TaxTMI 
TaxTMI 
2018 (1) TMI 667
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....l as loans to Subsidiary Companies on interest to be received and therefore the amount of interest received should be reduced by the amount of interest paid on the principles of NETTING OFF. 2. The Learned A.O. as well as Learned CIT(A) have erred in deciding that gross amount of interest paid on loans borrowed should be deducted from PROFIT OF SHIPPING BUSINESS to arrive at shipping profits for the purpose of allowing deduction u/s.33AC of the Act and erred in deciding that interest received from SUBSIDIARY COMPANIES as well as interest received on INTER CORPORATE LOANS and BILLS DISCOUNTING to be considered as Income from Other Sources, overlooking the principles of NETTING OFF and not considering that interest received is on funds utilized from funds borrowed on which interest is paid and therefore amount of interest paid should be deducted from amount of interest received and erred in overlooking the principles of NETTING OFF settled by Supreme Court. 3. LOSS IN BARGE DIVISION . The Learned A.O. as well as Learned CIT(A) have erred in coming to the conclusion that for the purpose of arriving at the profit derived from the business of operation of ship....
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....tion of any facts. We, therefore, admit this additional ground. 4. The assessee again vide letter dated 1st August, 2017 move an application for admission of the following additional grounds: - "1. The Addl. Commissioner of Income-tax, Special Range - 31, Mumbai (hereinafter referred to as the Assessing Officer) erred in treating following incomes aggregating Rs. 3,64,92,593 as income from other sources as against business income considered by the appellants - Sr. No. Particulars Amount (in Rs.) (i) Interest from subsidiary companies Rs. 3,32,89,425 (ii) Interest from securities Rs 1,24,761 (iii) Interest and discounting charges on trade bills Rs. 28,34,996 (iv) Miscellaneous earnings Rs. 2,29,911 (v) Rent Rs. 13,500 Rs. 3,64,92,593 The appellants contend that on the facts and in the circumstances of the case and in law, the action of the Assessing Officer in holding aforesaid incomes as income from other sources is not tenable in law and ought to have been considered as business income. 2. The Assessing Officer has erred in apportioning the interest expense Rs. 1,20,73,....
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....from pages 158 to 161 of the paperbook. We therefore, reduce the addition to Rs. 7,55,931/-. Thus, this ground is partly allowed. 8. Now coming to the additional grounds taken up by the assessee vide letter dated 01.08.2017. Vide its first ground of appeal, the assessee has challenged the interest income received by it as "Income from other sources" as detailed below: A) Interest from Subsidiary Companies: (i) Tolani Bulk Carriers Ltd. Rs. 1,08,39,116/- (ii) Tolani Shipping Co. Ltd. Rs. 65.97,575/- Rs. 1,74,36,691/- B) Other Interest Income (a) Inter Corporate Deposits Rs. 1,38,38,314/- (b) Staff Loan Rs. 2,918/- (c) Income-tax refunds Rs. 20,11,502/- Rs. 1,58,52,734/- Rs.3,32,89,4257- C) Discounting charges on Trade Bills Rs. 28,34,996/- D) Interest on Securities Rs. 1,24,761/- E) Miscellaneous earnings Rs. 2,29,911/- F) Rent received Rs. 13,500/- TOTAL INCOME CONSIDERED AS INCOME FROM OTHER SOURCES Rs.3,64,92,593/- We have heard the rival submiss....
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....sessee, for purchase of ship, M.V PrabhuMihikaa from M/s. Cereza World Line Inc. For a sum of Rs. 82,35,32,699/-. The financing of the ship acquisition included loan taken from the assessee as under: (i) Loan taken by Tolani Bulk Carriers Ltd. From SCICI Ltd. on 6.1.1996 Rs.61,02,11,000/- (ii) Loan from Appellant Company on 24.1.1996 Rs. 5,00,00,000/- (iii) Loan from M/s. Tolani Shipping Co. Ltd. (subsidiary of Appellant Company) on 24.1.1996 Rs. 10,00,00,000/- (iv) Balance from internal sources of Tolani Bulk Carriers Ltd. Rs. 6.33,21.6997- TOTAL Rs.82,35,32,6997- The assessee has given a total loan of Rs. 17,50,00,000/- to Tolani Bulk Carriers Ltd. as under: (i) Out of Loan from SCICI Ltd. (24.1.1996) Rs. 5,00,00,000/- (ii) Out of funds withdrawn from Corporate Deposits and Bill Discounting (23.9.96 to 31.3.97) Rs. 9,50,00,000/- (iii) Out of funds withdrawn from Corporate Deposits and Bill Discounting (1.4.97 to 31.3.98) Rs.3.00,00,000/- TOTAL Rs. 17,50,00,000/- The assessee received interest to the extent of Rs. 1,74,36,691/- from the subsidiary company as well as inter....
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....noted that during the impugned assessment year, the assessee earned dividend and interest from tax free bonds amounting to Rs. 4,69,92,994/- which has been claimed by the assessee to be income exempt from tax. The AO did not dispute the income to that extent to be a tax free income but allocated a sum of Rs. 1,20,73,623/- out of the expenses claimed by the assessee under the head "Income from business" towards earning of this exempt income in the following manner:- "1. Investment in shares and securities (As per Balance Sheet) Rs. 160,131,377/- 2. Total investment of the assessee including investment in current assets (Assets side of Balance sheet) Rs.537,535,849/- 3. Total interest charged to profit and loss account. Rs.247,54,448/- 4. Interest attributable to tax free receipts ( ½ x 3 ) Rs. 73,74,324/- 5. Other expenses attributable to tax free receipt - Take on estimate basis @ 10% of dividend receipt Rs. 4,699,299/- 6. Total interest and expenses attributable to tax free receipt (4 + 5) Rs. 12,073,623/-" It is not a case where the AO has applied the provisions of section 14A but just allocated the various expenses ....