Case Law Details
Spaarkon Trading Chennai Pvt. Ltd. Vs ACIT (ITAT Chennai)
Upon perusal of loan sanction letter dated 12-05-2010 issued by Standard Chartered Bank, it could be seen that the assessee has been sanctioned term loan of Rs. 32 Crores for the purpose of part financing the purchase of equipments to be leased by the assessee under a Lease Agreement on a BOO/BOOT basis to M/s Everonn Education Limited (EEL). These Equipments would be used by EEL to execute the contract that it has received from Director General of School Education, Haryana State Government. The tenor of the loan is 5 years and Equipments would include assets in the nature of Computers, UPS etc. aggregating to Rs.23.50 Crores and assets in the nature of furniture & fixtures, electrical fittings, generator etc. aggregating to Rs.16.50 Crores. All these Equipments will be charged to the Lender.
Pursuant to the same, the assessee has entered into master rental agreement (MRA) with EEL on 14-05-2010. As per the recitals of the agreement, the assessee has been granted certain credit facilities for the purpose of financing part of the goods under the agreement. The assessee agrees to let the Equipments to EEL and it would receive rentals in 19 installments over a period of 5 years. On the basis of all these documents, it could be concluded that the assessee had business connection with EEL whereby EEL would lease the computer hardware owned by the Assessee for the project that EEL would receive from Haryana State Government. For the same, the assessee obtained a loan from Standard Chartered Bank to fund the purchase of equipment. Accordingly, the capital advances have been made by the assessee in furtherance of its business purposes. The lease income thus earned by the assessee would be offered as business income and interest so paid would be claimed as business expenditure. In fact, the lease income has been offered to tax as ‘Business income’. The financial statements as placed on record support the case of the assessee. Another fact to be noted is that the loan was obtained in financial year 2010-11 and there is nothing on record which would suggest that any such disallowance was made in earlier years. Accordingly, rule of consistency also favor the case of the assessee. Therefore, considering the facts and circumstances of the case, the impugned addition stand deleted. The loans thus obtained by the assessee could be said to be utilized for its business purposes and therefore, interest so paid would constitute business expenditure and accordingly, an allowable deduction.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
1. Aforesaid appeal by assessee for Assessment Year (AY) 2013-14 arises out of the order of learned Commissioner of Income Tax (Appeals)-15, Chennai [CIT(A)] dated 28-03-2018 in the matter of assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Act on 30-03-2016. The grounds taken by the assessee read as under:
Please become a Premium member. If you are already a Premium member, login here to access the full content.
