Aban Offshore Limited Vs DCIT (ITAT Chennai)
ITAT Chennai held that disallowance of interest u/s 36(1)(iii) of the Income Tax Act on loans and advances given to subsidiary company unjustified as investment in subsidiary is purely for commercial expediency.
Facts- The assessee is a Public Ltd Company, engaged in the business of offshore drilling and production services to companies engaged in exploration, development of oil and gas, both in domestic and international markets.
The case of the assessee was reopened u/s. 147 of the Act and the assessment has been completed u/s. 143(3) r.w.s. 147 of the Act on 26.12.2018, and determined total income in the re- assessment was at Rs. 455,28,83,672/-, after disallowing Rs. 8,61,33,985/- u/s. 40(a)(ia) of the Act towards payment made outside India without TDS to M/s. Haledon International Corporation and Rs. 50,02,70,902/- u/s. 37(1) of the Act, on account of disallowance of foreign exchange loss.
CIT(A) partly allowed appeal filed by the assessee. Aggrieved by the CIT(A) order, the assessee has preferred the present appeal.
Conclusion- Held that the AO disallowed forex loss mainly on the ground that said loss is on account of fluctuation in foreign currency loan/liabilities borrowed for the purpose of acquisition of capital assets. Similar issue has been considered by the coordinate bench of ITAT in the assessee’s own case, where the Tribunal under an identical set of facts, the issue has been set aside to the file of the AO for further verification. Therefore, consistent with the view taken by the coordinate bench, the bench set aside the order passed by the CIT(A) and restore the issue back to the file of the AO, and direct AO to reexamine the claim of the assessee and decide the issue in light of our reasons given in assessee’s own case.
Held that the assessee, as a businessman, has taken a prudent decision to make investments in subsidiary company to derive commercial advantage and thus, we are of the considered view that the AO as well as the DRP are erred in disallowing interest expenses u/s.36(1)(iii) of the Act, on loans and advances given to subsidiary company and also investment in equity share capital of subsidiary company.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This bunch of five appeals filed by the assessee and one appeal filed by the revenue are directed against separate but identical orders passed by the learned Commissioner of Income Tax (Appeals)-1, Chennai/NFAC, Delhi, dated 18.09.2020, 30.09.2019 & 22.03.2019 & 29.09.2021 for assessment years 2011-12 & 2013-14 . The assessee had also filed appeals against final assessment order passed by the Assessing Officer dated 28.02.2022 & 18.07.2022, in pursuant to directions of the learned DRP-2, Bengaluru, issued u/s. 144C(5) for assessment year 2017-18 & 2018-19. Since, facts are identical and issues are common for the sake of convenience, the appeals filed by the assessee and revenue are heard together and are being disposed off, by this consolidated order.
ITA No: 798/Chny/2020 for AY 2011-12:
2. The assessee has raised the following grounds of appeal:
