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TMI Blog2020 (5) TMI 674X X X X Extracts X X X X X X X X Extracts X X X X ..... e business and utilization of the amount for investment in the equity shares of the subsidiary company or the amount invested for infusion of the capital in any other company. The AO may then take a considered decision with regard to disallowance of interest on loan and bank charges in accordance with the provisions of the Income Tax Act. - ITA No. 3131/Del/2016, ITA No. 3132/Del/2016, CO No. 239/Del/2016, CO No. 240/Del/2016 - - - Dated:- 12-5-2020 - Sh. Amit Shukla, Judicial Member And Dr. B. R. R. Kumar, Accountant Member For the Assessee : Sh. S. D. Kapila, Adv. For the Revenue : Sh. Rajesh Kumar, Sr. DR ORDER Per Dr. B. R. R. Kumar, Accountant Member: The present appeals by the revenue and the Cross Obje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the merits of the case and on an ad-hoc basis. The said expenditure represents legitimate business expenditure and is fully allowable u/s 37(1) of the Act. Disallowance of Interest on Working Capital: 5. During the year the assessee company claimed interest on working capital to the tune of ₹ 4,70,59,275/- (and FE losses). The AO held that these expenses were not incurred wholly and exclusively for the purpose of business as the assessee company has invested in STPL equity at ₹ 42,50,00,000/- which is more than to the loan amount on which the interest on working capital has been claimed by the assessee. In view of this interest claimed amounting to ₹ 4,70,59,275/- is disallowed and added back to the income of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exclusively for business purpose and Investment in Equity of STPL is equal to Working Capital Loan on which Interest has been claimed. The AO treated the entire loan amount as Investment in Equity of STPL. 11. Before the ld. CIT (A), it was submitted that the assessee availed credit facilities/loan from Bank of Nova Scotia, New Delhi, ( BNS ) during the financial year 2001-02, which was utilized for meeting the working capital requirements of its various project offices in India. The said bank loan was adequately guaranteed by the Standby Letter of Credits ( SBLCs ) issued by Malaysian Bank i.e. CIMB Bank on behalf of the ultimate holding company i.e. Bumi Hiway Ventures Berhad ( BHV ). Subsequently, during FY 2006-07, CIMB Bank restruc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the revenue in the earlier year in ITA No.5871/Del/2013 for the assessment year 2009-10. Hence, the appeal of the revenue is hereby dismissed. 15. Regarding the Cross Objections of the assessee, the matter is being referred to the file Assessing Officer for verification of the utilization of the loan for business purpose by taking into account the amount of the loan raised, the quantum of the own capital and the reserves surplus, utilization of the amount for day-to-day running of the business and utilization of the amount for investment in the equity shares of the subsidiary company or the amount invested for infusion of the capital in any other company. The AO may then take a considered decision with regard to disallowance of intere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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