sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Latest Expert Exchange
« From the Courts »
  Suresh M. Jamkhindikar vs. ACIT (Bombay High Court)
 Mangammal @ Thulasi vs. T.B. Raju (Supreme Court)
 Mahabir Industries vs. PCIT (Supreme Court)
  Oriental Bank Of Commerce Vs. Additional Commissioner Of Income Tax
  Suresh M. Jamkhindikar vs. ACIT (Bombay High Court)
  Union of India vs. Pirthwi Singh (Supreme Court)
 Cromption Greaves Limited vs. CIT (ITAT Mumbai)
 Director Of Income Tax Vs. M/s. Modiluft Ltd.
 Director Of Income Tax Vs. M/s. Royal Airways Ltd.
 Lally Motors India (P.) Ltd vs. PCIT (ITAT Amritsar)
  Mehsana District Co-operative vs. DCIT (Gujarat High Court)

Interest expenditure on acquisition not tax-exempt - ITAT
November, 27th 2009

Interest paid on funds borrowed for acquiring controlling stake in a company will not be exempt from tax. The Income Tax Appellate Tribunal (ITAT) has ruled that such expenditure for investing in shares of a company cannot be exempted, since it has not been incurred wholly and exclusively for the purpose of earning dividend income.

The ruling was given in the case of Panatone Finvest Ltd, a special purpose company formed by Tata Group for acquiring 45 per cent stake in VSNL under the governments disinvestment programme.

By this acquisition, the Tata Group got management control over VSNL, which was earlier owned by the government.

For financing the acquisition, Panatone Finvest used its share capital and borrowed funds raised through unsecured loan and private placement of bonds and debentures. It claimed deduction on interest paid on the borrowed funds under dividend income head.

Section 57 of the Income Tax Act provides for deduction of revenue expenditure, laid out or expanded wholly and exclusively, for the purpose of earning income assessable under income from other sources.

ITAT said Panatone Finvest acquired a controlling stake in VSNL only to serve its holding companys interest by acting as an SPV, and not with the objective to earn income, directly or indirectly.

Panatone Finvest, on its part, had argued that funds were borrowed for strategic investment in VSNL and not with the intention of trading in such shares. The government had barred Panatone Finvest from selling its shares in VSNL for three years. The company, thus, said this investment qualified as capital investment to earn dividend income.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Publishing Management System PMS News Management System Publishing Management System Development Online News Management System for media company custom Publishing management system development Survey management system Market Res

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions