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TMI Blog2022 (2) TMI 338X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2005-2006. 2. The assessee has raised following grounds of appeal: 1. The C.I.T.(Appeals) erred in law and on facts in confirming the disallowance of Rs. 11,10,427/- u/s.36(1)(ii) of the I.T. Act, 1961 without appreciating the facts of the case properly. The appellant reserves its right to add, amend, alter or modify any of the grounds stated hereinabove either before or at the time of hearing. 3. The only issue raised by the assessee is that the Ld. CIT(A) erred in confirming the order of the AO by sustaining the disallowance of interest expenses of Rs. 11,10,427/- under the provision of section 36(1)(iii) of the Act. 4. Briefly stated facts are t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee in 5 companies to have the controlling interest in these companies. Thus the investment was made for the strategic purpose and therefore there cannot be any disallowance of interest. 7.1 The Ld. AR further submitted that the companies in which the investment was made were amalgamated with the assessee by the Order of the Hon'ble Gujarat High Court which is placed at pages 36 to 54 of the paper book. 8. On the other hand the Ld. DR contended that at the time when assessee has acquired the shares, these companies were not the subsidiary companies to the assessee and there was no information on record that whether the investment was made by the assessee to acquire the controlling interest. The Ld. DR vehemently supported the order of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;2. Respondent-assessee is a private limited company and is engaged in the business of financing. During the scrutiny assessment of the assessee's return for the assessment year 2008-09. Assessing Officer noticed that the assessee had claimed expenditure of interest paid on borrowed funds. The assessee had also funded its sister concern without charging interest. The Assessing Officer therefore disallowed the interest expenditure. The issue eventually reached the Tribunal. The Tribunal by the impugned judgment held in favour of the assessee. The Tribunal referred to and relied upon the decision of the Supreme Court in case of S.A. Builders Ltd. v.CIT 228 ITR 1 (SC) and concluded as under: - "If the aforesaid ratio laid down by Hon&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of CIT vs. Phil Corpn. Ltd. reported in 14 taxmann.com 58 has held as under: The reasoning of the Tribunal that the overdraft was not operated only for investing in the shares of subsidiary company and the fact that it was also used for investment in the shares of the sister/subsidiary company to have control over that company and, therefore, the element of interest paid on the overdraft was not susceptible of bifurcation and, therefore, the assessee was entitled to the deduction under section 36(1)(iii). [Para 11] Thus, the Tribunal was right in deleting the addition of Rs. 19,73,333. [Para 12] 10.6 In view of the above, we note that the investments was made by the assessee in the companies in order to have controlling stake which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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