DCIT Vs East India Petroleum Limited. (ITAT Hyderabad)
ITAT Hyderabad held that interest on loan taken to acquire shares of any company for taking controlling interest is eligible as deduction under section 36(1)(iii) of the Income Tax Act. Accordingly, appeal of revenue dismissed.
Facts- The assessee, engaged in the business of providing terminal ling services to oil marketing companies for storage of bulk liquid products including fuels like high speed diesel, motor spirit, petroleum products like gas condensate and naphtha and petrochemicals as well as liquefied gas fuels like butane, propane and liquefied petroleum gas (LPG) at Visakhapatnam Port, Andhra Pradesh, filed its return of income on 30.10.2018 for the A.Y.2018-19, declaring total income of Rs.31,38,15,690/-.
The company, by name, M/s Rushikonda Petroleum Projects Private Limited (“M/s RPPPL”), having similar objects had been amalgamated with the assessee company w.e.f.01.04.2017. Subsequently, to give effect to the amalgamation of M/s RPPPL and the assessee company, a revised return has been filed on 30.03.2019, declaring total income of Rs. Nil and refund tax claim of Rs.9,23,40,520/-.
The case was selected for scrutiny. During the course of assessment proceedings, AO noticed that the amalgamation has led to creation of artificial intangible asset in the form of goodwill of Rs.88,21,86,061/-, on which depreciation @25% amounting to Rs.22,05,65,250/- has been claimed. AO, further observed that since the assessee company did not put to use, the asset in the business, it is not eligible for depreciation. AO noted that the assessee has debited interest of Rs.18,68,28,250/-.
