TaxTMI 
TaxTMI 
2013 (12) TMI 3
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....come of Rs.1,13,50,138/- cannot be considered as income from other sources and directing the AO to set off the interest income with the interest paid. 2. Ld.CIT(A) erred in law and on the facts of the case in allowing the expenses of Rs.61,191/- without appreciating that the assessee did not carry out any business activity during the year. 3. The appellant craves for reserving the right to amend, modify, alter, add or forego any ground (s) of appeal at any time before or during the bearing of appeal." 3. In the cross-objection, the assessee has raised the following grounds:- "1. That on the facts and in the circumstances of case and in law, the ld.CIT-A erred in giving a finding at Para 7/Page 6 that "The AO has clearly establis....
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....,13,50,138/- from City Guide Yellow Pages Pvt.Ltd. against the interest paid to UFPL and sustained the disallowance. From the facts of the assessee's case, it is evident that the money borrowed from UFPL was not for the purpose of business and, therefore, the entire disallowance of interest was to be sustained. There is no provision under the Income-tax Act for setting off the interest received against the interest paid on the money which was not borrowed for the purpose of business. He, therefore, requested that the order of learned CIT(A) should be reversed and that of the Assessing Officer may be restored. With regard to disallowance of interest amounting to Rs. 61,191/-, he relied upon the order of the Assessing Officer. 5. The learn....
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....on was routed to Verv.}}. 7. City Guide paid an amount of Rs.22.50 Cr on 16/09/2008 to Unicon : a. Rs.9.50 Cr paid back, received from Unicon on 10/09/2008. b. Rs.13 Cr. Paid to Unicon, received from Sameer on 12/09/2008. 8. In nut shell City Guide forwarded a loan of Rs.13 Cr. to Unicon, to part fund the loan of Rs.22.50 Cr. by Unicon to Verv. 9. Unicon charged interest on Rs.22.50 Cr. from Verv - Rs.1.94 Cr. 10. Unicon paid interest on Rs.13 Cr. to City Guide - Rs.1.13 Cr. 11. City Guide paid interest on Rs.13 Cr to Verv - Rs.1.13 Cr. 12. Verve Engineering paid back Rs.22.50 Cr. loan to Unicon. a. 27/10/08 - 0.75 cr directly by Sameer - recd. Loan from Sameer on same date. b. 05/01/09 - 2.00 Cr. Rtgs from HSB....
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....f capital borrowed for acquisition of an asset for extension of existing business or profession (whether capitalised in the books of account or not); for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, shall not be allowed as deduction.] Explanation.--Recurring subscriptions paid periodically by shareholders, or subscribers in Mutual Benefit Societies which fulfil such conditions as may be prescribed, shall be deemed to be capital borrowed within the meaning of this clause;" 8. From the above, it is evident that Section 36 provides the deductions which are to be allowed while computing the income under the head 'profit and gains o....
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....e next question arises whether the interest paid to UFPL is to be set off against the interest of Rs. 1,13,50,138/- received by the assessee from City Guide Yellow Pages Pvt.Ltd. That Sameer Manchanda paid from his bank account Rs. 13 crores to City Guide Yellow Pages Pvt.Ltd. However, later on, the loan account was transferred to the assessee company by passing journal entries. The assessee has not paid any interest to Sameer Manchanda but received the interest of Rs. 1,13,50,138/- from City Guide Yellow Pages Pvt.Ltd. However, on the above facts, in our opinion, there is no case for set off of the interest paid to UFPL with the interest received from City Guide Yellow Pages Pvt.Ltd. The CIT(A) has allowed the set off with the following fi....
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....ut the said interest cannot be set off against the interest payment on the basis of some hypothesis or presumption. We, therefore, reverse the finding of the learned CIT(A) in this regard and restore that of the Assessing Officer. 12. The only ground that remains in the Revenue's appeal is with regard to disallowance of expenses of Rs. 61,191/- which were disallowed by the Assessing Officer and allowed by the learned CIT(A). 13. After considering the arguments of both the sides and the facts of the case, we are of the opinion that the learned CIT(A) was fully justified in deleting the disallowance of the expenses amounting to Rs. 61,191/- on the ground that these were the expenses of general nature. It is a settled law now that even w....