KS Holdings Private Ltd, Chennai V. ITO, Corporate Ward 4(3), Chennai

ITA 65/CHNY/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9745 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 04-01-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R CLEMENT RAMESH KUMAR
• Assessee Lawyers: AJITH KUMAR CHORADIA
• Keywords: Business expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . . . , ! .#$#%, ' !( BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ./ ITA NO.65/CHNY/2018 % *% / ASSESSMENT YEAR : 2014-15 M/S KS HOLDINGS PRIVATE LIMITED, ARIHANT PLAZA, 3 RD FLOOR, NEW NO.193/232, WALL TAX ROAD, CHENNAI - 600 003. PAN : AAFCK 1594 D V. THE INCOME TAX OFFICER, CORPORATE WARD 4(3), CHENNAI - 600 006. (,-/ APPELLANT) (./,-/ RESPONDENT) ,- 0 1 / APPELLANT BY : SH. AJITH KUMAR CHORADIA, CA ./,- 0 1 / RESPONDENT BY : SHRI R. CLEMENT RAMESH KUMAR, ADDL.CIT 2 0 3' / DATE OF HEARING : 10.12.2018 45* 0 3' / DATE OF PRONOUNCEMENT : 12.12.2018 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -8, CHENNA I, DATED 25.10.2017 AND PERTAINS TO ASSESSMENT YEAR 2014-15. 2 I.T.A. NO.65/CHNY/18 2. SH. AJITH KUMAR CHORADIA, THE LD. REPRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISALLOWANCE OF INTEREST PAID BY THE ASSESSEE ON BO RROWED FUNDS. REFERRING TO THE ASSESSMENT ORDER, THE LD. REPRESEN TATIVE SUBMITTED THAT THE ASSESSING OFFICER FOUND THAT SECTION 115BB D OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') IS NOT AP PLICABLE TO THE FACTS OF THE CASE. HOWEVER, SHE DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THERE WAS NO INCOME EARNED BY THE A SSESSEE. ACCORDING TO THE LD. REPRESENTATIVE, ADMITTEDLY, TH E ASSESSEE IS AN INVESTMENT COMPANY AND THE BORROWED FUNDS WERE INVE STED IN THE SUBSIDIARY COMPANY OUTSIDE THE COUNTRY ON MAURITIUS . IT IS ALSO AN ADMITTED FACT THAT NO DIVIDEND WAS DISTRIBUTED OR R ECEIVED, THEREFORE, ACCORDING TO THE LD. REPRESENTATIVE, THE EXPENDITUR E HAS TO BE ALLOWED WHILE COMPUTING THE TAXABLE INCOME. 3. ON THE CONTRARY, SHRI R. CLEMENT RAMESH KUMAR, T HE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT SINCE N O INCOME WAS EARNED BY THE ASSESSEE ON THE INVESTMENT, THE INTER EST PAID BY THE ASSESSEE ON THE BORROWED FUNDS CANNOT BE ALLOWED. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE 3 I.T.A. NO.65/CHNY/18 ASSESSEE IS AN INVESTMENT COMPANY. THE ASSESSEE BO RROWED FUNDS TO INVEST IN A SUBSIDIARY COMPANY OUTSIDE THE COUNTRY AT MAURITIUS. IT IS ALSO NOT IN DISPUTE THAT THE ASSE SSEES SUBSIDIARY COMPANY AT MAURITIUS HAS NOT DECLARED ANY DIVIDEND OR DISTRIBUTED ANY DIVIDEND. IN THOSE FACTUAL CIRCUMSTANCES, THE ASSESSING OFFICER FOUND THAT SINCE NO INCOME WAS EARNED BY THE ASSESS EE, THE INTEREST PAYMENT CANNOT BE ALLOWED. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT WHEN THE ASSESSEE INCURRED EXPENDITURE, IRRESPECTIVE OF THE FACT WHETHER THE ASSESSEE EARNE D INCOME OR NOT, SO LONG AS THE EXPENDITURE IS FOR BUSINESS PURPOSE, IT IS TO BE ALLOWED. 5. IT IS NOT THE CASE OF THE REVENUE THAT THE INTER EST PAYMENT IS NOT FOR BUSINESS. THE ASSESSING OFFICER HAS DISALL OWED THE INTEREST PAYMENT ONLY ON THE GROUND THAT NO DIVIDEND INCOME WAS RECEIVED FROM SUBSIDIARY COMPANY AT MAURITIUS. THIS TRIBUNA L IS OF THE CONSIDERED OPINION THAT IRRESPECTIVE OF THE FACT WH ETHER THE ASSESSEE RECEIVED DIVIDEND INCOME FROM THE SUBSIDIA RY COMPANY AT MAURITIUS OR NOT, THE PAYMENT OF INTEREST HAS TO BE ALLOWED AS BUSINESS EXPENDITURE. THEREFORE, WE ARE UNABLE TO UPHOLD THE ORDERS OF THE AUTHORITIES BELOW. ACCORDINGLY, ORDE RS OF BOTH THE 4 I.T.A. NO.65/CHNY/18 AUTHORITIES BELOW ARE SET ASIDE AND THE ASSESSING O FFICER IS DIRECTED TO ALLOW THE INTEREST PAYMENT ON THE BORROWED FUNDS . 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 12 TH DECEMBER, 2018 AT CHENNAI. SD/- SD/- ( !.#$#% ) ( . . . ) (ABRAHAM P. GEORGE) (N.R.S. GANESAN) ' / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 7 /DATED, THE 12 TH DECEMBER, 2018. KRI. 0 .389 :9*3 /COPY TO: 1. ,- /APPELLANT 2. ./,- /RESPONDENT 3. 2 ;3 () /CIT(A)-8, CHENNAI 4. PRINCIPAL CIT, CHENNAI-4, CHENNAI 5. 9< .3 /DR 6. =% > /GF.