AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (10) TMI 789
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....UMSTANCES OF CASE LEARNED CIT APPEAL HAS ERRED IN NOT ADJUDICATING ADDITIONAL GROUND BEEN INTEREST PAID TO LIC ON BORROWED MONEY BEING USED FOR BUSINESS. 2. THE LEARNED CIT APPEAL HAS FAILED TO APPRECIATE THAT INTEREST PAID TO LIC ON LOAN IS DISCUSSED IN DETAIL IN OUR LETTER DATED 06/06/2016 AND RELEVANT DOCUMENTS ARE FILED AND MATTER DISCUSSED WITH CIT APPEAL. 3. THE LEARNED CIT APPEAL HAS INCORRECTLY REJECTED APPLICATION FOR RECTIFICATION. 4. THE LEARNED CIT APPEAL HAS ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST EXPENSE ON GROUND THAT SAME IS USED TO EARN THE TAX FREE DIVIDEND IN AS MUCH AS ASSESSEE HAS INVESTED HIS OWN MONEY IN SHARE INVESTMENT. 5. THE LEARNED CIT APPEAL HAS INCORRECTLY HELD THAT BUSINESS IS COMPOSITE AND INDIVISIBLE AND AS SUCH APPLICATION OF SECTION 14A IS ILLEGAL. 6. THE LEARNED CIT APPEAL HAS FAILED TO APPRECIATE THAT ASSESSEE HAS USED HIS OWN CAPITAL FOR INVESTMENT IN SHARES AND HAS NOT USED BORROWED MONEY AND AS SUCH APPLICATION OF SECTION 14A IS ILLEGAL. 7. THE LEARNED CIT APPEAL HAS FAILED TO APPRECIATE THAT ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE TO EARN TAX FREE DIVIDEND INCOME AND AS SUCH APPLICATION OF SECTION 14A IS ILLEGAL. ....
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....ules, the assessee filed first appeal before Ld.CIT(A) who dismissed the appeal of the assessee and confirmed the additions as were made by the AO, vide appellate order dated 01/07/2016 passed by learned CIT(A). The learned CIT(A) held that no disallowance of interest expenditure incurred in relation to earning of an exempt income was made by the AO u/s 14A of the 1961 Act read with Rule 8D(2)(ii) of the 1962 Rules nor any direct expenses were disallowed under Section 14A read with Rule 8D(2)(i) of the 1962 Rules, rather the AO invoked Section 14A read with Rule 8D(2)(iii) of the 1962 Rules to make disallowance of expenditure incurred in relation to earning of an exempt income computed by applying formula prescribed @ 0.5% of average investment held by the assessee for the year ended 31.03.2010. The learned CIT(A) held that the business of the assessee is indivisible and composite and total income included both exempt and taxable income. The learned CIT(A) held that once business is composite and indivisible, and an expenditure incurred by the assessee are composite indirect expenses as is evident from composite financial statements , the disallowance of the expenditure incurred in....
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....ited financial statements of the assessee for the relevant period which is placed in file, we have observed that the assessee has it is own capital of Rs. 11.40 crores . We have observed from the audited Balance Sheet, Computation of income filed, Drawings Account and other financial data's which are placed on record that the assessee has claimed interest expenditure to the tune of Rs. 62.46 lacs as deduction from interest income of Rs. 59.60 lacs earned from partnership firm M/s Ritesh Exports.The assessee also claimed as deduction towards Securities Transaction Tax paid of Rs. 87079/- from Profit in Futures and Options segment of NSE. Apart from the above deductions, the assessee has also claimed deduction of Rs. 2, 100/- towards Professional Fee u/s 37(1) and Audit fees of Rs. 6000/- , from income from commission and Brokerage Received. Apart from above expenses, there are certain expenses incurred by the assessee but the same were debited to Drawings Account meaning thereby no deduction of expenses from income are claimed by the assessee consequently resulting in no prejudice to Revenue thereby warranting no disallowance u/s 14A of the 1961 Act as no prejudice is caused to Reve....
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....artnership firm M/s Ritesh Exports . The AO rejected the contentions of the assessee and did not allow the assessee to adjust interest paid to LIC on loans taken against the interest income from partnership firm, vide assessment order dated 31.12.2012 passed by the AO u/s 143(3) of the 1961 Act. 8. The assessee filed first appeal before the Ld. CIT(A) . The Ld. CIT(A) did not gave any finding on this issue while adjudicating assessee's appeal vide appellate order dated 01-07-2016. The assessee filed rectification application before the Ld. CIT(A) agitating the non adjudication of the issue by learned CIT(A) of non allowability of interest paid on LIC loans but the said rectification application was dismissed by Ld. CIT(A) vide orders dated 30-09-2016 by holding that since no grounds of appeal were raised by the assessee before the Ld. CIT(A) in its first appeal and hence the same was not adjudicated by learned CIT(A). The learned CIT(A) noted in its rectification order dated 30-09-2016 that the AO considered the claim of the assessee but rejected the same. 9. The assessee has now raised this ground of allowability of interest paid on LIC Loans before us and prayer is made to adju....
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....not made in the assessment order in computation of income but rather interest income of Rs. 59, 60, 000/- was reduced to NIL after allowing adjustment of Rs. 59, 60, 000/- towards interest expenditure as against claim of deduction of Rs. 62, 46, 604/- made by the assessee . Thereafter again a disallowance of Rs. 4, 22, 202/- is separately made on account of interest payment made on borrowings which were purported to be utilised for granting interest free loans and advances to relatives and sister concerns. The manner in which computation of income is drawn by the AO in pursuance to assessment framed is definitely not free from state of confusion. This could possibly be the reason for the assessee not raising the specific grounds of appeal before learned CIT(A) in first appeal . The assessee albeit raised this issue in pleadings/submissions before learned CIT(A) but specific ground of appeal was not raised before learned CIT(A). Immediately after receipt of learned CIT(A) appellate order, the assessee filed rectification application dated 12-09-2016 before learned CIT(A). The assessee is also contending the same before learned CIT(A) in its rectification application dated 12-09-2016....
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....of the 1961 Act. 12. The assessee filed first appeal before learned Ld. CIT(A) who dismissed the appeal of the assessee vide appellate order dated 01-07-2016 . The assessee has claimed that it has own funds to the tune of Rs. 11.40 crores and borrowings free of interest were to the tune of Rs. 1.21 crores were also available with the assessee, and it was submitted that the interest free loans and advances advanced to sister concerns and relatives were to the tune of Rs. 46.91 lacs only. It was claimed that no borrowed funds were used to advance aforesaid interest free loans and advances to sister concerns and relatives. The above contentions did not found favour with learned CIT(A) who dismissed appeal of the assessee vide appellate order dated 01-07-2016 and learned CIT(A) upheld the disallowance of interest expenditure u/s 36(1)(iii) of the 1961 Act to the tune of Rs. 4, 22, 202/- as was made by the AO. 13. Aggrieved by the appellate order passed by learned CIT(A), the assessee has filed second appeal with the tribunal. 14. The contentions are raised by learned counsel for the assessee that interest free own funds available with the assessee are to the tune of Rs. 11.40 crores....