TaxTMI 
TaxTMI 
2020 (2) TMI 116
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....R 172. ii. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) was right in not adjudicating upon the disallowance made in respect of interest expenses u/s 57 of the IT Act, 1961 on the basis of the fact that the Ld.CIT(A) has treated the interest receipt of Rs. 59,11,170/- as business receipt as against treatment of the same by the Assessing Officer as revenue receipt and taxed under the head income from other sources which is supported by the Apex Court decision in the case of Tuticorin Alkali Chemical & Fertilizers Ltd. V/s CIT (1997) 227 ITR 172. iii. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) was right in treating the interest expenses as WIP when assessee is not engaged in any business activity and neither there was any project during the year under consideration. iv. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) was right in holding that no disallowance u/s 14A is called for once there is no exempt income received or receivable by the assessee in contrary to CBDT Circular No.5/2014 which clarified that the Rule 8D r.w.s. 14A of the Act provides for disallowance of the expenditure ....
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....kepoint Builders Pvt. Ltd. of Rs. 1,34,44,386/- and Rs. 1,09,18,038/- respectively. In respect of the above, the assessee was asked to explain why the interest income and the professional fees should not be brought to tax under the head "income from other sources". In response, the assessee made submissions vide letter dated 23/02/2015 and 12/03/2015 which was considered by the Assessing Officer. The Assessing officer stated that in the assessee's case the ICD's or even shares are not held as stock in trade and so the income derived therefrom cannot be assessed as business income. The interest income earned by the assessee in the ICD's cannot be said to be business income since the assessee is not an NBFC and its business does not include financing. Further, in respect of the Project Management Consultancy Fees the assessing officer accepted the assessee's contention and accepted the same as revenue from business operation of the assessee company. The assessing officer relied on various judicial pronouncements and concluded that the action of the assessee of treating interest income under the head 'Business' as incorrect and accordingly the interest income of Rs....
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.... was not applicable. The assessee stated that it had opted for overdraft facility on which the interest was paid and demand loan was availed on which the interest cost incurred was Rs. 8,92,87,976/-.The assessee further submitted that out of the said interest cost, it had transferred interest expense of Rs. 6,15,25,903 to the project WIP and the balance of Rs. 2,77,62,073 was claimed under the head business. Further, expense of Rs. 50,160 (Bank charges of Rs. 2,298/-, interest on service tax Rs. 12,587/-, and other expenses of Rs. 35,275/-) have been debited to the profit and loss account. The Assessing Officer considered the submissions of the assessee but the same was not accepted by the assessing officer. The Assessing Officer relied on the various decisions of jurisdictional courts and considering the facts of the case invoked the provisions of Rule 8D for computation of attributable expenditure in respect of long- term investments for disallowance under section 14A after considering that interest expenditure directly attributable for such long-term investments. Applying the formula prescribed in Rule 8D, the Assessing Officer computed the expenses attributable for exempt incom....
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....s incurred the said interest as business expenditure. The appellant has made investments in Suadela Constructions Pvt. Ltd. amounting to Rs. 86,96,34,643/-. This is strategic investment with a view to have controlling interest on this company. One of an ancillary object of the appellant company is to control business operation of any other company having similar object and therefore, such investment in share of SCPL was in line with the objects given in MoA of the appellant company. The appellant company is holding 31% shares of SCPL. Further, the appellant has made investment in ICDs in another group company. The borrowings have been invested for the purpose of business. Accordingly, the interest expenditure on the borrowings is expenditure for the purpose of business and therefore, the appellant was of the view that interest expenditure should be allowed to the appellant as business expenditure. 5.2.3 It is noted that the interest receipt of the appellant has been held as income from business as against AO's contention that the same should be treated as income from other sources. When the receipt of interest has been held as income from business then the expenditure of inte....
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....submission in this regard is as under: "1) In A.Y. 2011-12, the paid up share capital of the company was Rs. 2,50,000/-, which has remained unchanged in subsequent year A.Y. 2012-13 under consideration before Hon'ble Tribunal. 2) In A.Y. 2011-12, Unsecured loan from promoters of the group, Shri Surendra Hiranandani stood at Rs. 23.20 crores which went up to Rs. 31.26 crores in A.Y. 2012-13, Rs. 32.56 crores in A.Y. 2013-14 and increased to Rs. 102.85 crores in the last year under consideration. 3) The secured loan from Banks by way of overdraft facility, which was Rs. 82.43 .crores from three Banking Institutions were Rs. 69.63 crores in subsequent year A.Y. 2012-13 and increased to Rs. 76.78 crores in A.Y. 2013-14 and stood at Nil in A.Y. 2014-15. 4)The total borrowings from promoters, other group companies and financial institutions comes to Rs. 105.62 crores in A.Y. 2011-12 stood at Rs. 100.89 crores in A.Y. 2012-13, Rs. 109.34 crores in A.Y. 2013-14 and Rs.lOZ85 crores in A.Y. 2014-15 confirming that overall picture of borrowed funds has remained more or less strategic for all assessment years taken together. 5)The funds detailed above have been invested in constr....
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....appeal has been dismissed by Hon'ble ITAT. 10)The ground of appeal no. 3 challenging the transfer of interest expense as WIP is also covered by the said order of ITAT for A.Y. 2011- 12 where in para nos. 17 and 18 the issue has been decided by Tribunal against the department. 11)The issue of disallowance u/s 14A of the Act is also covered by order of ITAT for A.Y. 2011-12 wherein the disallowance u/s 14A has been deleted on the ground that during the relevant period there was no income that was not chargeable to tax was received by the assessee. This finding has been given in para no.19 to 21 of the order of ITAT. In the assessment year 2012-13 also there is no income earned which is not chargeable to tax. Therefore the matter is covered by the order of ITAT for A.Y. 2011-12. 12) The issue of adjustment of amount of disallowance u/s 14A for calculation of book profit u/s. 115JB of the Act becomes academic because when there is no disallowance u/s 14A there cannot be any adjustment for calculation of book profit In view of the facts narrated above and relying upon the order of Ld. CIT(A) for the A.Ys. 2012-13 where he has categorically admitted that there is no change in....
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....H SOT 627) wherein it was held as under :- "Though the principle of res judicata does not apply to the income-tax proceedings as each year is an independent year of the assessment but in order to maintain consistency, it is a judicially accepted principle that same view should be adopted for the subsequent years, unless there is a material change in the facts". 13. We find from the records that Ld, DR failed to point out that there is no material change in the facts for the instant assessment year with that of previous assessment year. Therefore in these circumstances, we have to abide by the decision of Coordinate Bench of ITAT in the case ofjanak S. Kangwala vs. ACIT (11 SOT 627) in order to maintain judicial discipline and judicial consistency. 14. Apart from above, we also notice that substantial part of the outstanding unsecured loan is from Mr. Surendra Hiranandani, one of the main promoters of the group companies. Further, OD facility of Rs. 79,08,26,609/- is against FD of another group company M/s Hiranandani Township Pvt Ltd, All these facts have not been disputed by the parties, which indicates that assesse company itself was substantial beneficiary of funds from th....
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.... said case that Special Bench had expounded that disallowance under section 14 A cannot be imported for adjusting the book profit under section 115 JB. Hence the order of Ld CITA on this issue is also upheld. Hence this ground raised is also dismissed 15. We shall now take up appeal for assessment years 2013-14 and 2014-15. The common grounds of appeal read as under: "i. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) was right in treating the interest receipt of Rs. 7,56,61,324/- as business receipt as against treatment of the Assessing Officer as revenue receipt and taxed under the head income from other sources which is supported by the Apex Court decision in the case of Tuticorin Alkali Chemical & Fertilizers Ltd. V/s CIT (1997) 227 ITR 172. ii. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) was right in holding that no disallowance u/s 14A is called for once there is no exempt income received or receivable by the assessee in contrary to CBDT Circular No.5/2014 which clarified that the Rule 8D r.w.s. 14A of the Act provides for disallowance of the expenditure even where taxpayer in a particular year has not earned....