Dy. CIT v. Vistas Wind Technology India P. Ltd.

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The Tax Publishers2013 TaxPub(DT) 0252 (Chen-Trib) : (2012) 020 ITR (Trib) 0243 INCOME TAX ACT, 1961 --Business expenditureAllowability Absence of invoices--During the course of assessment, assessing officer received a reference from the assessing officer of 'P' who had entered into certain transactions with assessee and had shown certain sum as advance received from the assessee. The said amount was claimed by assessee as revenue expenses. According to assessing officer, since 'P' had treated the entire amount as advance in his hands but assessee had produced invoices only or the part of the claim, therefore, the entire amount could not be allowed as revenue expenditure. Assessee contended that since it had received invoices from 'P' for the services rendered by him and expenses were properly entered in the books of account therefore, the entire amount should be allowed as revenue expenditure. *Held:* Except the fact that out of the claim invoices were produced before the assessing officer only for amount nothing was coming out from the record as to what was the service rendered by P and why such an amount was treated by him as 1 advance in his books, therefore, matter requires the claim with regard evidence produced by the assessee in support of the claim. Accordingly, matter was remanded to assessing officer. [Para 15] Income Tax Act, 1961 Section 37(1) INCOME TAX ACT, 1961 --Business deduction under section 36(1)(iii)--Interest on borrowed capital Interest free advances and loans given to subsidiary company--Assessee was engaged in business of erection, commission and selling of windmills. It claimed interest on fixed and other loans. Assessing officer found that assessee had given loans and advances to is subsidiary companies. He, therefore, made proportionate disallowance out of total claim of interest. Assessee contended that the loans and advances were made from its own funds and not from borrowed funds. It, further, contended that subsidiary companies, where the assessee had invested were incorporated in Karnataka to facilitate its business interest. Therefore, it prayed for deletion of disallowance made y assessing officer. *Held:* No doubt, subsidiary companies were all in Karnataka and had acquired lands for the purpose of erection of wind farms and the assessee's business was to erect, commission and sell windmills. Thus, No doubt, subsidiary companies were all in Karnataka and had acquired lands for the purpose of erection of wind farms and the assessee's business was to erect, commission and sell windmills. The role performed by subsidiary companies might have been different from that of the assessee-company but this effectuated the business interests of the assessee. Thus, assessee in is subsidiaries stood well demonstrated. There was also no dispute that the taxable income of the assessee for the assessment years 2001-02 to 2006-07 totallad to more than Rs. 317 crores. The assessee thus had more than sufficient own funds with it for giving advance of Rs. 21,78,46,000 to its enter concern. Thus, in view of above, disallowance of proportionate interest made by assessing officer could not sustain. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 0252 (Chen-Trib) : (2012) 020 ITR (Trib) 0243

INCOME TAX ACT, 1961

--Business expenditureAllowability Absence of invoices--During the course of assessment, assessing officer received a reference from the assessing officer of 'P' who had entered into certain transactions with assessee and had shown certain sum as advance received from the assessee. The said amount was claimed by assessee as revenue expenses. According to assessing officer, since 'P' had treated the entire amount as advance in his hands but assessee had produced invoices only or the part of the claim, therefore, the entire amount could not be allowed as revenue expenditure. Assessee contended that since it had received invoices from 'P' for the services rendered by him and expenses were properly entered in the books of account therefore, the entire amount should be allowed as revenue expenditure. Held: Except the fact that out of the claim invoices were produced before the assessing officer only for amount nothing was coming out from the record as to what was the service rendered by P and why such an amount was treated by him as 1 advance in his books, therefore, matter requires the claim with regard evidence produced by the assessee in support of the claim. Accordingly, matter was remanded to assessing officer. [Para 15]

Income Tax Act, 1961 Section 37(1)

INCOME TAX ACT, 1961

--Business deduction under section 36(1)(iii)--Interest on borrowed capital Interest free advances and loans given to subsidiary company--Assessee was engaged in business of erection, commission and selling of windmills. It claimed interest on fixed and other loans. Assessing officer found that assessee had given loans and advances to is subsidiary companies. He, therefore, made proportionate disallowance out of total claim of interest. Assessee contended that the loans and advances were made from its own funds and not from borrowed funds. It, further, contended that subsidiary companies, where the assessee had invested were incorporated in Karnataka to facilitate its business interest. Therefore, it prayed for deletion of disallowance made y assessing officer. Held: No doubt, subsidiary companies were all in Karnataka and had acquired lands for the purpose of erection of wind farms and the assessee's business was to erect, commission and sell windmills. Thus, No doubt, subsidiary companies were all in Karnataka and had acquired lands for the purpose of erection of wind farms and the assessee's business was to erect, commission and sell windmills. The role performed by subsidiary companies might have been different from that of the assessee-company but this effectuated the business interests of the assessee. Thus, assessee in is subsidiaries stood well demonstrated. There was also no dispute that the taxable income of the assessee for the assessment years 2001-02 to 2006-07 totallad to more than Rs. 317 crores. The assessee thus had more than sufficient own funds with it for giving advance of Rs. 21,78,46,000 to its enter concern. Thus, in view of above, disallowance of proportionate interest made by assessing officer could not sustain.