AI Drafter 
TaxTMI 
TaxTMI 
2016 (12) TMI 621
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.... Rs. 2,84,65,000/- ignoring the facts that the assessee continues to receive the income from the same sources ,even before and also after the "termination of agreement" on the basis of letter dated 03.03.2009 issued by First Rand Bank, South Africa, as discussed by Assessing Officer in the assessment order. 2. Insofar as ground no.1 is concerned, briefly stated the facts are, assessee an individual filed his return of income for the impugned assessment year on 30th September 2009, declaring total income of Rs. 40,01,528. During the assessment proceedings, the Assessing Officer noticing that the assessee has earned exempt income by way of dividend amounting to Rs. 31,232, called upon the assessee to explain why disallowance under section 14A r/w rule 8D, should not be made. In reply though, the assessee submitted that no expenditure was incurred for earning exempt income but the Assessing Officer rejecting the contention of the assessee disallowed an amount of Rs. 56,872 under rule 8D(2)(iii) r/w section 14A of the Act. Being aggrieved, assessee challenged the disallowance before the learned Commissioner (Appeals). 3. The learned Commissioner (Appeals), after considering the s....
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....ng the return of income filed by the assessee, the Assessing Officer noticed that the assessee had received compensation of Rs. 2,48,65,000 from the FirstRand Bank Ltd., South Africa, but he has not offered it as income pleading that it is in the nature of a capital receipt. On Assessing Officer's query to justify such claim, it was submitted by the assessee that for the purpose of establishing investment banking business in India, FirstRand Bank Ltd., South Africa, had offered the assessee preferred partnership on the condition that the assessee has to terminate his business / professional engagement in the field of investment banking. The assessee should completely and exclusively be available for the Bank's venture in Indian sub-continent; and lastly, the assessee should not take up or accept any fresh business or professional commitment in the field of investment banking. It was submitted, pursuant to such offer of the bank, assessee did not pursue / undertake business activity in the field of investment banking for more than two years and kept himself exclusively available for the business of the bank. However, subsequently, due to unfavourable business environment, Bank revie....
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....was into investment banking business and source of income available to the assessee remained unchanged during the period under reference. Therefore, it cannot be said that the amount received by the assessee was in the nature of compensation for loss of business. He submitted, the assessee is a professional and he continued to earn income from his professional activities during the relevant period. He, therefore, submitted there is no reason to treat the amount received by the assessee from FirstRand Bank Ltd., South Africa, as capital receipt. 10. Learned Authorised Representative supporting the decision of the learned Commissioner (Appeals) submitted, the assessee is an experienced entrepreneur and business leader having vast experience in the field of real estate, financial services and hospitality. He submitted, considering assessee's capabilities and leadership quality, the FirstRand Bank Ltd., South Africa, vide letter dated 2nd April 2007, has offered the assessee preferred partnership for its investment banking business to be set-up and established in India. He submitted, in the said letter, the bank had put certain conditions preventing the assessee from taking up any b....
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....to kindly terminate a1 your business / professional engagements at the earliest in the filed of Investment banking so as to make yourself completely and exclusively available for this venture in Indian Subcontinent. We would request you not to take up or accept any fresh business/ professional commitments in the field of investment banking as we have committed to invite you as preferred partner in India and by this letter, we reiterate our commitment to you. As discussed and agreed, we will formalize our partnership for the investment banking business in India in the next few months, wherein you will be allocated appropriate equity stake in the India venture and we further confirm that you will be our exclusive partner for this venture in India." 13. On a careful reading of the aforesaid letter, it is clear that FirstRand Bank Ltd., South Africa, in the said letter had made an offer to the assessee to become a preferred partner for its investment banking business to be set-up in India, with certain terms and conditions. The terms and conditions imposed are as under:- i) Assessee should exclusively work with the investment banking business of the bank; ii) Assessee shoul....
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....urse of hearing, the learned Departmental Representative had submitted that the assessee neither in the past nor in the future had any connection with investment banking business. Therefore, it is all the more necessary for the assessee to demonstrate that after entering into agreement with FirstRand Bank Ltd., South Africa, the assessee had fulfilled the conditions imposed in the letter dated 2nd April 2007 by terminating business professional engagements in the field of investment banking and has not accepted any fresh business / professional commitment in the filed of investment banking, though, there might have been such offer from other entities. Unless, these facts are established on record with supporting evidence, it cannot be said that the assessee has suffered any financial loss on account of FirstRand Bank Ltd., South Africa, deciding against setting-up of an investment banking business in India. As it appears, learned Commissioner (Appeals) while accepting assessee's claim has not at all examined these factual aspects and merely relying upon certain case laws cited before him has come to a conclusion that the payment received from FirstRand Bank Ltd., South Africa, is i....