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TMI Blog2021 (8) TMI 424X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as loan to subsidiaries/group companies and not its own funds/funds generated with zero interest liability. 2. That on facts and circumstances of the case, the Ld. CIT(A) has erred in holding that there was a direct correlation between the interest bearing funds and grant of interest bearing ICDS to subsidiaries/Group Companies." 3. The facts relevant to this case are as under: The assessee company is a Non-Banking Finance Company with Reserve bank of India and was engaged in the business of providing financial advisory services and support services to its subsidiaries and Religare Group Companies. The company incurred expenses of Rs. 976,30,09,360/- out of which an amount of Rs. 946,22,50,000/- has been disallowed u/s. 37(1) and Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.5 percent of the average value of investment, income from which does not form part of the total income, as appearing in the balance sheet of the assesse as on the first day and last day of the previous year 4,76,09,990 Total Disallowance 24,53,29,611 The assessing officer has disallowed interest on Compulsorily Convertible Debentures (CCDs) of Rs. 7,60,92,407/-. The appellant also submitted a detailed breakup of the interest costs incurred by it in the instant AY and suo-moto disallowance u/s. 14A of the Act r.w. Rule 8D as under: S. No. Particulars Amount ( Rs.) Amount considered while computing disallowance under section 14 A Amount disallowed under section 37 of the Act Amount not considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o subsidiary and group companies @ interest rate of 14% on which interest income of Rs. 7,90,16,370/- was earned by the appellant and duly offered to tax a business income in its return of income expense of Rs. 6,92,18,710/- was not disallowed u/s. 14A of the Act. (ii) Purchase of 150 12.5% convertible debenture of Religare Finvest Limited ("RFL") in the secondary market on December 7, 2012 aggregating to Rs. 16.17 crores). It was further submitted that as the appellant on sale of the said NCDs earned interest aggregating to Rs. 57,28,081/- and profit on sale of NCDs of Rs. 81,53,633/- which has been duly offered to tax as business income in its return of income filed for the subject AY the corresponding CCF interest cost of Rs. 68,73,6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... May 6, 2014 and allotting NCDs aggregating to Rs. 845 crores to various mutual fund houses on March 28, 2013 at a coupon rate of 14 percent. Ld. AR of appellant further submitted that being a prudent businessman, it would not raise funds from an international organisation like IFC which is funded by the World Bank nor would it place NCDs with reputed mutual fund houses unless and until its own funds were not adequate to meet its business requirements viz. infusion of additional share capital in its subsidiaries and grant of inter-corporate deposits to its subsidiaries for enabling them to meet their working capital requirements. Perusal of submissions reveals that there exists one to one correlation between the funds aggregating to Rs. 404 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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