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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI ABRAHAM P. GEORGE
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) -8, Chennai, dated 25.10.2017 and pertains to assessment year 2014-15.
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 borrowed funds.
Referring to the assessment order, the Ld. representative submitted that the Assessing Officer found that Section 115BBD of the Income-tax Act, 1961 (in short 'the Act') is not applicable 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 assessee.
According to the Ld. representative, admittedly, the assessee is an investment company and the borrowed funds were invested in the subsidiary company outside the country on Mauritius. It is also an admitted fact that no dividend was distributed or received, therefore, according to the Ld. representative, the expenditure has to be allowed while computing the taxable income.
On the contrary, Shri R. Clement Ramesh Kumar, the Ld. Departmental Representative, submitted that since no income was earned by the assessee on the investment, the interest paid by the assessee on the borrowed funds cannot be allowed.
We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, the assessee is an investment company. The assessee borrowed funds to invest in a subsidiary company outside the country at Mauritius. It is also not in dispute that the assessee’s 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 assessee, 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 earned income or not, so long as the expenditure is for business purpose, it is to be allowed.
It is not the case of the Revenue that the interest payment is not for business. The Assessing Officer has disallowed the interest payment only on the ground that no dividend income was received from subsidiary company at Mauritius. This Tribunal is of the considered opinion that irrespective of the fact whether the assessee received dividend income from the subsidiary 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, orders of both the authorities below are set aside and the Assessing Officer is directed to allow the interest payment on the borrowed funds.
In the result, the appeal filed by the assessee is allowed.