IN HIGH COURT OF JUDICATURE AT BOMBAY O.O.C.J. INCOME TAX APPEAL NO.491 OF 2017 Pr. Commissioner of Income Tax-9 Appellant Vs M/s.E-City Investments & Holdings Company Respondent Private Limited Mr.Tejveer Singh for Appellant Mr.Ravi Sawana I/b PPS Legal for Respondent CORAM: AKIL KURESHI & S.J. KATHAWALLA, JJ. DATED: JULY 22, 2019 P.C.: 1. This Income Tax Appeal is filed by Revenue challenging order of Income Tax Appellate Tribunal. following question is presented for our consideration: i) Whether on facts and circumstances of case and in law, ITAT erred in not upholding decision of learned CIT (A) in allowing assessee s claim for deduction of interest on borrowed fund when same is utilised to give interest free loan/share application money to subsidiary companies? Page 1 of 3 ITXA.491.2017_27.doc 2. We notice that similar issue had come up for our consideration before this Court in case of very same assessee in Income Tax Appeal No.213 of 2017 and appeal was dismissed making following observations: 2. Respondent-assessee is private limited company and is engaged in business of financing. During scrutiny assessment of assessee s return for assessment year 2008-09. Assessing Officer noticed that assessee had claimed expenditure of interest paid on borrowed funds. assessee had also funded its sister concern without charging interest. Assessing Officer therefore disallowed interest expenditure. issue eventually reached Tribunal. Tribunal by impugned judgment held in favour of assessee. Tribunal referred to and relied upon decision of Supreme Court in case of S.A. Builders Ltd. Vs.CIT1 and concluded as under: - If aforesaid ratio laid down by Hon ble Apex Court is analyzed by keeping same in juxtaposition with facts of present appeal, firstly, we find that there is no finding by Assessing Officer that funds were not utilized for business purposes and secondly, we note that advancing loan to sister-concern was for purposes of Commercial Expediency , thus, we find merit in contention of ld. Counsel for assessee. So far as, issue of commercial expediency is concerned, decision has to be taken by assessee and Assessing Officer is not expected to sit in chair of assessee and to decide business interest. assessee is to watch its business interest well. Once it is established that there was nexus between expenditure and purpose of busienss (which need not necessarily be business of assess3ee itself) Revenue cannot 1 288 ITR 1 (SC) Page 2 of 3 :ITXA.491.2017_27.doc justifiably claim to put itself in arm-chair of businessman or in position of board of directors and assume role to decide how much is reasonable expenditure having regard to circumstances of case. No businessman can be compelled to maximize his profits. 3. We do not find any error in view of Tribunal. entire issue is quarely covered in favour of assessee in case of S.A. Builders Ltd. (supra). Tribunal correctly held that assessee s decision to fund its subsidiaries driven by business exigency. 4. In result, no question of law arises. Income Tax Appeal is dismissed. 3. In result, this Appeal is also dismissed. (S.J. KATHAWALLA, J.) (AKIL KURESHI, J.) Page 3 of 3 Pr. Commissioner of Income-tax-9 v. E-City Investments & Holdings Company Private Limited