Case Law Details
Four Seasons Wines Ltd. Vs DCIT (ITAT Bangalore)
Disallowance of interest expenses justified for Borrowed money invested in equity without any commercial expediency
The first common issue urged in both the years relate to disallowance of interest expenditure u/s 36(1)(3) of the Income-tax Act,1961 [‘the Act’ for short]. The facts relating to the same are stated in brief. The A.O. noticed that the assessee has borrowed funds from banks and other entities and paid interest thereon. He further noticed that the assessee has made investments in other companies namely Wines Society of India Pvt. Limited (WSIPL) and other companies without collecting interest from them. Hence the A.O. disallowed proportionate interest expenditure of Rs.24 lakhs in assessment year 2011-12 and Rs.41.04 lakhs in assessment year 2012-13. In the appellate proceedings, the Ld. CIT(A) noticed that the assessee has given two separate loan/investment in M/s. WSIPL and the assessee has collected interest from the one of the loans. Accordingly he deleted interest disallowance relating to the loan on which interest was received. The Ld. CIT(A) noticed that the assessee could not establish commercial expediency in making the investment in WSIPL. Accordingly, he confirmed interest disallowance in respect of remaining amount of loans in both the years under consideration.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
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