TaxTMI 
TaxTMI 
2017 (2) TMI 1293
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....t u/s.10(2A) from the partnership firms in which the assessee company is one of the partners. In the computation of income the assessee has claimed expenses of Rs. 4,61,16,561/- for earning the said exempt income and accordingly disallowed and added to the total income u/s.14A of the I.T. Act. The Assessing Officer, therefore, asked the assessee to furnish the working of the said disallowance of Rs. 4,61,16,561/- and justification thereof. 4. From the details furnished by the assessee, the Assessing Officer observed that assessee has also received taxable income of Rs. 2,31,38,427/- from M/s. Kumar Sons, Rs. 1,46,66,007/- from M/s. K.K. Erectors and Rs. 76,04,519/- from Kumar Builders. Accordingly, he noted that the claim of the assessee that the taxable income by way of interest on partners capital has been received from those firms and offered for taxation as income of company is correct. 5. However, at the same time, the assessee has received exempt income by way of share of profit from the said firms. Therefore, in respect of such a composite income which is partly taxable and partly exempt, disallowance u/s.14A has to be made on pro-rata basis. Relying on the decision of the....
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....urpose of computation of disallowance u/s.14A r.w. Rule 8D has also considered share application money of Rs. 83,47,553/- received by the assessee for computation of disallowance u/s.14A r.w. Rule 8D. The Assessing Officer has not considered the assessee's debit/overdrawn balances in the capital/current accounts in partnership firms. The Assessing Officer has taken pro-rata balances of capital/current accounts in the firms from whom the assessee received taxable as well as tax free income. It was accordingly argued that the Assessing Officer should be directed not to consider the share application money paid by the assessee as well as the share application money received by the assessee for working of the disallowance u/s.14A. Further, the Assessing Officer should also be directed to consider the debit balances in the partnership firms for working out the disallowance u/s.14A r.w. Rule 8D. 9. During the appeal proceedings the Ld.CIT(A) called for certain details from the assessee to which the assessee filed the source of share application money pending allotment as on 31-03-2009. The assessee also filed the details of the interest and non-interest bearing funds utilized for making....
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....ind myself unable to agree with the proposition that the negative balance in the partnership firms should also be considered for working of the average value of investments. In the first instance, it is seen that the appellant had itself not included any of the investments in the partnership firms for the purposes of working out the disallowance u/s.14A in its return of income and as furnished before the Assessing Officer during the assessment proceedings vide letter dated 13.6.2011. Since the share of profit received from the other partnership firms was exempt in the hands of the appellant u/s 10(2A), the Assessing Officer made a disallowance u/r 8D(2) by reworking average value of investments. In the above cases, the appellant has not earned any tax-free incomes from these firms during the year. Further, it is seen from the record that the negative/ debit balances in the capital and current account of the company in the partnership firms M/s Kumar Builders has arisen mostly in view of the withdrawal, from the, capital in that firm for making investments in the share application money invested in various sister concerns. The total withdrawals of the appellant from its capital acco....
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....ing the disallowance u/s. 14A and not the entire share application money paid by the appellant company. 2] The learned CIT(A) further erred in holding that the learned A.O. was justified in making disallowance u/s. 14A in respect of the share of profit earned by the appellant company from partnership firms without appreciating that the provisions of Section 14A were not applicable to the share of profit earned from partnership firms. 3] The learned CIT(A) erred in holding that the learned A.O. was justified in not considering the debit balances of appellant company in the firms in which the appellant is a partner while determining the average investments for the purposes of determining the disallowance u/s. 14A r.w.r 8D. 14. The assessee has also filed the following additional grounds : "The appellant in the above referred appeal requests for admission of the following additional Grounds of Appeal which are raised without prejudice to the original grounds of appeal - 1. The assessee submits that the disallowance offered by it of interest expenditure of Rs. 4,24,30,542/- u/s 14A r.w.r. 8D in the return of income is not warranted and the same should be deleted while comp....
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....ship firms from which assessee has earned share of profit and also interest income for the purpose of disallowance u/s.14A. The Assessing Officer after considering the investments in the partnership firms on pro-rata basis enhanced the disallowance by Rs. 2,94,01,003/- u/s.14A of the I.T. Act. He submitted that the Ld.CIT(A) held that ultimately the shares are allotted in the subsequent years in 2 companies and the intention of the assessee is to hold the shares as an investment. Further, the disallowance made by the Assessing Officer u/s.14A on account of investment in partnership firms is also justified. He, however, directed the Assessing Officer to exclude the share application money received by the assessee from different persons while computing the disallowance u/s.14A. 18. He submitted that not only the disallowance made by the Assessing Officer and upheld by the CIT(A) is incorrect but also the disallowance offered in the return of income is also not correct and there is no reason for any disallowance u/s.14A. Referring to the copy of the balance sheet, copy of which is placed from pages 7 to 42 of the paper book the Ld. Counsel for the assessee submitted that assessee has....
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....d.(Supra). 20. So far as the inclusion of share application money for the purpose of disallowance u/s.14A is concerned he submitted that no shares are allotted as on 31-03-2009 and therefore the question of earning any exempt income simply does not arise. Referring to the decision of Mumbai Bench of the Tribunal in the case of Rainy Investment Pvt. Ltd. Vs. ACIT reported in 56 SOT 61 he submitted that the Tribunal in the said decision has held that share application money cannot be regarded as an investment in shares or an asset yielding tax free income and neither is it capable of yielding any tax free income and therefore no disallowance can be made u/s.14A of the I.T. Act. Referring to the decision of Kolkata Bench of the Tribunal in the case of LGW Ltd. Vs. ITO and vice versa vide ITA No.267/Kol/13 and CO No.29/Kol/13 order dated 07-10-2015 he submitted that the Tribunal in the said decision has held that while working out the average value of the investments under Rule 8D(2)(iii) of the Rules, the share application money should not be included. 21. So far as the decision of Special Bench of the Tribunal in the case of Cheminvest Ltd. relied on by the Assessing Officer and th....
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....ation money cannot be considered as part of tax free investments since no shares are allotted to it. While doing so, he held that ultimately the shares are allotted in the subsequent years in two companies and the intention of the assessee is to hold the shares as an investment. He also rejected the submission of the assessee that pro-rata inclusion of the capital in the firms is not correct. Thus, the CIT(A) upheld the action of the Assessing Officer in making disallowance u'/s.14A on account of share application money and investment in partnership firms. 25. It is the submission of the Ld. Counsel for the assessee that not only the disallowance u/s.14A made by the Assessing Officer over and above the disallowance offered in the return of income should be deleted but the disallowance offered in the return of income by the assessee being not correct should also be deleted. According to the Ld. Counsel for the assessee since the assessee company has not received any dividend income during the year from the companies in which it has invested in shares, therefore, no disallowance u/s.14A is called for. So far as the investment in share application money is concerned it is his submiss....
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....ssee that disallowance u/s.14A is not warranted on account of investment of Rs. 117,85,71,206/- in shares in subsidiary/associate companies." 27. We find before the Hon'ble Delhi High Court in the case of cheminvest Ltd. the following substantial question of law was raised : "Whether disallowance u/s.14A of the Act can be made in a year in which no exempt income has been earned or received by the assessee." 28. The Hon'ble High Court in ITA No.749/2014 order dated 02-09-2015 reversed the decision of Special Bench of the Tribunal in the case of ACIT Vs. Cheminvest Limited Vs. CIT reported in (2009) 317 ITR (AT) 86 (Delhi) (SB) and observed as under : "19. In light of the clear exposition of the law in Holcim India (P) Ltd. (supra) and in view of the admitted factual position in this case that the assessee has made strategic investment in shares of Max India Ltd., that no exempted income was earned by the assessee in the relevant AY and since the genuineness of the expenditure incurred by the assessee is not in doubt, the question framed is required to be answered in favour of the assessee and against the revenue. . . . . . . . . . . . . . . . . . . . . . . 23. In the ....
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....t class) yielding tax-free income, and neither is it capable of yielding any tax-free income. The same would, therefore, in our clear view, have to be excluded in working out the disallowance u/r. 8D. Further, though the Revenue has not disputed the sums reflected as 'share application money' in the assessee's balance-sheet, the AO, to whom the matter is to be in any case restored for working out the disallowance by excluding the same, shall, in the set aside proceedings, also examine the veracity of the assessee's claim with regard to the same being 'share application money'. This is in view of the pertinent questions raised by the Bench in its respect, to which no satisfactory answer was forthcoming during hearing, nor - to be fair to the ld. AR, could possibly be in the absence of any details on record. We state so as the 'share application money' would ordinarily only be 'public money' and, thus, except perhaps where toward shares of private limited companies, subject to stringent procedure, as is generally in place for such funds. We may further clarify that the exclusion of 'share application money', as opined by us, is not in t....
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....the average value of the investments u/r 8D(2)(iii) of the Rules the share application money should not be included. We hold accordingly and dismiss ground no.(i) raised by the revenue." 32. Respectfully following the decisions of Coordinate Benches of the Tribunal cited (supra) we hold that share application money pending allotment should be excluded from the investments for the purpose of computing disallowance u/s.14A. 33. Now coming to the computation of disallowance u/s.14A on account of investment in partnership firms we find the assessee has excluded the same for the purpose of computation of disallowance u/s.14A. We find the Assessing Officer included the investments made in K.K. Erector, Kumar Sons and Kumar Builders on a pro-rata basis which has been upheld by the CIT(A). We find the amounts invested in the above firms is much less than the own capital and free reserves of the assessee company. The Coordinate Bench of the Tribunal in the case of Kolte Patil Developers Ltd. (supra) while adjudicating the issue of disallowance u/s.14A, has held that no disallowance can be made u/s.14A where the own capital and free reserves are much more than the investments, the income ....
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....rest thereon while it was paying interest on the amounts borrowed by it. To the extent, therefore, to which it would have been in a position to collect interest on the outstandings due to it from others, it could not be permitted to claim interest paid by it to outsiders. In our opinion the view taken by the Income tax Officer is clearly unsustainable. As has been pointed out by the Madhya Pradesh High Court in Ram Kishan Oil Mills v. Commissioner of Income tax the only conditions required to be satisfied in order to enable the asseesee to claim a deduction in respect of the interest under section 10(2)(iii) are, firstly, that money must have been borrowed by the assessee ; secondly, it must have been borrowed for the purpose of business and, thirdly, the assessee must have paid interest on the said amount and claimed it as a deduction. It is not the requirement of the provision that the assessee must further show that the borrowing of the capital was necessary for the business so that if at the time of borrowing the assessee had sufficient amount of its own, the deduction could not be allowed. Similarly, the Madras High Court in Amna Bai Hajee Issa v. Commissioner of Income tax ha....
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....the Act. Thus, the decision of this Court in HDFC Bank Ltd.(Supra) for the first time on 23rd July, 2014 has settled the issue by holding that the test of presumption as held by this Court in Reliance Utilities and Power Ltd. (Supra) while considering Section 36(1)(iii) of the Act would apply while considering the application of Section 14A of the Act. The aforesaid decision of this Court in HDFC Bank Ltd. (Supra) on the above issue has also been accepted by the Revenue inasmuch as even though they have filed an appeal to the Supreme Court against that order on the other issue therein, viz., broken period interest, no appeal has been preferred by the Revenue on the issue of invoking the principles laid down in Reliance Utilities and Power Ltd. (Supra) in its application to Section 14A of the Act. Therefore, the issue which arose for consideration before the Tribunal had not been decided by this Court in Godrej and Boyce Manufacturing Co. Ltd. (Supra). It arose and was so decided for the first time by this Court in HDFC Bank Ltd. (Supra). Thus, there is no conflict as sought to be made out by the impugned order. Thus, impugned order has proceeded on a fundamentally erroneous basis a....
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....re than the investment in the partnership firms and since we have already held in the preceding paragraphs that the share application money as well as investment in the group companies on which no dividend has been received has to be excluded from the investments for the purpose of computation of disallowance u/s.14A, therefore, in view of the discussions above no disallowance u/s.14A is called for in the instant case. Accordingly, the grounds raised by the assessee including the additional grounds are allowed. 35. Grounds of appeal No.4 to 4.2 by the assessee reads as under : "4] The learned CIT(A) erred in confirming the addition of Rs. 12,24,391/- being interest received on deposits belonging to the society without appreciating that the said interest was not income of the appellant company. 4.1] The learned CIT(A) failed to appreciate that the above interest was received on deposits made which were to be ultimately transferred to the flat owners' society and hence, the interest received on such deposits could not be taxed as an income of the appellant company. 4.2] The learned CIT(A) erred in holding that the appellant company has claimed credit of the TDS deducted ....
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....rmity in the action on the part of the Assessing Officer in bringing the amounts of interest income received from IDBI Bank Ltd. and State Bank of Travancore, to tax. Ground No.5 thus, fails." 40. The Ld. Counsel for the assessee could not bring any material before us to show that assessee has infact handed over the money to the society. Since there is no evidence on record that any society has been formed and the assessee has transferred the money to the society or has shown any liability in its books and considering the fact that the assessee has claimed tax credit on such interest income, therefore, we find no infirmity in the order of the CIT(A) on this issue. Accordingly, the grounds raised by the assessee on this issue are dismissed. 41. Grounds of appeal No.5 to 5.4 by the assessee and 4 to 9 by the revenue relates to deletion of proportionate disallowance of Rs. 58,75,491/- which was made by the Assessing Officer on account of diversion of borrowed funds and amount of Rs. 12,95,32,777/- on account of enhancement of income. 42. Facts of the case, in brief, are that the Assessing Officer during the course of assessment proceedings observed that the assessee in the profit ....
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....deduction. Section 36(1)(iii) relates to the amount of interest paid on capital borrowed for the purposes of the business, profession or vocation. The assessee has to satisfy the assessing authority that he is entitled to obtain deduction in accordance with the taxing statute. The burden is on the assessee to prove that a particular class of income is exempt from taxation. The burden is on the Revenue authorities to show that the income is liable to tax under the statute; but the onus of showing that a particular class of income is exempt from taxation lies on the assessee. To earn the exemption,' the assessee has to establish that his case clearly and squarely falls within the ambit of the exempting provisions of the Act. The principles equally apply in cases of deductions claimed. Once the assessee claims any such interest as deduction in their books of account the onus is always on the assessee to satisfy the Assessing Officer that whatever loans were raised by the assessee were for the purpose of business. If in the process of examination of genuineness of such deduction, it transpires that the assessee has. advanced certain funds to sister concerns charging no interest, th....
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....usiness and loans to that extent were required to be raised. Therefore, direct nexus of the funds between borrowings of the funds and diversion thereof for non-business purposes is not at all a factor in considering the issue of allowability of Section 36(1)(iii). Rather, there should be nexus of use of borrowed funds for the purpose of business to claim deduction .under Section 36(1)(iii) of the Act". 10.8 It is the matter of record that the appellant has taken term loans and short term loans from the banks amounting to Rs. 119,75,71,641 which are outstanding as on 01-04-2009 and the appellant has claimed interest expenditure of Rs. 21,02,92,673 which has been debited to the P&L account. Interest amounting to Rs. 7,22,93,707 has also been paid to others. Thus, the total interest outgoings are to the tune of Rs. 28,25,86,380. Interest bearing funds of Rs. 11,77,06,761 have also admittedly been borrowed for making share application advances (see chart at para 4.5 supra). The appellant has advanced huge sums of money of Rs. 29,81,16,675 as share application money which is standing in the books of its subsidiary companies as on 31.3.2009. It has made these share application advance....
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.... free funds at, its disposal and the bank loans of Rs. 119 crores and other interest-bearing loans of Rs. 11.77 crores (as stated in para 10.8 supra) nave been utilized towards making the impugned interest free advances. That being the position, there would be no escape from the finding that interest being paid by the appellant to the extent the amounts are diverted to sister concern on interest free basis are to be disallowed. The view that where the amount is advanced from a mixed account or share capital or sale proceeds or profits, it would not be deemed as diversion of borrowed capital or that the Revenue had not been able to establish nexus of the funds advanced to the sister concerns with the borrowed funds, is not correct. Once it is borne out from the record that the assessee had borrowed certain funds on which liability to pay interest is being incurred and on the other hand certain amounts had been advanced to sister concerns or others without carrying any interest and without any business purpose, the interest to the extent the advance had been made without carrying any interest is to be disallowed under Section 36(1)(iii) of the Act. In fact, the Delhi High Court in Pu....
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....ng laid down the test for determination of the allowability of deduction u/s.36(1)(vii) the Apex Court set aside the matter to be decided afresh. This decision of the Supreme Court overruled a host of High Court decisions to the contrary which gave a limited interpretation to the scope of the phrase "for the purposes of business or profession" used in section 36(1)(iii). This decision overruled the Bombay High Court decisions in the case of Phaltan Sugar Works Ltd. reported in 208 ITR 989 and 215 ITR 582, and approved the Delhi High Court decision in CIT V. Dalmia Cement (Bharat) Ltd. [2002] 254 ITR 377. 10.11 Subsequent to this decision of the Apex Court, the Dept. filed an SLP against the Delhi High Court's decision in Addl.CIT Vs. Tulips Star Hotels Ltd. reported in 338 ITR 482 wherein the High court had held that the interest liability on loans borrowed to acquire the equity capital of a subsidiary company which was in the same line of business was allowable deduction u/s.36(1)(iii). While admitting the SLP of the Department, the Supreme Court vide order dated 30.4.2012 directed that the earlier view of the Court in S.A. Builders Ltd. vs. CIT should be referred for reconside....
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....The subsidiary incurred losses of Rs.(-)60.51 lakhs in the previous year and Rs.(-) 77.83 lakhs in the current year. The pro rata interest on such advance @12% of Rs. 2,99,15,174 is clearly disallowable in view of SC decision in Tulip Star Hotels Ltd. and also for the reasons discussed in the subsequent paragraphs. 3 Khiranagar Development Pvt. Ltd. Paid on behalf of wholly owned subsidiary engaged in redevelopment of Khiranagar CHS, Santa Cruz, Mumbai for purchasing the flats from the flat holders The appellant company successfully bid for redevelopment tender for Khiranagar Co-operative Housing Soc. In the year 2007. During the year all the expenses/investments towards this project transferred to newly formed subsidiary company & shown as advance in Schedule 9 of the balance sheet. The contention that it is not an interest free advance but transfer of property and is ultimately aimed at improving the business prospect is accepted. 4 Sinew Developers Ltd.(SDL) Paid to Suvarna Sah Bank for release of pledged assets and shares of subsidiary (clearing defects & removal of title encumbrances) in exchange of refund of borrowing. The loan had been taken from the bank for d....
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....e appellant sold its property at Manjari to the outstanding represents amount receivable on sale of property thus it is in the nature of sundry debtors and not advance. The amount actually represents purchase of land through the subsidiary. Vide MOU dated 3/10/2008, the development rights over land for special township in the land belonging to the appellant admeasuring 1 hectare 25.5 ares at Manjri transferred to the subsidiary Rs. 53 crores advanced as against requirement of token amount of Rs. 12 crores until March 2009 as per MOU. The appellant's contention that the amount outstanding represents amount receivable on sale of property has been examined since both the companies were in same line of business, the commercial expediency in purchasing land through subsidiary and partaking of the profits subsequently is established. 10.13 In reaching these conclusions, I am guided by the fact that while a businessman is normally expected to take sound and prudent business decisions (in CIT v. Walchand & Co. (P) Ltd. [1967] 65 ITR 381 (SC) it was observed that yardstick will have to be taken from the businessman point of view but the businessman must be a prudent businessman....
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....ey to a subsidiary and the same is used by the subsidiary for some business purposes, the assessee would, (in the opinion of Supreme Court) ordinarily be entitled to deduction of interest on its borrowed loans" required reconsideration/ review by another bench of the Supreme Court because the commercial expediency aspect cannot be said to have been satisfied merely on the basis of holding/subsidiary relationship, more so when the two companies are independent entities in the eyes of law. The observations of the Court in the context of holding/subsidiary company contained in paragraph 35 of the judgment may not be the ratio decidendi of the decision since the lower Courts' decisions have been set aside/remanded by the Apex Court. If the theory regarding businessman's view point is to prevail and is to be taken to its logical conclusion, then a view could emerge to the effect that there is no need to have elaborate provisions in the Act in regard to allowances of expenditure in a long drawn way by having sections 30 to 43D. 10.15. As discussed at para 10.12 above, it is seen that the interest free advances given to two of the subsidiary companies viz. Riverview Properties ....
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....very heads, lf the receipt falls under a particular head, then, the income from such receipt must be computed in accordance with the provisions under the very head, irrespective of the nature of receipts. The receipts and the expenditure having nexus with each other must be considered under one head only. If the expenditure incurred by the assessee is not allowable under that head, then it cannot be allowed even if it has been incurred by the assessee. On this account also, interest paid on borrowed capital cannot be allowed as there is no foreseeable 'income from business' in the shares held in the subsidiary companies for 'investment' purposes. The Hon'ble Delhi High Court in CIT vs J.K. Synthetics Ltd. reported in 200 Taxman 101 took a view that Section 36(1)(iii) uses the expression "for the purpose of business", while section' 37 contains the expression "laid or expended wholly and exclusively for the purpose-of business" and since the Supreme Court in S.A. Builders v. CIT has equated the two expressions and as a matter of fact applied the test laid down by courts under section 37 to interpret the expression used under section' 36(i)( iii), taking a....
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....issue related to circular trading entered into solely with the idea of' evading tax since the' record indicated, prima facie, that the assessee company had acquired the shares of AEC, through finances arranged mainly from Torrent Group (sister companies) along with two other companies only to enable Torrent Group to acquire and takeover the business of AEC. 10.17 It can be thus seen from the judicial precedents and facts that are elaborately discussed at paras 10.6 to 10.16 that the investments made in the subsidiary companies namely Riverview Properties Pvt. Ltd. and Sinew Developers Ltd. are in the nature of long term investments. The fact borne out from the records show that the appellant's intention was to earn capital gains from their sale and dividends from such holding, Accordingly, the interest expenditure incurred by the appellant for purposes of acquiring these shares cannot be allowed in entirety u/s 36(1)(iii). For the reasons discussed in para 10.12 above it is held that the addition made by the Assessing Officer for disallowing pro-rata interest in respect of interest free advances given to L.K. Developers Pvt. Ltd. and Pune Technopolis Development Pvt.....
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.... advanced as on 31-03-2009 to Riverview Properties Pvt. Ltd. was Rs. 26,75,90,063/- and M/s. Sinew Developers Pvt. Ltd. was Rs. 72,74,39,982/-. Thus total amounts advanced to these two concerns is Rs. 99.49 crores. Referring to the balance sheet of the assessee company as on 31-03-2009, he submitted that the share capital and free reserves of the assessee company as on 31-03-2009 is Rs. 180,90,35,430/-. ( Rs. 172,88,51,035/- as on 31-03-2008). He submitted that since the own capital and free reserves of the assessee company are much higher than the amounts advanced to the above two concerns free of interest, therefore, in view of the decision of Hon'ble Bombay High Court in the case of Reliance Utilities and Power Ltd. reported in 313 ITR 340 and the decision of Pune Bench of the Tribunal in the case of Trinity India Ltd. Vs. DCIT vide ITA No.666/PN/2012 order dated 28-08-2013 no disallowance is called for. 48. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A) to the extent of enhancement of income by Rs. 12,95,32,777/-. So far as deletion of Rs. 58,95,491/- is concerned the Ld. Departmental Representative heavily relied on the order o....
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.... "6. We have carefully considered the rival submissions. Ostensibly, in this case, it was found that assessee had advanced interest-free funds of Rs. 2,44,74,710/- to two sister-concerns as on 31.03.2008. The opening balance of such advances as on 01.04.2007 was Rs. 23,09,460/- and the balance of Rs. 2,21,65,250/- was advanced during the year under A.Y. 2008-09 consideration. On the other hand, assessee incurred interest expenditure of Rs. 2,85,38,397/- on borrowings. The Revenue has disallowed the interest proportionate to the impugned interest-free advances by invoking Section 36(1)(iii) of the Act professing that the same is for non-business purposes. That such advances are for nonbusiness purposes is not an issue for consideration before us inasmuch as the assessee has not disputed the position arrived at by the CIT(A) that such advances are for non-business purposes. However, before us, the disallowance has been sought to be resisted on the basis of the proposition emerging from the judgement of the Hon'ble Bombay High Court in the case of Reliance Utilities & Power Ltd. (supra) whereby it can be said that where an assessee has advanced interest- free funds to the sister ....
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....ess purposes, the aforesaid proposition laid down by the Hon'ble Bombay High Court is not applicable. In our considered opinion, the interpretation placed by the CIT(A) on the judgement of the Hon'ble Bombay High Court is quite misplaced. In- fact, to say that the proposition that where there are funds available both interest-free and interest bearing, then a presumption would arise that investments are out of interest-free only if interest-free are sufficient to cover the investment is a proposition which is available only in a situation where the investments are for business purposes, is wrong. We say so for the reason that if the investments/advances to the sister concerns were for business purposes then the question of disallowance under Section 36(1)(iii) would not arise at all, as Section 36(1)(iii) explicitly permits deduction for the amount of interest paid in respect of capital borrowed for the purposes of business or profession. Once interest is paid in respect of funds used for purposes of business there is no question of its disallowance under Section 36(1)(iii) of the Act and there would not be a necessity to see as to whether the funds advanced to sister conce....
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.... of appeal No.1, 10 and 11 by the Revenue being general in nature are dismissed. 54. In ground of appeal No.2 & 3 the Revenue has challenged the order of the CIT(A) in deleting the addition of Rs. 2,80,224/- made by the Assessing Officer on account of society maintenance charges. 55. Facts of the case, in brief, are that the Assessing Officer during the course of assessment proceedings observed that the assessee has debited an amount of Rs. 2,83,224/- on account of society maintenance charges. On being questioned by the Assessing Officer to justify the same by filing necessary details, the assessee furnished the details on account of society maintenance charges paid for the Project Kumar Surakasha - Rs. 2,83,224/- Project Orion Residency, Park Valencia, Kumar Dhruva, Kumar crystal- Rs. 3,000. It was submitted that the builder has to lookafter the society maintenance activities till the completion of the project and till the society is formed and handedover. 56. However, the Assessing Officer was not satisfied with the explanation given by the assessee. He observed that the assessee has not claimed any income under the head income from business/profession from the Project "Kumar ....