SRSR Holdings Pvt.Ltd., Hyd., Hyderabad V. DCIT, Central Circle-9, Hyd, Hyderabad

ITA 214/HYD/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2305 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 21-06-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 05-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: H PHANI RAJU
• Keywords: Business income; Business expenditure; Commercial expediency; Revenue expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 214/HYD/2015 ASSESSMENT YEAR: 2008-09 SRSR HOLDINGS PVT. LTD., HYDERABAD. PAN AAKCS 0134 N VS. DY. COMMISSIONER OF INCOME- TAX, CENTRAL CIRCLE 9, HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K.C. DEVDAS REVENUE BY : SHRI H. PHANI RAJU DATE OF HEARING : 21-06-2017 DATE OF PRONOUNCEMENT : 31-07-2017 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS IS AN APPEAL OF THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX(A) - 12, HYD ERABAD, DATED 31-12-2014 FOR AY 2008-09. AT THE TIME OF HEARING, LD. AR SUBMITTED PAPER BOOK II BUT ON OBJECTION FROM LD. DR, LD. A R WITHDREW THE PB- II AND MADE SUBMISSION THAT HE WILL NOT RELY ON PB II. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE COMPANY IS A PRIVATE LIMITED COMPANY WHICH FILED ITS RETURN OF I NCOME FOR THE AY 2008-09 ON 25/09/2008 DECLARING LOSS OF RS. 3,36,03 ,738/-. SCRUTINY ASSESSMENT U/S 143(3) WAS COMPLETED ON 20/12/2010 A SSESSING THE INCOME AT RS. 65,53,653/- UNDER THE HEAD INCOME FR OM OTHER SOURCES AND CARRY FORWARD LOSSES CLAIMED WAS NOT ALLOWED. 2 ITA NO. 214/H/15 SRSR HOLDINGS PVT. LTD. 2.1 THE ASSESSEE COMPANY HAD INVESTED IN EQUITY SHA RES OF SATYAM COMPUTER SERVICES LTD. TO THE TUNE OF RS. 2266.23 C RORES AND HAD DIVIDEND INCOME OF RS. 19.50 CRORES. DURING THE YEA R, IT ALSO HAD FIXED DEPOSIT AND RECEIPT OF INTEREST ON SUCH FIXED DEPO SITS OF RS. 65,53,653/-. THE ASSESSEE CLAIMED DIVIDEND AS EXEMP T U/S 10(34) OF THE IT ACT. 2.2 AS REGARDS THE INTEREST INCOME OF RS. 65.53 LAK HS, IT TOOK IT AS BUSINESS INCOME IN PROFIT AND LOSS ACCOUNT AND ADJU STED AGAINST IT THE EXEPENSES TO THE TUNE OF RS. 4,01,49,652/- AND ARR IVED AT BUSINESS LOSS OF RS. 3,36,03,738/- TO BE CARRIED FORWARD AS PER THE TAX RETURN FILED. THE AO EXAMINED THE DETAILS OF EXPENSES WHIC H WERE AS UNDER: S.NO. ITEM AMOUNT I) NCD ISSUE EXPENSES A) DSK LEGAL RS. 5,32,020 B) NCD LEGAL FEE RS. 6,00,000 C) STAMP DUTY - RS. 12,22,500 TOTAL 23,54,520 II) INTEREST PAID ON DEBENTURES 3,49,89,042 III) LEGAL FEE 1,00,000 IV) SYNDICATION FEES (DSP) 16,85,400 V) TRUSTEESHIP FEE A/C 84,270 VI) DEMAT CHARGES 12,45,721 TOTAL 4,04,58,953 2.3 THE AO, THEREFORE, HELD THAT THE ABOVE EXPENSES WERE NEITHER ATTRIBUTABLE TO THE EARNING OF INTEREST INCOME NOR ATTRIBUTABLE TO ANY INVESTMENT OR DIVIDEND, HENCE, HE HELD THAT THE BUS INESS LOSS CANNOT BE ALLOWED TO BE CARRIED FORWARD. HE HAD ALSO OBSER VED THAT NOTWITHSTANDING THE ABOVE STAND, CERTAIN EXPENSES L IKE LEGAL FEE, SYNDICATION FEE ETC. WERE IN THE NATURE OF COMMISSI ON OR BROKERAGE, FEES FOR PROFESSIONAL SERVICES AND WERE TO BE ALLOW ED ONLY IF TDS IS DONE AND SINCE THESE DETAILS WERE NOT AVAILABLE, TH EY HAVE TO BE DISALLOWED EVEN OTHERWISE U/S 40(A)(IA). HE, THERE FORE, TREATED THE INTEREST INCOME OF RS. 65,53,653/- AS INCOME FROM O THER SOURCES AND ASSESSED THE ENTIRE INTEREST INCOME AS INCOME FOR T HE YEAR AND SUBJECT TO TAX. 3 ITA NO. 214/H/15 SRSR HOLDINGS PVT. LTD. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE P REFERRED AN APPEAL BEFORE THE CIT(A) AND FILED WRITTEN SUBMISSI ONS WHEREIN IT WAS STATED AS UNDER: A) THE APPELLANT COMPANY HAS THE OBJECTIVE CLAUSE O F INVESTING FUNDS AND EARNING INTEREST IN ITS MEMORANDUM AND AR TICLES OF ASSOCIATION. A COPY OF THE SAME WAS FILED. THE AO T HEREFORE WAS INCORRECT TO TREAT INTEREST INCOME AS INCOME FR OM OTHER SOURCES. (B) THE APPELLANT MOBILIZED FUNDS FOR PURSUING ITS OBJECTS. THE FUNDS SO MOBILIZED WERE DEPLOYED BY WAY OF INVESTME NT AND EARNED INTEREST INCOME THE FUNDS SO MOBILIZED HAVE A COST NAMELY THE INTEREST PAID ON THE FUNDS MOBILIZED. TH E APPELLANT THEREFORE HAD RIGHTLY SET OFF THE INTEREST PAYMENT FROM THE INCOME EARNED AND SUBMITTED ITS RETURN OF INCOME ON THE NET AMOUNT. THE AO WAS THEREFORE WRONG IN NOT ONLY ALLO WING ANY EXPENDITURE TO BE SET OFF AGAINST ITS INTEREST INCO ME OF RS.65.63 LAKHS EVEN IF HE HAD ASSESSED AS INCOME FROM OTHER SOURCES. (C) SUPPORTING DOCUMENTS LIKE BANK STATEMENT AND LE DGER COPIES WERE FILED TO INTIMATE THE NEXUS BETWEEN THE BORROWALS OF FUNDS AND UTILIZATION OF THE SAME FOR MAKING FIX ED DEPOSITS. THE APPELLANT THEREFORE SUBMITTED THAT THE FIXED DE POSITS WITH THE BANKS HAVING EMANATED OUT OF BORRROWAL OF FUNDS BY WAY OF NON CONVERTIBLE DEBENTURE LOANS FROM BIRLA MUTUAL F UNDS, THE CLAIMED INTEREST EXPENDITURE IS TO BE ALLOWED. 4. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E AND AFTER EXAMINING THE EXPENSES CLAIMED BY THE ASSESSEE, THE CIT(A) OBSERVED THAT OUT OF THE TOTAL CLAIM OF RS. 4,04,58 ,953/-, THE EXPENSES TO FOLLOWING EXTENT WERE ALLOWABLE: A) INTEREST RS. 1,05,94,863 B) NCD ISSUE EXPENSES RS. 5,78,152 C) SYNDICATION FEE & LEGAL FEE RS. 4,38,458 TOTAL RS. 1,16,11,473 ============= 4.1 CIT(A) OBSERVED THAT THE AMOUNT IS AVAILABLE TO THE ASSESSEE TO SET OFF AGAINST ITS INTEREST INCOME OF RS. 65,53,65 3/- AND AS A RESULT OF ALLOWING OF SUCH EXPENDITURE, TOTAL INCOME FOR THE ASSESSEE FOR THE 4 ITA NO. 214/H/15 SRSR HOLDINGS PVT. LTD. YEAR IS NIL AND THE BALANCE EXPENDITURE IS ALLOWED TO BE CARRIED FORWARD AS BUSINESS LOSS. HE CONCLUDED THAT THE QU ANTIFIED EXPENSES HOWEVER ARE TO BE ALLOWED SUBJECT TO PAYMENT OF TDS ON THESE AMOUNTS AS PER SECTION 40(A)(IA), WHICH MAY BE VERI FIED WHILE GIVING EFFECT TO HIS ORDER. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL BEFORE US CONTENDING THAT THE ORDER OF THE CIT(A) HAVING FOUND AS A MATTER OF FACT THAT THE ASSESSEE WAS CARRYING ON BU SINESS ERRED IN RESTRICTING THE CLAIM OF BUSINESS EXPENDITURE TO RS . 1,16,11,473/- AS AGAINST RS. 4,04,58,953/- IS WHOLLY UNSUSTAINABLE B OTH ON FACTS AND IN LAW. 6. LD. AR SUBMITTED THAT INTEREST INCOME EARNED BY THE ASSESSEE IS PART OF BUSINESS INCOME AS THE ASSESSEE COMPANY IS FORMED TO CARRY ON THE BUSINESS OF INVESTMENT OF FUNDS AND EA RNING INTEREST AS PER THE MEMORANDUM AND ARTICLES OF ASSOCIATION, HOW EVER, THE AO TREATED THE INTEREST INCOME AS INCOME FROM OTHER S OURCES. HE SUBMITTED THAT DURING THIS YEAR, THE ASSESSEE HAS B ORROWED MONEY FROM THE FINANCIAL COMPANIES AND LENT THE SAME TO I TS SISTER CONCERNS. SINCE THE OBJECT OF THE COMPANY IS TO CARRY ON THE BUSINESS OF SOURCING FUNDS AND LENDING, INTEREST INCOME EARNED SHOULD BE TREATED AS PART OF BUSINESS INCOME. HE FURTHER SUBMITTED TH AT EVEN FOR THE SAKE OF ARGUMENT IF ASSESSEE CONSIDERS THE TREATMEN T OF INTEREST INCOME AS INCOME FROM BUSINESS, THE AO SHOULD HAVE ALLOWED THE RELATED EXPENDITURE OF EARNING OF SUCH INCOME, WHIC H HE MISERABLY FAILED TO CONSIDER. 6.1 LD. AR SUBMITTED THAT AO DID NOT ALLOW BUSINESS EXPENDITURE OF THE ASSESSEE, WHICH IS BONAFIDE BUSINESS EXPENDITUR E, WHICH WAS NECESSARY TO CARRY ON THE ACTIVITIES OF THE ASSESSE E. HE SUBMITTED THAT THE MAIN EXPENDITURE IS PAYMENT OF INTEREST FO R THE FUNDS RECEIVED FROM BIRLA MUTAL FUNDS, SOME FUNDS WERE LE NT TO ITS SISTER 5 ITA NO. 214/H/15 SRSR HOLDINGS PVT. LTD. CONCERNS AS THE SAME WERE ADVANCED TO ITS SISTER CO NCERNS ON COMMERCIAL EXPEDIENCY AS ALL THE SISTER CONCERNS, N AMELY, M/S AMARAVTHI, BANGAR, PAVITRAVATI & VAMADEVA ARE OF GR OUP CONCERNS AS THE SHAREHOLDERS OF THE ASSESSEE COMPANY ARE ALSO T HE SHAREHOLDERS OF OTHER RELATED CONCERNS. THE FUNDS GIVEN AS ADVAN CE TO THESE SISTER CONCERNS ARE FOR THE PURPOSE OF BUSINESS AND IT AMO UNTS TO COMMERCIAL EXPEDIENCY. HE HEAVILY RELIED ON THE DEC ISION OF HONBLE SUPREME COURT IN THE CASE OF SA BUILDERS LTD. VS. C IT, [2007] 288 ITR 1 AND HERO CYCLES LTD., 379 ITR 347 (SC), AS PE R WHICH, THE FUNDS GIVEN TO THE SISTER CONCERNS/SUBSIDIARY COMPA NIES ARE CONSIDERED TO BE ON COMMERCIAL EXPEDIENCY. THEREFOR E, THE INTEREST EXPENDITURE IN FACT PERTAINS TO THE BUSINESS EXPEN DITURE OF THE ASSESSEE AND, THEREFORE, IT IS BONAFIDE BUSINESS EX PENDITURE OF THE ASSESSEE. HE, THEREFORE, SUBMITTED THAT CIT(A) HAS TREATED THE EXPENDITURE AS BUSINESS EXPENDITURE OF THE ASSESSEE AND HE HAS ALLOWED PARTIAL EXPENDITURE, WHICH IS NOT PROPER. HE SUBMITTED THAT WHOLE EXPENDITURE SHOULD BE ALLOWED AS BUSINESS EXP ENDITURE, WHICH IS DONE ON COMMERCIAL EXPEDIENCY. LD. AR BROUGHT TO OUR NOTICE STATEMENT SHOWING THE FUNDS MOBILISATION FROM BIRLA MUTUAL FUNDS AND DIVERSION OF FUNDS TO ITS SISTER CONCERNS AND S UBSEQUENT RECOVERY FROM THE SISTER CONCERNS, WHICH IS PLACED AS PART O F PAPER BOOK AT PAGES 6 TO 8 OF PAPER BOOK I. 6.2 FOR THE OTHER EXPENSES, LIKE NCD ISSUE EXPENSES , SYNDICATION FEES AND LEGAL FEES, HE SUBMITTED THAT ALL THESE EX PENDITURES ARE INCURRED TO MOBILIZE THE FUNDS FROM FINANCIAL INSTI TUTIONS, WHICH IS PART OF THE REVENUE EXPENDITURE. HE FURTHER SUBMITTED TH AT CIT(A) HAS OPINED THAT THE INCOME AND EXPENDITURE OF THE ASSES SEE ARE RELATING TO BUSINESS FOR WHICH HE HAS GIVEN A FINDING IN PAR A 6.1 OF HIS ORDER AND FURTHER STATED THAT THE EXPENDITURE CAN BE ALLO WED AS BUSINESS EXPENDITURE. HE REMITTED THE MATTER BACK TO THE FIL E OF THE AO TO VERIFY WHETHER THE ASSESSEE HAS FOLLOWED THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, WHICH GIVES AN IMPRESSION THAT CIT(A) H AS CONSIDERED THE 6 ITA NO. 214/H/15 SRSR HOLDINGS PVT. LTD. ACTIVITIES OF THE ASSESSEE AS RELATING TO BUSINESS. HE SUBMITTED THAT ALL THE EXPENDITURES SHOULD BE ALLOWED TO SET OFF A GAINST THE INCOME OF THE ASSESSEE AND IN CASE OF SHORTFALL, IT SHOULD BE ALLOWED TO CARRY FORWARD. 7. LD. DR BESIDES RELYING ON THE ORDER OF THE AO, S UBMITTED THAT LENDING OF FUNDS TO SISTER CONCERNS CANNOT BE CONSI DERED AS COMMERCIAL EXPEDIENCY, WHICH IS THE IMPORTANT FINDI NG IN THE CASE OF SA BUILDERS (SUPRA). HE SUBMITTED THAT MERE ADVANCE TO SISTER CONCERNS CANNOT BE TREATED AS ON COMMERCIAL EXPEDIE NCY AS TERMS AND SITUATION OF THE LENDING WILL DIFFER CASE TO C ASE. HE STRONGLY SUPPORTED THE VIEWS TAKEN BY THE AO. 8. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL FACTS ON RECORD. AS PER THE ASSESSMENT ORDER, ASSESSEE HA S EARNED INTEREST INCOME, WHICH WAS TREATED BY THE AO AS IN COME FROM OTHER SOURCES. HOWEVER, AS PER THE MEMORANDUM AND ARTICL ES OF ASSOCIATION, ASSESSEE IS CARRYING ON THE BUSINESS O F INVESTMENT OF FUNDS AND EARNING INTEREST. CONSIDERING THE ABOVE O BJECTIVE CLAUSE, WE FIND THAT THE MAIN OBJECTIVE OF THE ASSESSEE AS WELL AS DURING AY UNDER CONSIDERATION, ASSESSEE HAS TAKEN LOAN FROM F INANCIAL INSTITUTIONS AND LENT THE MONEY TO ITS SISTER CONCE RNS AND ACCORDINGLY EARNED INTEREST INCOME BY PARKING THE SURPLUS FUNDS IN FIXED DEPOSIT. IT SHOWS THAT ASSESSEE HAS EARNED THE INCOME BY LEN DING THE MONEY AND WHATEVER SURPLUS AT ITS DISPOSAL WERE DEPOSITED IN THE BANKS AS FIXED DEPOSIT. THE SAME CAN BE CONSIDERED AS MADE F OR THE PURPOSE OF BUSINESS, HENCE, INTEREST INCOME CAN BE CONSIDER ED AS INCOME FROM BUSINESS. OUR VIEW IS SUPPORTED BY THE DECISIO N OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. TAMIL NADU DAIRY DEVELOPMENT CORPORATION LTD. [1995] 216 ITR 535 WHEREIN IT WAS HELD AS UNDER: THE TERM 'BUSINESS' IS A WORD OF VERY WIDE CONNOTA TION AND BY NO MEANS DETERMINATE IN ITS SCOPE AND HAS TO BE CONSID ERED WITH REFERENCE TO EACH PARTICULAR KIND OF ACTIVITY AND O CCUPATION OF THE PERSON CONCERNED. UPON THE PECULIAR FACTS OF THIS C ASE, THE 7 ITA NO. 214/H/15 SRSR HOLDINGS PVT. LTD. INTEREST ACCRUED ON SHORT-TERM DEPOSITS OF THE ASSE SSEE-COMPANY WHICH WERE MADE OUT OF THE BUSINESS FUNDS AVAILABLE WITH ASSESSEE-COMPANY BEFORE THE SAME WERE UTILISED FOR ACTUAL BUSINESS AND, AS SUCH, THE SAME IS INCIDENTAL TO TH E BUSINESS ACTIVITY OF THE ASSESSEE-COMPANY AND AS SUCH, THE I NTEREST ON THE SHORT-TERM DEPOSITS SHOULD BE TREATED AS BUSINESS I NCOME.CIT VS. CALCUTTA NATIONAL BANK LTD. (1959) 37 ITR 171 ( SC) FOLLOWED . 8.1 COMING TO THE ISSUE OF INTEREST EXPENDITURE, AC CORDING TO THE ASSESSEE, THE FUNDS WERE ADVANCED TO ITS SISTER CON CERNS, WHICH AMOUNTS TO COMMERCIAL EXPEDIENCY AS THE SAME WAS LE NT TO ITS CLOSE ASSOCIATE ENTITIES, FOR WHICH THE ASSESSEE HEAVILY RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F SA BUILDERS (SUPRA). ON CAREFUL READING OF THIS DECISION, WE FI ND IT APPROPRIATE TO PRODUCE SOME OF THE OBSERVATIONS OF THE APEX COURT AS UNDER: 32. WE WISH TO MAKE IT CLEAR THAT IT IS NOT OUR OPINION THAT IN EVERY CASE INTEREST ON BORROWED LOAN HAS TO BE ALLO WED IF THE ASSESSEE ADVANCES IT TO A SISTER-CONCERN. IT ALL DE PENDS ON THE FACTS AND CIRCUMSTANCES OF THE RESPECTIVE CASE. FOR INSTANCE, IF THE DIRECTORS OF THE SISTER-CONCERN UTILIZE THE AMOUNT ADVANCED TO IT BY THE ASSESSEE FOR THEIR PERSONAL BENEFIT, OBVIOUS LY IT CANNOT BE SAID THAT SUCH MONEY WAS ADVANCED AS A MEASURE OF C OMMERCIAL EXPEDIENCY. HOWEVER, MONEY CAN BE SAID TO BE ADVANC ED TO A SISTER-CONCERN FOR COMMERCIAL EXPEDIENCY IN MANY OT HER CIRCUMSTANCES (WHICH NEED NOT BE ENUMERATED HERE). HOWEVER, WHERE IT IS OBVIOUS THAT A HOLDING COMPANY HAS A DE EP INTEREST IN ITS SUBSIDIARY, AND HENCE IF THE HOLDING COMPANY AD VANCES 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 INT EREST ON ITS BORROWED LOANS. 8.2 AS PER THE ABOVE DECISION, ASSESSEE CAN ADVANCE INTEREST FREE LOANS TO ITS SISTER CONCERNS, WHICH CAN BE TREATED AS COMMERCIAL EXPEDIENCY WHEREIN THE LENDING COMPANY SHOULD HAVE DEEP INTEREST IN THE SISTER CONCERNS/SUBSIDIARY, THE SAME USED BY SUCH SUBSIDIARY FOR SOME BUSINESS PURPOSES, THEN, THE ASSESSEE WOUL D ORDINARILY BE ENTITLED TO DEDUCTION OF INTEREST ON ITS BORROWED L OANS TOO. HOWEVER, IN THE GIVEN CASE, LD. AR SUBMITTED THAT ASSESSEE H AS GIVEN LOAN TO ITS SISTER CONCERNS. THEY ARE RELATED TO ASSESSEE B EING COMMON SHAREHOLDERS BUT ASSESSEE DOES NOT HAVE A DIRECT IN TEREST ON SUCH SUBSIDIARY COMPANY EXCEPT BY HAVING COMMON SHAREHO LDERS IN SUCH 8 ITA NO. 214/H/15 SRSR HOLDINGS PVT. LTD. OTHER CONCERNS. IN OUR CONSIDERED VIEW, SUCH SISTER CONCERNS HAVING COMMON SHAREHOLDERS CANNOT BE TREATED AS HAVING DEE P INTEREST FOR THE SIMPLE REASON THAT HOLDING COMPANY ADVANCES MON EY OR MAKING INVESTMENT IN SUCH SUBSIDIARY COMPANIES, WHICH HAS DIRECT HOLD ON THE PERFORMANCE OF SUCH SUBSIDIARY COMPANIES OR WEL L BEING OF THE SUBSIDIARY COMPANIES. EARNING OF SUCH SUBSIDIARY CO MPANY WILL HAVE DIRECT IMPACT ON THE HOLDING COMPANYS INTEREST AS WELL AS HOLDING COMPANY CAN PLOUGH-BACK THE PROFIT OF SUCH COMPANY BY WAY OF DIVIDEND. WHEREAS IN THE CASE OF RELATED CONCERN, WHICH IS RELATED MERELY BECAUSE IT HAS COMMON SHAREHOLDERS, THE ASSE SSEE COMPANY CAN NEVER BE ABLE TO CLAIM NOR PLOUGH-BACK THE PROF ITS OF SUCH RELATED CONCERN, THEREFORE, IT CANNOT BE CONSIDERED AS HAVI NG A DEEP INTEREST IN SUCH RELATED CONCERN. THEREFORE, WE CANNOT HOLD THAT ASSESSEE HAS INCURRED INTEREST EXPENDITURE ON COMMERCIAL EXPEDIE NCY. IN OUR VIEW, INTEREST EXPENDITURE CANNOT BE TREATED AS BUSINESS EXPENDITURE AND, THEREFORE, ASSESSEE CANNOT CLAIM THE INTEREST EXPEN DITURE AS BUSINESS EXPENDITURE AND CANNOT BE ALLOWED TO CARRY FORWARD. 8.3 COMING TO OTHER EXPENDITURE LIKE NCD, LEGAL FEE S, THE DISALLOWANCES OF WHICH WERE PARTLY CONFIRMED BY CIT (A), WE FIND THAT ALL THESE EXPENSES WERE INCURRED BY THE ASSESSEE TO MOBILIZE THE FUNDS FOR THE PURPOSE OF TAKING LOANS FROM FINANCIA L INSTITUTIONS. THIS EXPENDITURE CAN BE TREATED AS REVENUE EXPENDITURE O F THE BUSINESS WHEN THE ASSESSEE PROVES THAT THE WHOLE SOURCING OF FUNDS WAS DONE ONLY FOR THE PURPOSE OF ITS OWN BUSINESS AND NOT FO R THE LOANS TAKEN FOR OTHER RELATED BUSINESS CONCERNS IN WHICH IT HAS NO INTEREST OR HOLD. IN THE GIVEN CASE, ALL THE FUNDS WERE SOURCED MAINL Y WITH THE OBJECT OF FINANCING SISTER CONCERNS FOR THEIR OWN BENEFIT. SI NCE THE ASSESSEE HAS NOT BROUGHT ON RECORD ANY TRANSACTION, WHICH IT HAS DONE FOR ITS OWN PURPOSE, IN OUR VIEW, EVEN THIS EXPENDITURE CAN NOT BE CLAIMED AS BUSINESS EXPENDITURE OF THE ASSESSEE. IN VIEW OF TH E ABOVE 9 ITA NO. 214/H/15 SRSR HOLDINGS PVT. LTD. OBSERVATIONS, WE UPHOLD THE ORDER OF THE CIT(A) ON THIS ISSUE AND DISMISS THE GROUNDS RAISED BY THE ASSESSEE. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 31 ST JULY, 2017. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RA HMAN) JUDICIAL MEMBER AC COUNTANT MEMBER HYDERABAD, DATED: 31 ST JULY, 2017. KV COPY TO:- 1) SRSR HOLDINGS PVT. LTD., PLOT NO. 80, ROAD NO. 9 , JUBILEE HILLS, HYDERABAD. 2) DCIT, CENTRAL CIRCLE 9, CHURCH BUILDING, TILAK ROAD, HYDERABAD. 3) CIT(A) - 12, HYDERABAD 4 CIT(CENTRAL), HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE