[2019] 111 taxmann.com 269 (Bombay)

Principal Commissioner of Income Tax, Mumbai  v. Concentrix Services (I) (P.) Ltd.

M. S. SANKLECHA AND NITIN JAMDAR, JJ.

IT APPEAL NOS. 778 AND 867 OF 2017, SEPTEMBER  4, 2019

It is undisputed that the business of the assessee is of running of BPO and Call Centres. Nor is it disputed that Canadian company is also in the business of Information Technology Enabled Services, i.e., BPO and Call Centre. It was the business decision of the assessee to enhance/expand its activities and presence in the world market and for that purpose it had acquired controlling interest in the business of ‘MC’ which was in the same line of business as the assessee. To make the above investment for the purpose of its business, the loan was taken. Therefore, the interest expenditure incurred on loans taken for investment in acquiring controlling interest in a company which was in the same line of business as that of the assessee would be allowable expenditure under section 36(1)(iii). Where an assessee claims deduction of interest paid on capital borrowed, all that an assessee has to show is that the borrowed funds were used for business purpose and if so then interest will have to be allowed as a deduction. The submission on behalf of the revenue that the assessee is in the business of BPO and Call Centre activities and not in the business of investment means that the prime business of the assessee is of running BPO and Call Centres and as recorded by the Tribunal the entire funds were borrowed so as to expand the business activities of BPO and Call Centres in Canada by acquiring a Canadian company. Thus, the loan was taken for the purpose of business. This is a finding of fact which has not been shown to be perverse. The expansion of one’s activities in Canada would require acquisition of a company by purchasing shares therein so as to expand the assessee’s business. The object of the expenditure clearly is for the purpose of the business and, therefore, the interest incurred on the funds borrowed for investment in MC Canada has to be allowed as a deduction under section 36(1)(iii). So far as the finance expenditure is concerned, it would follow the allowing of interest expenditure. This expenditure is incurred in respect of the above loan taken for purpose of business and allowable under section 36(1)(iii).