CIT Vs Shriram Investments (Madras High Court)
The Revenue filed a tax case appeal before the Madras High Court challenging the order dated 12.01.2022 of the Income Tax Appellate Tribunal (‘B’ Bench, Chennai) in ITA No. 2232/Chny/2019 relating to assessment year 2015-16. The substantial questions of law raised concerned whether the Tribunal was correct in deleting the disallowance under Section 36(1)(iii) of the Income Tax Act where the assessee had advanced interest-bearing funds without charging interest to associated concerns, and whether the Tribunal erred in not applying the matching principle of income and expenditure under Sections 36 and 37 when the assessee followed the cash system of accounting.
Read SC Judgment: SC allows Interest Deduction on Borrowed Capital; Cash Accounting Excludes Matching Principle
The assessee, engaged in the business of finance and investment, filed its return of income for AY 2015-16 on 29.09.2015 declaring a loss of ₹16,64,50,745/-. Subsequently, the case was reopened under Section 147 through notice under Section 148 dated 01.05.2017. The assessment was completed under Section 143(3) read with Section 147 on 28.12.2018, assessing total income at ₹6,62,63,586/- and making additions including ₹23,26,10,491/- under Section 36(1)(iii) and ₹1,03,840/- under Section 14A. The assessee appealed to the Commissioner of Income Tax (Appeals)-2, who by order dated 30.05.2019, partly allowed the appeal by deleting the Section 36(1)(iii) addition but confirming the Section 14A disallowance. Aggrieved, the Revenue appealed to the ITAT, which dismissed the appeal on 12.01.2022.
