,881/- Investing and financing activities as NBFC A. Non Current Investment ₹ 19,59,75,719/ B. Long Term Loans Advances ₹ 2,02,88,133/- C. Short Term Loans and Advances ₹ 17,27,74,705/- (including share application money of ₹ 4,72,10,000/-) ₹ 38,90,38,557/- From the above, it is evident that the assessee had utilised its whole of the owned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. CIT 324 ITR 396. 4. The Ld. CIT(A) did not find merit in the submissions made on behalf of the assessee company on the issue under consideration and proceeded to confirm the disallowance made by the AO out of interest expenditure for the following reasons given in his impugned order: I have considered the submission of the appellant and perused the relevant assessment records. The company had claimed interest amounting to ₹ 49,05,630/- as expenditure u/s 36(1)(iii) of the Act. The AO in the assessment order had disallowed the claim on the grounds that the interest relates to loan utilised for share application and has no nexus with the business of the appellant. There is merit in the findings of the AO. The investment in sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk of India, was engaged in the business of investing and financing activities. He contended that the assessee company was regularly investing in share application money as part of its ordinary course of business and the details of such investments made right F.Y. 2005-06 were duly furnished before the AO during the course of assessment proceedings. Relying on the decision of Hon ble Andhra Pradesh High Court in the case of CIT vs Peninsular Investment Ltd. 213 Taxman 327, he contended that when the business of the assessee was to invest in shares, interest paid by the assessee on loan utilised for making investment in shares was allowable as deduction u/s 36(1)(iii). He also relied on the decision of Calcutta High Court in the case of CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed during the course of assessment proceedings before the AO showing that the investment in share application money was regularly made by the assessee right from the F.Y. 2005-06. The nature of business activities undertaken by the assessee as a non-banking finance company was duly explained by the assessee during the course of appellate proceedings before the Ld. CIT(A) pointing out that the revenue was generated by the assessee company mainly from its investing and financing activities and the payment of share application money was part of its investing activities. The Ld. CIT(A) however still confirmed the disallowance made by the AO out of interest expenditure mainly on the ground that the investment in shares was a capital investment. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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