DCIT Vs Tally Solutions Pvt. Ltd. (ITAT Bangalore)
Claim of depreciation on the home-theatre used for the business purpose is allowable in law – In absence of nexus between the borrowed funds and outstanding amount of the sister-concern, addition is not sustainable.
Facts-
AO observed that the assessee has diverted funds of INR 9,72,38,877 towards sister-concern without charging interest. AO made addition of INR 1,40,99,637 as interest @14.5%.
Further, AO observed that assessee had purchased home-theatre for an amount of INR 2,01,90,028 which was not for the business purpose and accordingly disallowed the same.
Conclusion-
The interest expenditure incurred by the assessee is on loans taken for specific purposes and the same cannot be diverted. In other words, there is no nexus between the borrowed funds and the amounts outstanding in the case of the sister-concern, namely, M/s.Tally India (P) Ltd. In such factual situation, there cannot be any addition for the reason that funds have been diverted to the sister-concern interest free.
The Assessing Officer has wrongly assumed that the asset is not used for the purpose of business. It has specific purpose for the nature of business the appellant is engaged in.
As the addition to asset is genuine and its having been used for the purpose of business activity is also not doubtful the appellant is eligible for depreciation as claimed.
