TaxTMI 
TaxTMI 
2015 (2) TMI 1227
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....ncome-tax(Appeals) V, Hyderabad dated 20.5.2010. 3. Grounds No.1 and 7 raised by the Revenue in this appeal are general, requiring no specific adjudication. 4. The common issue relating to the disallowance of interest attributable to the share application money made by the Assessing Officer and partly sustained by the learned CIT(A) is raised by the Revenue in grounds No.2 to 4 of this appeal, which read as under- "2. The learned CIT(A) relying on the Hon'ble Punjab & Haryana High Court decision in the case of Haryana Land Reclamation and Development Vs. CIT(2008) 302 ITR 218, erred in holding that Section 14A is not applicable to disallowance of interest on investment in share application money. 3. The learned CIT(A) ought to have recognised that in view of close proximity of the assessee-HUF land its sister concerns, no shares have been allotted and the borrowed funds are lying in share application money deposit. As such, the CIT(A) should have upheld the action of the Assessing Officer in invoking the provisions of Secirton14A. 4. The learned CIT(A) should have recognized that the assessee is borrowing funds to play the interest costs and hel....
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....rn was not the business activity of the assessee, and therefore, interest paid by the assessee on the borrowed funds to the extent attributable to the investments made in the share application money was liable to be disallowed. Accordingly, the learned CIT(A) confirmed the disallowance made by the Assessing Officer on account of interest attributable to the investments made in the share application money, although on a different ground. 7. As regards the alternative contention of the assessee that the quantum of disallowance made by the Assessing Officer on account of interest on compounding basis is not justified, as the same constitutes only a notional disallowance and that it should be restricted to the interest actually paid by the assessee on the borrowed funds which were utilised for making payment of share application money, the learned CIT(A) found merit in the same. He accordingly directed the Assessing Officer to verify the exact amount of interest expenditure claimed by the assessee, with respect to the corresponding borrowings and restrict the disallowance to that extent. 8. Aggrieved by the order of the ld CIT(A) on this issue, Revenue is in appeal before us. ....
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....tment made in the landed property was not allowable as deduction even as per S.36(1)(iii) of the Act. He further held that such interest, in any case, was required to be capitalized to the respective land account till the same was put to use for the purpose of business. Accordingly, interest attributable to the investment made in the landed property to the extent of Rs. 5,70,68,728 was disallowed by the Assessing Officer. 12. During the course of appellate proceedings before the learned CIT(A), it was submitted by the assessee that the provisions of S.14A were not applicable to make disallowance on account of interest attributable to the investment made in the landed property. It was also submitted that the landed properties in question were purchased by the assessee for its business purposes and the same were duly reflected in the Balance Sheet as capital assets pertaining to the business. The learned CIT(A) found merit in the contentions raised on behalf of the assessee and held that the provisions of S.14A were not applicable to make disallowance on account of interest attributable to the investments made in the landed property as the said investment was not going to yield an....
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....the learned Commissioner of Income-tax(Appeals) V, Hyderabad dated 3.9.2010. Revenue's Appeal: 16. In the appeal of the Revenue, grounds No.1 and 7 are general, seeking no specific adjudication, while remaining grounds No.2 to 6 read as under- "2. The learned CIT(A) relying on the Hon'ble Punjab & Haryana High Court decision in the case of Haryana Land Reclamation and Development Vs. CIT(2008) 302 ITR 218, erred in holding that Section 14A is not applicable to disallowance of interest on investment in share application money. 3. The learned CIT(A) ought to have recognised that in view of close proximity of the assessee-HUF land its sister concerns, no shares have been allotted and the borrowed funds are lying in share application money deposit. As such, the CIT(A) should have upheld the action of the Assessing Officer in invoking the provisions of Secirton14A. 4. The learned CIT(A) should have recognized that the assessee is borrowing funds to play the interest costs and held that the Assessing Officer is correct in calculating the disallowed interest on cumulative basis. 5. The learned CIT(A) erred in deleting the addition made towards....
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.... withdrawals made by the assessee out of borrowed funds, it is observed that the assessee-HUF during the year under consideration had made withdrawals from Ushakiron Movies as well as form other concerns for personal purposes. According to the Assessing Officer, these withdrawals were made from the borrowed funds and therefore, interest paid on the borrowed funds to the extent attributable to the withdrawals made was liable to be disallowed on compounding basis. He, therefore, computed such interest at Rs. 39,37,464 and made a disallowance to that extent. On appeal, the disallowed CIT(A), deleted the disallowance made by the Assessing Officer on this issue, accepting the contention of the assessee that withdrawals for personal and household purpose were made out of profits generated in Ushodaya News Agency and not out of borrowed funds. 20. We have heard the arguments of both the sides and also perused the relevant material on record.. The Learned Departmental Representative has contended that the claim of the assessee of having made the withdrawals for household purposes out of the profits generated in M/s. Ushodaya News Agency was not supported by any evidence and still the le....
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.... disallowance made by the Assessing Officer and sustained by the learned CIT(A) to the extent of Rs. 4.39 crores on account of interest attributable to the investment allegedly made by the assessee in the residential building out of borrowed funds. 24. As noticed by the Assessing Officer during the course of assessment proceedings, the assessee-HUF had constructed residential building for its own occupation at Ramoji Film City and the cost of the said construction was met from the borrowed funds. Since the said investment was not made by the assessee for its business purposes, the Assessing Officer held that the interest attributable to the investment made in the residential building at Ramoji Film City was liable to be disallowed on compounding basis. Accordingly, he worked out the interest to be disallowed at Rs. 4.39 crores and made a disallowance to that extent. 25. On appeal, the learned CIT(A) found that a similar issue involving identical facts and circumstances was already decided by him in assessee's own case for assessment year 2005-06 vide order dated 28.5.2010 as under- "6.1 I have considered the arguments and facts and I find that once again there is no ....
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....ct to the residential building at Ramoji Film City and make a disallowance to that extent. In his impugned order for assessment year 2006-07, the learned CIT(A) has followed his own order for the assessment year 2005-06 and has given a similar direction to the Assessing Officer to verify the exact amount of interest expenditure claimed by the assessee with respect to the residential building at Ramoji Film City and make disallowance to that extent. We therefore, find no infirmity in the impugned order of the learned CIT(A) on this issue and upholding the same, we dismiss ground No.3 of the assessee's appeal. 27. The issue involved in ground No.4 of the assessee's appeal for assessment year 2006-07 relates to the disallowance made by the Assessing Officer and sustained by the learned CIT(A) to the extent of Rs. 3,47,76,217 on account of interest attributable to the investment made by the assessee out of borrowed funds in fixed assets created for the purpose of tourism, but not put to business use. 28. As noticed by the Assessing Officer during the course of assessment proceedings, the funds borrowed on interest were partly utilised by the assessee for the construction of fixed....
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.... ITA No.1461/Hyd/2010 of the Revenue and ITA No.1507/Hyd/2010 of the assessee, which are directed against the order of the learned Commissioner of Income-tax(Appeals) V, Hyderabad dated 3.9.2010. Revenue's Appeal: 32. In the appeal of the Revenue, grounds No.1 and 7 are general, seeking no specific adjudication, while remaining grounds No.2 to 6 read as under- "2. The learned CIT(A) relying on the Hon'ble Punjab & Haryana High Court decision in the case of Haryana Land Reclamation and Development Vs. CIT(2008) 302 ITR 218, erred in holding that Section 14A is not applicable to disallowance of interest on investment in share application money. 3. The learned CIT(A) ought to have recognised that in view of close proximity of the assessee-HUF land its sister concerns, no shares have been allotted and the borrowed funds are lying in share application money deposit. As such, the CIT(A) should have upheld the action of the Assessing Officer in invoking the provisions of Secirton14A. 4. The learned CIT(A) should have recognized that the assessee is borrowing funds to play the interest costs and held that the Assessing Officer is correct in calculating ....
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....purposes. 35. As regards the issue involved in ground No.6 relating to disallowance of interest attributable to the withdrawals made by the assessee out of borrowed funds, the learned representatives of both the sides have agreed that this issue is similar to the one involved in assessment year 2006-07, which has already been decided by us in the foregoing paras of this order. As the material facts relating to this issue as involved in the year under consideration as well as the arguments of both the sides are similar to assessment year 2006-07, we follow our conclusion drawn in assessment year 200607 and restore this issue to the file of the Assessing Officer for deciding the same afresh, after giving the assessee sufficient opportunity to establish its claim that the withdrawals for house hold expenses were made out of the profits generated in Ushodaya News Agency and not out of the borrowed funds. Ground No.6 of the Revenue's appeal for assessment year 2007-08 is treated as partly allowed for statistical purposes. 36. In the result, Revenue's appeal for assessment year 2007-08, being ITA No.1461/Hyd/2010, is partly allowed for statistical purposes. Assessee's Appeal: ....
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....icer for the limited purpose of working out, as done in the assessment year 2005-06 as per the directions of the learned CIT(A) for that year, the actual quantum of interest actually paid by the assessee on the borrowed funds utilised for the construction of the relevant assets which were not put to use in the year under consideration and restrict the disallowance to that extent. He shall accordingly redecide this issue after giving reasonable opportunity of hearing to the assessee. Ground No.4 is accordingly treated as partly allowed for statistical purposes. 40. Ground No.5 of the assessee's appeal relating to the treatment given by the Assessing Officer and confirmed by the CIT(A) with regard to income of Rs. 773,67,56,036 from sale of TV/Film software, as income from capital gains, was not pressed by the learned counsel for the assessee at the time of hearing before us. The same is accordingly dismissed. 41. In the result, appeal of the assessee for the assessment year 2007-08, being ITA No.1507/Hyd/2010, is partly allowed for statistical purposes. Cross Appeals for Assessment year 2008-09 42. Now, we shall take up the cross appeals for assessment year 2008-09, bein....
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....n as well as the arguments of both the sides are similar to assessment year 2005-06, we follow our conclusion drawn in assessment year 2005-06 and uphold the impugned order of the learned CIT(A) on this issue. Grounds No.2 to 4 are accordingly dismissed. 45. As regards the issue involved in ground No.5, it relates to disallowance of interest attributable to the investments made in landed properties. As agreed at the time of hearing before us by the learned representatives of both the sides, this issue is similar to the one involved in assessment years 2005-06, which has already been decided by us in the foregoing paras of this order. As the material facts relating to this issue as involved in the year under consideration as well as the arguments of both the sides are similar to assessment year 2005-06, we follow our conclusion drawn in assessment year 2005-06 and restore this issue to the file of the Assessing Officer for deciding the same afresh, after verifying the specific submissions made by the learned counsel for the assessee before us, in accordance with law and after giving sufficient opportunity of hearing to the assessee. Grounds No.5 is accordingly treated as allowed ....
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....der consideration as well as the arguments of both the sides are similar to assessment year 2006-07, we follow the conclusion drawn in assessment year 2006-07, and uphold the impugned order of the learned CIT(A) on this issue. Ground No.3 of the assessee's appeal is accordingly dismissed. 50. The issue involved in ground No.4 of the assessee's appeal for assessment year 2008-09 relates to the disallowance made by the Assessing Officer and sustained by the learned CIT(A) to the extent of Rs. 6,26,44,482 on account of interest attributable to the investment made by the assessee out of borrowed funds in fixed assets created for the purpose of tourism, but not put to business use. As agreed at the time of hearing before us by the learned representatives of both the sides, this issue is similar to the one involved in assessment year 2006-07, which has already been decided by us in the foregoing paras of this order. As the material facts relating to this issue as involved in the year under consideration as well as the arguments of both the sides are similar to assessment year 2006-07, we follow the conclusion drawn in assessment year 2006-07, and restore the matter to the file of the ....