TaxTMI 
TaxTMI 
2016 (5) TMI 1302
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....7, the assessee filed its return of income on 28.11.1006 declaring total income of Rs. 1,10,89,117/-. The return was processed under section 143(1) of the Income Tax Act, 1961 (in short 'the Act') and the case was subsequently taken up for scrutiny. The assessment was completed under section 143(3) of the Act vide order dated 15.12.2008 wherein the income under normal provisions was determined at Rs. 2,36,60,650/- due to various additions/disallowances and 'Book Profits' under section 155JB of the Act were computed at Rs. 60,14,740/-. On appeal the learned CIT(A) disposed off the assessee's appeal vide the impugned order dated 06.12.2010 allowing the assessee partial relief. 2.2. For A.Y. 2007-08, the assessee filed its return of income on 11.11.2007 declaring total income of Rs. 1,27,50,940/-. The return was processed under section 143(1) of the Act and the case was subsequently taken up for scrutiny. The assessment was concluded under section 143(3) of the Act vide order dated 22.06.2009, wherein the assessee's income, under normal provisions, was determined at Rs. 2,28,94,930/- in view of certain additions/disallowances and the 'book profits' under section 115JB of th....
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....e following grounds, which are extracted hereunder and will be disposed off as below. Assessee's appeal in ITA No. 1880/Mum/2011 - for A.Y. 2006-07 3.1 For A.Y. 2006-07, the assessee has raised the following grounds of appeal: - "1(a) The learned Commissioner of Income Tax (Appeals) erred in confirming the disallowance of interest paid of Rs. 65,80,910/- on term loan taken from Canara Bank for investment made in acquiring 100% shares of Amroon Foods Private Limited (Subsidiary Company). (b) The learned Commissioner of Income Tax (Appeals) erred in not appreciating the fact properly about the business advantage that was derived by the appellant company from investment made in shares of Amroon Foods Pvt. Ltd. and further erred in considering increase in export turnover of Amroon Foods Pvt. Ltd. in terms of time and not in terms of value. (c) The learned Commissioner of Income Tax (Appeals) erred in not treating the investment made in purchase of 100% shares of Amroon Foods Pvt. Ltd. with regard to commercial expediency. (d) The learned Commissioner of Income Tax (Appeals) erred in not allowing interest paid under section 36(1)(iii) / 37(1) of....
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....ax (Appeals) erred in not allowing interest paid under section 36(1)(iii) / 37(1) of the Act. (e) Without prejudice to the above, the learned Commissioner of Income Tax (Appeals) erred in not appreciating that section 14A of the Act is not applicable to the facts of the case. 2(a) The learned Commissioner of Income Tax (Appeals) erred in confirming the disallowance of interest paid of Rs. 15,72,987/- out of interest paid as proportionate interest attributable to Capital work in progress and order of the learned Commissioner of Income Tax (Appeals) and learned Deputy Commissioner of Income Tax is based on incorrect findings and facts. (b) Without prejudice to the above, the learned Commissioner of Income Tax (Appeals) erred in not deducting interest paid on the term loans taken for investment in shares, other old term loan and term loans taken for purchase of Motor cars while computing the disallowance. (c) The learned Commissioner of Income Tax (Appeals) erred in not appreciating the fact of the case that interest free funds utilized for purchase of capital assets. 3 That orders of Learned Commissioner of Income Tax (Appeals) and learned....
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..... 3 That orders of Learned Commissioner of Income Tax (Appeals) and learned Deputy Commissioner of Income Tax and additions made and confirmed therein are not sustainable on various legal and factual grounds. 4. The appellant craves leave to add, alter, modify, amplify, amend and vary the above grounds of appeal." Assessee's appeal in ITA No. 5378/Mum/2012 - for A.Y. 2009-10 3.4 In this appeal for A.Y. 2009-10, the assessee has raised the following grounds: - "1(a) The learned Commissioner of Income Tax (Appeals) erred in confirming the disallowance of interest paid of Rs. 30,83,648/- on term loan taken from Canara Bank for investment made in acquiring 100% shares of Amroon Foods Private Limited (Subsidiary Company). (b) The learned Commissioner of Income Tax (Appeals) erred in not appreciating the fact properly about the business advantage that was derived by the appellant company from investment made in shares of Amroon Foods Pvt. Ltd. and further erred in considering increase in export turnover of Amroon Foods Pvt. Ltd. in terms of time and not in terms of value. (c) The learned Commissioner of Income Tax (Appeals) erred in not ....
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.... "1(a) The learned Commissioner of Income Tax (Appeals) erred in confirming the disallowance of interest paid of Rs. 1,99,123/- on term loan taken from Canara Bank for investment made in acquiring 100% shares of Amroon Foods Private Limited (Subsidiary Company). (b) The learned Commissioner of Income Tax (Appeals) erred in not appreciating the fact properly about the business advantage that was derived by the appellant company from investment made in shares of Amroon Foods Pvt. Ltd. and further erred in considering increase in export turnover of Amroon Foods Pvt. Ltd. in terms of time and not in terms of value. (c) The learned Commissioner of Income Tax (Appeals) erred in not treating the investment made in purchase of 100% shares of Amroon Foods Pvt. Ltd. with regard to commercial expediency. (d) The learned Commissioner of Income Tax (Appeals) erred in not allowing interest paid under section 36(1)(iii) / 37(1) of the Act. (e) Without prejudice to the above, the learned Commissioner of Income Tax (Appeals) erred in not appreciating that section 14A of the Act is not applicable to the facts of the case. 2(a) The learned Commissioner....
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....e and the learned D.R. for Revenue. The learned A.R. for the assessee fairly brought to the notice of the Bench that this very issue was considered by a Coordinate Bench of this Tribunal in the assessee's own case for A.Y. 2005-06 and in its order in ITA No. 7285/Mum/2008 dated 25.03.2011, the Coordinate Bench decided the issue against the assessee and that the assessee is in appeal before the Hon'ble High Court in the matter. We find, on a perusal thereof, that as submitted, the Coordinate Bench in the aforesaid order in the assessee's own case for A.Y. 2005-06 (supra) at paras 12 and 13 thereof have held, against the assessee and in favour of the Revenue, as under: - 12. We have heard the rival submissions, perused the orders of the lower authorities and the materials available on record. The facts are not disputed. The borrowed funds have been utilized for acquiring shares of Amroon Foods Pvt. Ltd. The assessee's claim is that, by acquiring the shares of Amroon Foods Pvt. Ltd. it carried on the business more efficiently and, therefore, the entire acquisition of shares was for the purpose of business and the interest paid on the amount borrowed was wholly and exc....
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....been charged to tax under s. 115-O(1) or the tax thereon. Thus, this sub-section has restricted the allowability of all deductions, which may otherwise be allowable under any other provisions of the Act, against dividend income. It means that the interest paid for borrowings used for purpose of acquiring shares which has resulted in earning of dividend, and all other expenses in relating to the earning of dividend income will not be allowed as deduction under any other provisions of the IT Act. 12. Prior to insertion of ss. 10(33) and 115-O of the Act, any dividend declared, distributed or paid by a company to its shareholder was chargeable to tax under the head "Income from other sources" irrespective of the fact whether shares were held by the assessee as investment or stock- in-trade as provided in s. 56 of the Act. Sec. 57 of the Act provides for certain deductions in computing the income chargeable under the head "Income from other sources". Reading s. 57 and s. 58 of the Act, it is plain that the expenditure, not in the nature of capital expenditure and personal expenses of the assessee, laid out or expended wholly and exclusively for the purpose of making or earning....
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....ertain shares and paid interest thereon during the accounting period relevant to the assessment year but did not receive any dividend on the shares purchased with those monies : Held, accordingly, that the interest on monies borrowed for investment in shares which had not yielded any dividend was admissible as a deduction under s. 57(iii) of the IT Act, 1961, in computing its income from dividend under the head 'Income from other sources'." (iii) CIT vs. L.N. Dalmia (1994) 207 ITR 89 (Cal) "Moreover, it has been submitted on behalf of the assessee that the assessee is entitled to submit before this Court that the said deduction should be allowed under the head "Other sources" though against the decision of the Tribunal that such interest was to be capitalised being part of cost of acquisition of shares has not been appealed against. It is well-settled that an allowance for deduction can be upheld on a ground other than that on which it was allowed by the Tribunal. We, accordingly, hold that the interest in question in the present case cannot be part of the cost of acquisition. It is allowable against the income from the investment in question and it can be considered to be ....
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....nce the assessee failed to fulfil the onus to establish its claim under section 36(1)(iii) of the Act, the AO proceeded to disallow the proportionate interest claim in the concerned assessment years 2006-07 to 2010-11. On appeal, the learned CIT(A) considering the identical submissions of the assessee, as put forth before the AO in assessment proceedings, and on examination of the assessee's Balance Sheets for the relevant period found that no interest free funds were available to the assessee for being utilized in investment in capital work-in-progress and accordingly upheld the disallowances of proportionate interest attributable to capital work-in-progress for assessment years 2006-07 to 2010-11. 5.2.2 Before us also, the learned A.R. for the assessee for the assessee reiterated the submissions put forth before the authorities below and in the grounds of appeal (supra), that for all the assessment years in appeal the assessee had only utilized its own interest free funds for investment in capital work-in-progress and had not diverted the interest bearing funds which were wholly utilized for business purposes. On an appreciation of the records before us, the orders of the auth....
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.... CIT(A) in the impugned orders. The applicability of the provisions of section 14A of the Act is in respect of expenditure incurred in relation to the earning of income not includible in total income. A plain reading of the provisions of section 14A of the Act envisages that there should be an actual receipt of income which is not includible in the total income. Therefore, the provisions of section 14A of the Act will not apply where no exempt income is received or receivable by the assessee during the relevant previous year. This proposition was upheld by the Hon'ble Delhi High Court in the case of Cheminvest Ltd. vs. CIT [(2015) 94 CCH 002] (Del) vide order dated 02.09.2015; wherein at para 23 thereof their Lordships have held as under: - "23. In the context of the facts enumerated hereinbefore the Court answers the question framed by holding that the expression 'does not form part of the total income' in Section 14A of the envisages that there should be an actual receipt of income, which is not includible in the total income, during the relevant previous year of the purpose of disallowing any expenditure incurred in relation to the said income. In other words, Secti....