TaxTMI 
TaxTMI 
2017 (2) TMI 1293
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....the I.T. Act. It has also claimed exempt profit 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....
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....considering the share application money paid by the assessee for the purpose 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 de....
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.... 12. However, the Ld.CIT(A) dismissed the additional ground raised before him by observing as under : "5.2 I have considered the submission of the appellant but find 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, c....
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....ents. 1.3] Without prejudice, the appellant company further submits that the share application money which is paid out of interest bearing funds should only be considered for the purposes of making 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 groun....
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....further disallowance of Rs. 2,91,01,003/- over and above the disallowance offered by the assessee. While doing so, he included the share application money as tax free investment. Further, the Assessing Officer also considered the investments in partnership 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 r....
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....tments. For the above proposition, he relied on the decision of Hon'ble Bombay High Court in the case of CIT Vs. HDFC Bank Ltd. reported in 366 ITR 505 which has been followed by the Coordinate Bench of the Tribunal in the case of Kolte Patil Developers Ltd.(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 ....
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....irms from which it had earned share of profit which is exempt and interest income. Accordingly, the Assessing Officer enhanced the disallowance by Rs. 2,94,01,003/-. 24. We find in appeal the Ld.CIT(A) rejected the contention of the assessee that the share application 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....
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....then no disallowance u/s.14A can be made. Similar view has been taken by the Hon'ble Delhi High Court in the case of CIT Vs.Holsim India Pvt. Ltd. vide ITA No. 486 and 299/2014 and various other decisions Therefore, we find merit in the argument of the Ld. Counsel for the assessee 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 ....
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.... tax in its respect. Qua merits, we find much force in the assessee's argument that 'share application money', to the extent it is actually so, so that it only represents amount/s paid by way of application for allotment of shares, the same cannot be regarded as an investment in shares, or an asset (or asset 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....
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....nly after the offer is accepted by the company resulting in a concluded contract, the Assessee becomes the shareholder in a company. Till this time the Assessee becomes a shareholder, the assessee cannot have any rights to claim any dividend that may be declared by the company. In such circumstances we are of the view that while working out 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 le....
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....the view of the Income tax Officer that if the assessee had collected the outstandings which were due to it from others, it would have been able to reduce its indebtedness and thus save a part of the interest which it had to pay on its own borrowings. The assessee, therefore, was not justified in allowing its outstandings to remain without charging any interest 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 ded....
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....hat the presumption which has been laid down in Reliance Utilities and Power Ltd. (Supra) with regard to investment in tax free securities coming out of assessee's own funds in case the same are in excess of the investments made in the securities (notwithstanding the fact that the assessee concerned may also have taken some funds on interest) applies, when applying Section 14A of 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....
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....partnership firms, the income of which is tax free, therefore, respectfully following the decision of the Hon'ble Bombay High Court in the case of HDFC Bank Ltd.(Supra) we hold that no disallowance u/s.14A r.w. Rule 8D(2) is called for on account of disallowance of interest. 34. Since the assessee in the instant case has conclusively proved that its own capital and free reserves are much more 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 appell....
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....circumstances arising out of these grounds of appeal. The appellant has claimed TDS of Rs. 2,789/- on interest income of Rs. 13,534/- received from IDBT Bank Ltd. and Rs. 2,69,179/- on interest income of Rs. 12,10,857/- received from State Bank of Travancore. Therefore, having claimed TDS on the interest incomes, there is no reason for the appellant to not offer the corresponding interest income for tax. I therefore see no infirmity 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 o....
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.... under : "10.6. I have given the appellant's submissions the most careful consideration. As per provisions of section 36(1)(iii) of the Act, the interest on loans raised by the assessee for business purposes is available as a business deduction. If the assessee makes a claim to deduction in terms of section 36 for the purpose of computation of income referred to in section 28, he has to place materials in support of his claim of entitlement to the 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....
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.... manner in which it generates income and not that it is diverted towards sister concern free of interest. This would result in not presenting true and correct picture of the accounts of the assessee as at the cost being incurred by the assessee, the sister concern would be enjoying the benefits thereof. It cannot possibly be held that the funds to the extent diverted to sister concerns or other persons free of interest were required by the assessee for the purpose of its business 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 amounti....
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....ication money of Rs. 83.47 lakhs received by the appellant (cannot be diverted for other purposes as per Company Act) and one-time maintenance deposits of Rs. 1.28 crores (refer Schedule 8; collected on behalf of proposed society of flat owners and therefore, a 'current liability') are not interest free funds available for purposes of making the impugned interest free advances, despite' the appellant's claims to the contrary. The figures therefore, clearly show that the appellant did not have sufficient interest 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....
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....xamine whether the amount advanced to the subsidiary or associated company or any other party was advanced as a measure of commercial expediency and not from the point of view whether the amount was advanced for earning profits. It was held that if the holding company advances borrowed money to a subsidiary and the same is used by the subsidiary for some business purposes (which need not necessarily be the business of the assessee itself), the assessee could, ordinarily be entitled to deduction of interest on its borrowed loans. Having 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....
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....ing share application in this subsidiary to the extent of Rs. 8,89,80,000 by withdrawing Rs. 95,00,000 from its capital in the partnership firm Kumar Builders and Rs. 1,59,00,000 as loan from another subsidiary co, Kumar Housing Corporation Ltd (appellant's submissions dated 26.2.2013, reproduced at para 4.5 supra) Further, the appellant has purchased the 32,500 shares at the premium of RS 9230.77 per share, thereby incurring additional cost of Rs. 30 crores. The balance amount of Rs. 26,75,90,063 represents interest free advance, adjusted against allotment of equity. 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 t....
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.... Pvt. Ltd. Development rights of property owned by subsidiary at Manjari Budruk, Pune to be transferred to appellant The appellant has advanced unsecured loan for utilization in investment in land, and the MOU dated 28/05/2008 shows that the subsidiary had clear title over the said property. The balance sheet of the wholly owned subsidiary company shows the unsecured loans from the appellant and the land and development rights under the head "Inventory". The appellant's contention that it is purely a business transaction with the subsidiary is acceptable. 6 L.K.Developers Pvt. Ltd. The 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 outstand....
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....at it is not in every case that interest on borrowed loan has to be allowed if the assessee advances it to a sister concern. It all depends on the facts and circumstances of the respective case. The tax authorities are therefore, entitled to probe the facts and circumstances under which the assessee has made certain interest free advances available to its subsidiaries. The observations of the Apex Court made in para 35 in the case of S.A. Builders Ltd. supra to the effect that "where it is obvious that a holding company has a deep interest in its subsidiary, and, hence, if the holding company advances borrowed money 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 i....
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....om capital gains, as discussed above. This aspect is also considered extremely relevant and critical to the issue at hand. For claiming any deduction under sections 30 to 43D in computing the income of the assessee, the condition precedent is that the income from the connected receipts is computed under the head 'Profits and gains from business or profession'. According to the Scheme of the Income Tax Act, all incomes of the assessee are to be classified under various heads described under section 14 and then income is to be computed under those very heads in accordance with the provisions contained under those 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 fro....
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.... Ltd., Riverview Properties Pvt. Ltd. and Sinew Developers Pvt. Ltd. are classified in the balance sheet as 'long term investments'. Profits on the same, are taxable under the head capital gains, as claimed by the appellant in the current year and also in the A.Y. 2010-11. Dividend income, if any, received is taxable under the head 'income from other sources'. Further, divesting shares at a later date through circular trading is also an issue that cannot be ruled out, as held by the Supreme Court in CIT vs Ashini Lease Finance (P) Ltd. (309 ITR 320] where the court set aside to the Gujarat High Court to examine the 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 Rive....
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....ng the year the details of which are given as under : Sr. No. Advances to subsidiary companies Balance as on 31-03-2009 Advanced during the year 1 Kumar perfumeries Pvt. Ltd. Rs.36,66,96,497 Rs.31,01,00,000 2 River View Properties Pvt. Ltd. Rs.26,75,90,063 Rs.7,75,87,539 3 Khiranagar Development Pvt. Ltd. Rs.19,37,99,436 Rs.19,37,99,436 4 Sinew Developers Ltd. Rs.72,74,39,982 Rs.5,40,95,482 5 Pune Technopolis Development Pvt. Ltd. Rs.5,75,14,834 Rs.5,75,14,000 6 L.K. Developers Pvt. Ltd. Rs.53,06,51,207 Rs.53,05,52,089 Total Rs.214,36,92,019 Rs.122,36,48,546 47. He submitted that the amounts 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....
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....oans to its sister concerns. Accordingly the Assessing Officer had disallowed proportionate interest @12% on the advances so made. Before CIT(A) the assessee made two fold arguments, i.e. (a) the advances were made for business purposes and therefore no disallowance is called for and (b) the assessee had sufficient interest free advances available with it and therefore in view of the decision of Hon'ble Bombay High Court in the case of CIT Vs. Reliance Utilities and Power Ltd. reported in 313 ITR 340 no disallowance of interest is called for. We find the Ld.CIT(A) rejected the above contention of the assessee. On further appeal the Tribunal deleted the disallowance of interest by observing as under : "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 Reven....
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....nterest-free funds. In such a situation, following the judgement of the Hon'ble Bombay High Court the disallowance of interest expenditure made by the Assessing Officer becomes untenable. 7. In-fact, the factual aspects of the said proposition have not been faulted by the CIT(A), though he has not found it fit to apply the said proposition to the assessee's case. As per the discussion made by the CIT(A) in para 5.3.2 it emerges that according to the CIT(A) the aforesaid proposition laid down by the Hon'ble Bombay High Court is applicable only in a situation where the advances/investments are made for business purposes alone. As per the CIT(A) where advances to sister concerns are for non-business 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 c....
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....nces given to the above two concerns are for commercial expediency. So far as the decision of Hon'ble Kerala High Court relied on by the Ld. Departmental Representative in the case of CIT Vs. Baby & Co. Reported in 254 ITR 248 is concerned we find the same is not applicable to the facts of the present case in view of the decision of Hon'ble Bombay High Court in the case of Reliance Utilities and Power Ltd. (supra) and the factual finding given by Ld.CIT(A). We, therefore, do not find any infirmity in the order of the CIT(A) in deleting the disallowance made by the Assessing Officer amounting to Rs. 58,75,491/-. Ground raised by the revenue is accordingly dismissed. ITA No.1636/PUN/2013 (By Revenue) : 53. In ground 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 accoun....
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....Assessing Officer by observing as under : "8.1 Having considered the submissions made by the appellant it is seen that the Assessing Officer has disallowed the expenditure in respect of project Kumar Suraksha on the ground that the same related to a completed project in respect of which the sales have been shown by the appellant in earlier years. However, the appellant is a builder and developer and it is a normal business practice that the builder is responsible for the maintenance of the buildings of a society, even though the flats may have been sold to the flat owners, till such time as the flat owners society or committee is formed and the maintenance of the society is thereafter handed over to the society or committee. The Assessing Officer has not doubted the genuineness of the expenditure nor is it his contention that the expenditure does not relate to the impugned assessment year or that it relates to the prior period. In the context of the business of the appellant and considering the reputation in the market, the society maintenance expenses incurred by the appellant are held to be business expenditure qualifying for deduction u/s.37(1). Ground No.4 therefore, s....