TaxTMI 
TaxTMI 
TaxTMI 
2016 (1) TMI 1350
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....e remaining interest had nexus with the investment activities. The Ld. AO further erred in treating the interest income of Rs. 19,144/- as business income. 3. For that the Ld AO erred in disallowing Rs. 30,67,213/- from interest and Rs. 5,71,648/- from expenses u/s 14A read with rule 8D when no such expenditure were incurred or claimed and further even otherwise the disallowance of any expenditure under rule 8D was not called for. 4. For that the Ld AO should have allowed deduction of Rs. 31,290/- and Rs. 34,604/- being actual expenditure incurred for earning the short term capital gain. 5. For that the Ld AO erred in treating the receipt of Rs. 4,40,730/- as income from other sources and also was not justified in disallowing the depreciation of Rs. 55,000/- claimed in accordance with law. 6. For that on the facts and circumstances of the case the Ld AO erred in treating the income of Rs. 25,25,508/- as income from other sources and further erred in disallowing the expenses claimed for earning such income. 7. For that the Ld AO erred in disallowing Rs. 12,00,000/- by applying the provisions of section 40(a)(ia) which was not applicable. 8. For that the Ld AO erred in not allo....
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.... was loss to the assessee from the trading of the shares therefore the assessee has claimed the same against the interest income to escape from the tax liability. Besides the above the assessee has shown income from interest for Rs. 19144.00 only as income from other sources which the AO held as income from the business. Accordingly the AO disallowed the interest of Rs. 43,10,083/- which was claimed as an expenditure against the income from the other sources and added to the total income of the assessee. 4. Aggrieved assessee preferred an appeal before Ld. CIT(A) who has upheld the action of AO by observing as under:- " Having considered the finding by the Assessing Officer and submission of the appellant I am of the considered view that the appellant conveniently makes adjustment of interest expenditure against capital gain or interest income or business income as per his own requirements and in the total disregard of the provision of law. In a year if there are profits under the head income from capital gain, the interest expenditure is adjusted against the head, which has been the case in the immediate previous year i.e. 2008-09. During the present assessment year the assessee....
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.... of the Assessing Officer in treating the interest income of Rs. 19,144/- as income from business is also confirmed." Being aggrieved by this order of Ld. CIT(A) assessee preferred second appeal before us. Shri Sunil Surana, Ld. Authorized Representative appearing on behalf of assessee and Md. Ghayas Uddin Ld. Departmental Representative appearing on behalf of Revenue. 5. We have heard both the parties and perused the materials available on record. Before us the Ld. AR has filed a paper book which is running into pages from 1 to 51. Before us the ld. AR submitted that the investment was made out of the borrowed fund only. In the earlier year the same borrowed fund was used in the shares trading business so the deduction was claimed against the capital gain income accordingly. However this year the borrowed fund was used in fixed deposit after the sale of the investment i.e. redemption of mutual funds and refund of unsecured loan. The ld. AR drew our attention on page 20 of the paper book where comparative balance sheet for the year ending March 2008 and March 2009 were furnished. It is clear from the same the FD of Rs. 5 crores was not there in the immediate preceding year but it....
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....old good. As regards the interest income of the assessee on the loan given to a party for an amount of 19,144/- we deem it to classify such income from other sources as the assessee is not into the money lending business. In view of above, we reverse the order of lower authorities. This ground of assessee's appeal is allowed. 6. The second issue raised by the assessee in this appeal is that Ld. CIT(A) erred in confirming the disallowance of Rs. 30,67,213/- and Rs. 5,71,648/- on account of interest expenses and other expenses u/s 14A of the Act read with Rule 8D of the Income Tax Rules 1962. 6.1 During the year under consideration assessee has declared dividend income of Rs. 15,22,890/- being exempted income by virtue of the provisions of section 10(34) & 10(35) of the Act but the assessee did not make any disallowance of the expenses as per the provisions of section 14A read with rule 8D of the IT Rules. During the assessment proceedings it was also seen that the assessee has invested borrowed fund in shares and mutual funds which has given exempted income. The AO called upon the assessee for the justification for not disallowance the expenses in terms of the provisions of sectio....
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....rage value of investment in accordance with Rule 8D of the IT Rule, 1961. Therefore, it is held that there is no merit in the submission of the Ld. A/R of the appellant and the action of the Assessing Officer is confirmed. Hence, Ground No.3 of the appeal is dismissed." Being aggrieved by this order of Ld. CIT(A) assessee preferred second appeal before us. 8. We have heard rival contentions and gone through the facts and circumstances of the case. Before us the ld. AR submitted that the borrowed fund was utilized for part of the year in the share investment business. But the AO has considered the entire interest expenses of Rs. 43.10 lacs for the calculation of disallowance under rule 8D(ii) of Income tax Rules 1962. The ld. AR submitted that the interest pertaining to the period after the creation of FD should not be taken for the purpose of disallowance under rule 8D(ii) of Income tax Rules 1962. Accordingly the AO submitted that the interest expenses of Rs. 26.78 lacs has the direct nexus with the interest income from the bank on FD for Rs. 26.59 lacs and 0.19 lacs being other interest earned on unsecured loan. Therefore the AO should have taken an amount Rs. 16.31 lacs (43.10 ....
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....disallowance, and once that happen, nothing remains for further disallowance u/s. 114A. The disallowance under section 14A can come into play only out of expenses claimed for deduction and expenses have been claimed for deduction, there cannot be any disallowance either. The conclusions arrived at by the CIT(A) are, therefore, correct and admit no interference by us. We, approve and confirm the order of the CIT(A)." Taking a consistent view in the case of M/s Trade Apartment Ltd. (supra) we restore this file to the AO for fresh adjudication as per law with the direction that :- i) Regarding the disallowance as per rule 8D(ii), the net figures of interest should be taken into consideration. ii) Regarding the disallowance as per rule 8D(iii), the disallowance should not exceed the total expenses claimed by the assessee. Hence, in terms of above, this ground of appeal of the assessee is allowed for statistical purposes. 9. The next issue raised by the assessee in this appeal is that Ld CIT(A) erred in treating the receipt of Rs. 4,40,730/- as income from other sources and further erred in disallowing the depreciation of Rs. 55,000/-. 10. The relevant details of the case are that ....
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....rtue of being promoter/director of the company, M/s SAF Fermion Ltd. the assessee became the undue beneficiary of the trade mark developed by the company. The same trade mark was let out to the same company and the assessee received payment for use by the company. As such the trade mark has been used in the business of the company and not the assessee's business. The AO disallowed the depreciation on this ground and held that the whole deal is a collusive deal aimed at defrauding the revenue and unduly enriching the assessee. The assessee is beneficiary of the collusive deal without doing any activity on his own. In light of the facts and circumstances of the case I am of the considered view that such income received by way of collusive deal has rightly been taxed under the head income from other source and the depreciation has rightly been disallowed by the Assessing Officer. Accordingly the action of the AO on this issue is confirmed. Hence, ground no.5 of the appeal is dismissed." Being aggrieved by this order of Ld. CIT(A) assessee preferred second appeal before us. 12. We have heard rival submissions of both the parties and perused the materials available on record. Before u....
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....es and further erred in disallowing expenses incurred for earning such income. 14. Before coming to the specific issue, let us understand the brief history of the case. There are two Pvt. Companies namely M/s SNR Constructions Pvt. Ltd. and M/s SNR builders Pvt. Ltd. Both the companies own a premise in Ballygunge A.C. Market, Kolkata. The said premise was let out to M/s India Bull Security Ltd. and M/s Om Kotak Mahindra Life Insurance in the year 2003. There was also an agreement for the maintenance of the let out property with M/s Essar Fermion Pvt. Ltd which is another group company of the assessee. So the tenants entered into agreement with the company M/s Essar Fermion Pvt. Ltd. for the maintenance services. The maintenance contract was further sublet out by M/s Essar Fermion Pvt. Ltd. to the assessee in his proprietorship concern. The assessee further sublet this contract to M/s S.R. data services Pvt. Ltd. which is actually providing maintenance services to the tenants. During the year the assessee receipts service charges from the tenants for an amount of Rs. 25,25,508/-. The AO observed that the assessee has not rendered any services for receiving the income. So the AO hel....
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....ot arise. In support of his claim the ld. AR submitted the assessment order of the immediate preceding year. However for the disallowance of the expenses the ld. AR submitted that in the last assessment year some of the expenses were disallowed and prayed to disallow the expenses in the same manner. 18.1 From the aforesaid discussion we find that the assessee declared business income from the maintenance activity. But the AO treated the same as income from income from other sources on the ground that the assessee has outsourced the entire activity to a third party. It means that the assessee in the instant case was not actually performing any work of maintenance. The assessee during the year has claimed an expense of Rs. 18.34 lacs towards the maintenance activity. The above said expenses were inclusive of Rs. 12 lacs which were paid to the third party to whom the maintenance work was outsourced. The AO disallowed all the expenses except Rs. 12 lacs. Since the same income has been held as business income of the assessee in the immediate preceding assessment year, we are not inclined to treat the same as income from other sources. Therefore to maintain the consistency we reverse th....
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....dingly, ground No. 7 of the appeal is dismissed." Being aggrieved by this order of Ld. CIT(A) assessee preferred second appeal before us. 21. We have heard rival contentions of both the parties and perused the materials available on record. Before us the ld. AR submitted that Rs. 12 lacs were paid to M/s S.R. Data Services Pvt. Ltd. for the maintenance services. The party has duly disclosed the income in its return of income tax. In support of his claim the assessee has submitted the copy of profit & loss account, computation of income, ITR acknowledgment, intimation under section 143(1) of the Act of the party which are placed at pages- 28, 26, 25 & 24 of the paper book. We find from the aforesaid discussion that the assessee failed to deduct TDS on the maintenance expenses and therefore, the AO disallowed the same and added to the income of the assessee in terms of the provisions of section 40(a)(ia) of the Act. However we find that the party to whom the maintenance charges were paid, have duly disclosed the receipt in its return of income and paid the due taxes on it. Now as per the amended provisions of the Finance Act 2012, the assessee shall not be treated as assessee in de....