TaxTMI 
TaxTMI 
2018 (1) TMI 667
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....o 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 ships for computing deduction u/s.33AC, the loss incurred in the opera....
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....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. 1,20,73,623/- to the earning of exempt incomes, namely, dividend and interest on tax-free securities aggregating Rs. 4,69,92,994/-. The appellants co....
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....ssee 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 submission and carefully considered the same along with the orders of the authorities below. We noted that in the computation statement the assessee has considered a sum of Rs. 3,62,62,682/- excluding the sum of Rs. 2,29,911/- considering it as business income other than income from sh....
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....(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 interest on inter-corporate deposit to the extent of Rs. 1,38,38,314/-. The assessee in the computation of income has shown the sum of Rs. 3,64,92,593/- as "Income from business", taken by the AO as "Income from other sources''. We have noted that out of this amount only a sum o Rs. 1,74,36,691/- Rs. 1,38,38,314/- and Rs. 28,34,996/- (on account of dis....
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.... 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 between the exempt income as well as taxable income. It is not denied that the assessee is having own funds to the extent of Rs. 39,74,69,549/- while investment on tax free securities was to the extent of Rs. 16,01,31,377/- as is apparent from page 87 of the paperbook (balance sheet). We noted that the disallowance has simply being made by the AO on estimate basis. In view of the ....