TaxTMI 
TaxTMI 
TaxTMI 
2016 (5) TMI 1017
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....essment order. 2.2 The CIT(A) ought to have appreciated that though the assessee has granted interest free advance of Rs. 21.50 crores to M/s.Hi-tech Housing Projects P Ltd., its sister concern, the interest accrued on the same is taxable as the assessee is 2.3 The CIT(A) ought to have followed the decision of the Hon'ble Madras High Court in the case of M/s.United Nilgiris Tea Estate Company (210 Taxman 62) dated 17/07/2012 wherein it is held that when the assessee is following mercantile system of accounting, interest accrued therein had to be assessed in the hands of the assessee even though the assessee had not received any amount as the principal amount itself was not a bad debt. 3. The CIT(A) erred in deleting the Disallowance of notional interest on interest free loan given to M/s.Hitech Housing Pvt.Ltd amounting to Rs. 1.55 crores. 3.1 The CIT(A) failed to appreciate that in the business of Non Banking Finance Companies, determining the activity of business and nonbusiness activity cannot be distinguished and in the assessee's case, the advances made are not distinguishable. 3.2 The CIT(A) ought to have appreciated that even if the loans have been granted out of t....
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....ed as additional cost of acquisition of those securities held as investment. 2. Adjustment to book profits under section 115JB of the Act. 2.1. The learned CIT (A) have erred in upholding the adjustment to book profits computed in accordance with section 115JB of the Act, towards disallowance Rs. 32,05,094 made under section 14A of the Act by applying the provisions of Rule 8D of the Rules. 2.2. The Ld.CIT(A) have failed to appreciate that the adjustment to book profits cannot be made on notional basis computing in accordance with Rule 8D of the Rules. 3. The brief facts of the case are that the assessee is a limited company, a Non Banking Financial Institution engaged in the business of trading in shares through JMF Trading account and filed its e-return of income on 13.10.2010 for assessment year 2010-11 with total income of Rs. 48,47,74,400/-. Subsequently, the return was selected for scrutiny and notice u/s.143(2) of the Act was issued to the assessee due to change in jurisdiction. In response to the notice, the Authorised Representative of assessee appeared from time to time and furnished the details called for during assessment proceedings. 3.1. The AO made disallo....
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....rinciple to determine whether the advancing of borrowed loan is on 'commercial expediency' or not. The AO was of the opinion that the interest accrued on advances to M/s.Hi-tech Housing Projects Ltd., is to be taxed and was worked out to Rs. 1,54,82,876/-. The ld. Assessing Officer with the above disallowances passed assessment order u/s.143(3) of the Act on 19.12.2013. Aggrieved by the order of the AO, the assessee has filed an appeal before the Ld.CIT(A). 4.1. In the appellate proceedings, on the issue of disallowance u/s.14A, ld.A.R vehemently argued the grounds raised in its appeal and supported his arguments with the decisions as referred at pages 3 & 4 of the CIT(A)'s order. The basic issue being that the assessee has not incurred any expenditure in respect of earning such exempt income and investments are out of interest free funds /own funds and no loan was obtained to make such investments. Ld.CIT(A) had considered the submissions/grounds and also the methodology of disallowances made by the AO and dealt in exhaustively in his order on the applicability of Rule-8D on what constitute the investments for the calculation of Third Limb under Rule 8D. The Ld.CIT(A) relied on t....
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....Loan' from JMF and the same was utilized for the purpose of purchase and sale of shares only. Considering the factual aspects, the advance is treated as interest free advance out of surplus fund, but the AO has made an addition of notional interest on the balance outstanding as on 31.03.2010. Ld.CIT(A) has allowed the ground of assessee by directing the AO to delete the disallowance by observing as under:- "As discussed in earlier paragraphs, the only loan facility i.e. the credit limit was taken from JMF for purchase and sale of shares. Since it is for specific purpose that too a credit limit and not in the form of cash, it cannot be construed that these funds were diverted to any other concerns. On the other hand, the appellant is also having sufficient own funds out of internal accruals as seen from the balance sheet (Reserve & Surplus as on 1.4.2009 of Rs. 21.29 crores were increased to Rs. 59.13 crores as on 31.03.2010) which could be used for advancing to other concerns. In view of the above facts, the notional interest disallowed by the AO is not called for. The AI is directed to withdraw the disallowance. The ground is allowed." Aggrieved by the order of Ld.CIT(A), the R....
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....vt Ltd. in ITA No.359/Mds./2013 for assessment year 2008-09 vide order dated 11.04.2013. So considering the provisions and submissions of Counsels we are of the opinion that the Ld.CIT(A) had dealt with the issue in detail and also considered the submissions and explanations of the assessee, Therefore, we are not inclined to interfere with the order of the Ld.CIT(A) and confirm the same. 6.2 On the issue of notional interest, the ld.D.R submitted that assessee company has provided interest free advances to M/s.Hitech Housing Projects Ltd., its sister concerns and the interest accrued on the same is taxable as the assessee is following mercantile system of accounting. As a prudent business practice, interest has to be considered in the books of accounts, even though the actual receipt does not fall in the current financial year. Further, if the loans have been granted out of income earned on sale of investments, disallowance has to be made u/s.36(1)(iii) of the Act and also the activity could not be distinguished by the assessee. The Ld.D.R has dealt with only Ld.CIT(A)'s observations in para 5.9 of his order where adjustments was made considering the disallowance. The fact that th....