The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT), held that Interest expenses under Section 36(1)(iii) of the Income Tax Act, 1961 not allowable for utilization of funds for investment in shares of subsidiary company. The assessee in the present appeal is M/s BIP Developers Pvt Ltd.
The present appeal has been preferred by the Revenue against the order of the Commissioner of Income Tax (Appeals) (CIT(A)) passed under Section 250 of the Income Tax Act. The Counsel for the assessee, stated that the sole issue involved in this appeal is relating to the disallowance of interest expenses u/s 36(1)(iii) of the Income Tax Act in respect of the utilization of the funds for investment in shares of the subsidiary company.
The Counsel has further submitted that the issue is covered by the decision of the Coordinate Kolkata Bench of the Tribunal in the assessee’s own case for immediately preceding year i.e. assessment year 2013-14.
In the above-mentioned case, it was held that “when the relevant borrowed funds were utilised by the assessee company for making investment in its subsidy engaged in the same business, the business purpose of the investment as well as its commercial expediency was duly established and the interest paid by the assessee on the borrowed funds was allowable as deduction under Section 36(1)(iii) of the Income Tax Act.”
The Departmental Representative could not rebut that the facts and issue involved are identical and the same are covered by the aforesaid decision of the Tribunal.
A Bench consisting of Sanjay Garg, Judicial Member and Girish Agrawal, Accountant Member observed that “In view of the above discussion, the facts being identical in the earlier assessment year and the issue being covered by the aforesaid decision of the Coordinate Kolkata Bench of the Tribunal, we do not find any reason to interfere with the order of the CIT(A).”
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