AI Drafter 
TaxTMI 
TaxTMI 
2020 (9) TMI 1046
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....e of notice under section 153A and 5). levy of interest under section 234B and 234C. 4. At the time of hearing Ld AR submitted that assessee prefers to press only ground Nos. 1,2 & 3 and not presses ground No. 4 and 5. We are extracting the facts only relating to ground No. 1, 2 and 3. 5. The AO observed that assessee has claimed interest expenses of Rs. 11,98,032/- against the interest income of Rs. 49,50,210/- received from various parties under section 57(iii) of the Act. When the assessee was asked to prove the interest expenditure is out of or expended wholly and exclusively for the purpose of making or earning the income. In this connection assessee submitted as below:- Name of the party Amount of interest Rate of interest Samir N. Bhojani 230833 15.6% Jewel Developers 303333 15% Satellite Developers Ltd 3822329 12% Pure Toners & Developers Pvt. Ltd. 43397 12% Prakash Housing Pvt. Ltd. 341250 16.4% Venus Wines 55068 12% Sukhwani Associates 154000 13.2% Total 4950210 6. He observed that, assessee has paid interest as under: Name of the party Amount of interest Rate of inte....
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....and Developers Private Limited (GIDPL) and who was also a co-owner of the property at Hyde Park from whom Bliss GVS Pharma Ltd (BGVSPL) had purchased the office premises as per agreement dated 07.07.2010. During the course of search, Mr. S. N. Kamath of BGVSPL was confronted on these documents, he stated that they have paid cash of Rs. 1.5 crore to GIDPL and offered the same as additional income for financial year 2010-11. AO observed that in view of the above statement, during the course of assessment proceedings in the case of GIDPL for assessment year 2011-12, when it was asked to explain the documents, GIDPL stated that a sum of Rs. 1.5 crore was received from BGVSPL by way of an RTGS transfer into the bank account and the same was refunded back. In that assessment, AO rejected the contention of GIDPL and observed as below: "First stream of financial transactions is that M/s Bliss GVS Pharma Ltd has purchased office premises No. 102, Hyde Park, Andheri, Mumbai from Ravi Gehi, director of Growmore Investment & Developers Private Limited and other co-owner in the financial year 2010 - 11 and has paid a sum of Rs. 1.5 crore in cash. This and unaccounted cash consideration....
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....t was willing to pay interest at 15% on the said loan. iv. To grab such an opportunity, your appellant had two options of sourcing such funds which are as follows: i. To accept new loans at a lower rate of interest of 9% and lend it to the said Supreme Mega Corporation LLP at the rate of 15% p.a. for investment in the project and in the process earn a differential of 6% p.a., ii. To recall the loans which were given @ 12% to 16% and lend it at the rate of 15% and loose about 1% p.a. or earn only 3% p.a. as a differential. v. The condition for earning a higher rate of interest was that the amount of Rs. 20 crores should be provided in one tranche. With the said intention, appellant tried to raise funds from his known sources and approached the willing lenders to lend money to the extent possible and make up the rest of the funds from his own interest free sources. The appellant had own funds of about Rs. 12 crore and required about Rs. 8 crore from the lenders to make up for the required amount of Rs. 20 crores. vi. With the intent of raising the funds to make up for the deficit, the appellant borrowed Rs. 60,00,000/-from Khoobsurat Ltd. ....
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....d also borrowed money from Khoobsurat Ltd. and Global Capital Market at 9%. However, M/s. Mega Supreme Construction LLP returned the said loans advanced to it by your appellant vide letter dt. 30.06.2010 (Ann 21) stating that it did not want money in instalments. Thus, even after the returning of said cheques, your appellant kept borrowing money @ 9% with intention to have an aggregate amount of Rs. 20 crore and then advancing the same to M/s. Supreme Mega Constructions LLP x. Thus, there was a possible source of income for which the appellant had incurred interest expenses and thus, the said interest of Rs. 11,98,032/- was eligible for deduction u/s. 57(iii) xi. Also, after receiving loan @ 9% from Khoobsurat Ltd. the same was parked in Fixed deposits and then were given as loan to M/s. Supreme Mega Construction LLP. Without prejudice, it is submitted that the deduction of the said interest should at least be given against the interest income earned on fixed deposits. The appellant relies on the following judgements: i) Rajendra prasad NIody, 115 I'M 519(SC) ii) Raj Kuinari Agarwal 47 taxmann.com 88 (Agra-Trib) iii) CIT v M....
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....ction 57 of the Income Tax Act. Kindly see the decision of the Supreme Court in the case of Rajendra Prasad Moody ( 115 ITR 519). 3. The said loans of Sr. No.3 to 6 aggregating to Rs. 1,50,00,000 from the above named persons was utilized for investment in FDR with IOB of Rs. 1,50,00,000/- on 13.07.2010, on which investments in FDR, an interest of Rs. 9,54,661/- was received from bank which interest was taxable and not exempt from taxation. The said interest was included in total interest of FDR with JOB of Rs. 9,54,661/- in filing return of income. Accordingly the interest paid on the above loans was deductible against the receipt of interest of the said FDR with IOB as per provisions . of section 57 of the Income tax Act. Kindly see the decision of the Supreme Court in the case of Rajendra Prasad Moody (115 ITR 519). 7.2. During the appeal proceedings the appellant submitted as under No expenditure incurred to earn an exempt income i. The Ld. A.O. disallowed an amount of Rs. 6,80,760/- by falsely resorting to Clause (iii) of Rule 8D(2) which provides for disallowance of 0.5% of average investment for indirect expenses. ii. Your appellan....
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....as made disallowance under the presumption without providing any basis or finding to arrive at conclusion that expenditure has been incurred to earn exempt income. In the Assessment Order, the Ld. A.O. has stated that it cannot be ruled out that no administrative and other expenses were incurred that facilitated earning of dividend income. ii. The Ld. A.O. has come to such conclusion without even pinpointing or identifying any particular activity or expense which would be considered to be directly attributable and instead chose to provide a routine and generic reason of resorting to Rule 8D. iii. Your kind attention is invited to the provisions of s. 14A of the Income Tax Act. It can be gathered that provisions of s. 14A are based on the principle of matching concept and based on same, the theory of nexus has evolved which implies that there should be direct or indirect link between the expenditure and the income which does not form part of the total income. Thus, only the expenditure which is incurred to earn exempt income has to be excluded as per s. 14A of the Act. iv. There should be proximate relation between the expenditure and the exempt i....
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....nting followed and the books of account maintained were verified and certified by the auditor as per the provisions of Sec 44AB of the Act. While calculating the disallowance u/s 14A the 1d. A.0 did not reject the books of accounts which is a must condition for addition or deletion u/s 145 3. Investment in capital of Partnership Firm to be excluded while calculating average investment as per rule 8D(2)(iii) i. The Appellant has investment in the capital of Everest Developers, Everest Heights, Everest Realtors and Mainlines Realtors LLP, which aggregated to Rs. 44,57,251/- as on 31.03.2011 (Ann 18). While calculating the average investment for the purpose of disallowance u/s. 14A read with Rule 8D, the Ld. A.O. has included the said investment in capital of Partnership Firm and LLP. ii. Such long term investment in capital of Partnership Firm and LLP being strategic in nature is made for furtherance and expansion of one's own business activities. Such passive investment, being trade investments are not made for earning any income per Se, let alone exempt income. The appellant has not incurred any administrative expenses during the year to maintain thes....
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....t directly relatable to taxable income which also needs to be excluded from the definition of component 'A' in the prescribed formula as per rule 8D(2)(ii), and rightly so, because it is only then that common interest expenses, which are to be allocated as indirectly relatable to taxable income and tax exempt income, can be computed. iv. The investment was made by the appellant from his own capital which stood at Rs. 29.96 crore as on 31.03.2011 which was almost twice of the investments made during the year. v. No nexus was ever established by the learned A.O. between the borrowed funds and the investments. Instead he assumed that such investments were made wholly out of borrowed funds. vi. The appellant was never asked to establish such nexus. vii. Where appellant made investment in shares out of its own funds and had sufficient interest free funds to meet its tax free investments yielding exempt income, it could be presumed that such investments were made from interest free funds and not loaned funds and, thus no disallowance under section 14A being can be made. The above contention of the appellant is supported by the following decisio....
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.... Growmore Investments and Developers Pvt. Ltd. by altogether ignoring that his act resulted in flagrant case of double taxation. f. Your appellant relies on the following decision 'which have held that A.O. has to carry out independent inquiry and cannot just act on the direction of the other person: i. Rainee Singh, 125 TTJ 816 (Del.) ii. Atul Jain 212 CTR 42 (Del.) iii. George Williamson Ltd. 258 1TR 126 (Gau.) iv. Mahesh Gum & Oil Industries 292 ITR 397 (Raj.) v. Chuggamal Rajpal 79 ITR 603 (SC) vi. IBM World Trade Corp. 216 ITR 811 (Born.) vii. Bawa Abhay Singh 253 ITR 83 (Del.) viii. United Electrical Co.(P.) Ltd. 258 ITR 317 (Del.) ix. Ganga Saran & Sons. (P.) Ltd. 130 IFR 1 (SC) X. Hindustan Lever Ltd. 268 ITR 322 (Bom.) g. Your appellant very strongly submits that the entire addition made without any basis in the in the manner stated above in violation of natural justice and without any findings of the facts deserves to be quashed. 2. Without prejudice to the aforesaid submission that the addition made by the Ld. A.O. in the manner aforesaid deserves to be quashed....
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....he reverse of the Bills of Exchange. Such sides containing narrations are distinct pieces of documentation; there is no reason to assume otherwise. The appellant cannot be bound to an arbitrary statement written on a photocopied page recovered from a third party's premises. Also, under the provisions of Indian Evidence 1872 the photocopies are not valid pieces of evidence. iv Year of taxation challenged Where paper seized from third party, indicating payment to assessee but did not indicate year or years to which such payments are related, there is no basis to conclude that the amount had been received in the A.Y. 2011-12 and thus the amount cannot be taxed in the impugned assessment year. iv. No third that payments were made or received form the appellant or G1DPL No admission was made by the third party i.e. Shri S. N. Kamath, director of bliss GVS Pharma Pvt. Ltd. that payments were made or received from your appellant or GIDPL. Mr. Kamath vide his Affidavit dt. 18,02.2011 confirmed that the statements given by him under oath on 17.11.2010 were given under duress and confusion. v. Explanation by third party that no transaction too....
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.... that cash money given to Growmore Investments and Developers Pvt. Ltd. is recived back. In fact the cash transaction of Rs. 1_50,00,000/- was in between Bliss GVS Pharma Pvt. Ltd. and myself Mr. Vipul Thakkar. Nowhere _Ws. Growmore Investments and Developers Pvt. Ltd. was involved in the cash transaction of Rs. 1,50,00,000/-. "Therefore, the transaction represented the payment by the said .M/s. Bliss GVS Pharma Pvt. Ltd. (third paty) to the said Mr. Vipul Thakkar (fourth party) and your appellant or GIDPL were nowhere involved in the cash transaction entered in to by them. viii. The explanation of Mr. Vipul Thakkar (fourth party) that he had received money from M/s. Bliss GVS Pharma Pvt. Ltd. (third party) on the strength of loose papers and had returned it back was accepted by the Settlement Commission. Mr. Vipul Thakkar had admitted in his application to the Settlement Commission that Rs. 1,50,00,000/- was taken by him for his personal use, using the name of M/s. Growmore Investments and Developers Pvt. Ltd. and returned the same in cash to M/s. Bliss GVS Pharrna Pvt. Ltd. and therefore, the noting on the backside of the hundies "Received cash with thanks from M/s. Grow....
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....n accepted by the Settlement Commission. M/s. Bliss GVS Pharma Pvt. Ltd. wide its application to the Settlement Commission dt. 05.02.20 13 confirmed as under: "During the course of search, 6 hundies worth Rs. 25 lakh each were seized in the name of the Grownore Investments and Developers Pvt. Ltd. and were inadvertently at the time of search were offered as additional income in the statement recorded u/s]32('4) by Mr. Vipul Thakkar (Finance Manager,) ofM/s. Bliss GVS Pharma Ltd." xii. M/s. Bliss, M/s. Bliss GYS Pharina Pvt. Ltd. had appeared before the Ld. A.O. of GIDPL and confirmed the facts in writing stated by your appellant. Mr. Ka-math vide his letter dt. 25.02.20 11 to Addl. Director of Income Tax(Envt) furnishing the explanation of the seized material gave the following explanation: "These are the discharged hundi papers for an amount of Rs. 1.25 crore. The transaction of loan to Growmore Investments is reflected in the books of accounts of Bliss GVS Pharma Pvt. Ltd. The hand written figures mentioned on the reverse of these pages are cash transactions. We have 'issued a cheque to Growmore Investments and Developers Pvt. Ltd which....
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....into the Bank Account of Growmore Investments and Developers Pvt Ltd with HDFC Bank Ltd (Bombay Scottish School Branch). The RTGS transfer was made by M's. Bliss GVS Pharma Ltd, from their bank account with the Fedral Bank, Dombivali Branch on 29.06.2010." Mr. S. N. Kamath vide his affidavit dt. 18.02.2011 also confirmed that statements recorded under oath were given under duress and confusion. xiv. Without prejudice, the transaction, if any, could have represented receipt of loan and repayment thereof by the said GIDPL not in the nature of any income. Mr. Kamath vide his letter dt. 25.02.2011 to Addl. Director of Income Tax(Invt) furnishing the explanation of the seized material gave the following explanation: "These are the discharged hundi papers for an amount of Rs. 1.25 crore. The transaction of loan to Growrnore Investments is reflected in the books of accounts of Bliss GVS Pharma Pvt. Ltd. The hand written figures mentioned on the reverse of these pages are cash transactions. We have issued a cheque to Growmore Investments and Developers Pvt. Ltd. which is reflected in the regular books of account. Copy of account in books of Bliss GVS Pharma L....
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....nder consideration or in any other year and requests your honour to put the Ld. A.O. to the strictest proof of evidence in support of his action of addition of the said Rs. 75,00,000/- in your appellant's hands. v. Your appellant jointly with his wife had under an agreement for sale dt. 07.07.2010 (Ann 23) sold his rights in premises at unit 102, Hyde Park to the said Bliss GVS Pharma for a consideration of Rs. 4,30,00,000/-. The said agreement was duly stamped and registered and the consideration of Rs. 4.30,00,000/- was much greater than the stamp duty value of Rs. 2,30,45,000/- then prevailing as on the date of the agreement. Please Ann 17 being 'Pavti' (first page of sale agreement) which refers to 'Bazar Mulya' i.e. Stamp Duty Value of Rs. 2,30,45,000/- vi. The appellant had a carpet area of 294.34 sq metres of 102, Hyde Park which was sold at Rs. 146089.56 per sq.metres. It is to be noted that the rates prevailing in the same building on which units of the building were sold by the respective owners on 25.08.2011, 09.09.2011and 22.02.2012 were 94999.52, 91139.04 and 155038.76 respectively which were much lower than the rates sold by your appe....
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....to be accounted. xii. The said Bliss Pharma GVS Pharma Ltd. had explained the contents and the facts of the transaction and therefore they should have been believed by Ld. A.O. 13. After considering the submissions of the assessee, Ld CIT(A) sustained the additions made by the AO by observing as under for the disallowance of interest expenditure, 14A disallowance and undisclosed sales consideration: 6.3. I have carefully examined the facts of the case, the stand taken by the A.O in the assessment order, the grounds of appeal, the written submissions filed by the appellant during the hearing proceedings and the remand report of the A.O. 6.4. I am inclined to agree with the A.O that as per provisions of section 57(iii) of the Act, interest expense can be allowed as a deduction against interest income only when it is shown by the appellant that the interest paid was laid out or expended wholly and exclusively for the purpose of making or earning such income. In this regard, I find that the appellant has made payment of interest of Rs. 11,98,032/- to two parties i.e. MIs. Global markets Ltd and M/s. Khoobsurat Ltd. The borrowing from M/s. Khoobsurat Ltd ha....
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....investment in FDR of Rs. 1 crore out of total FDR made of Rs. 13.75 crores on 30.6.2010. The A.O. is directed to verify the interest received on this FDR of Rs. 1 crore and allow the interest expense on the borrowings made from M/s. Khoobsurat Ltd on 29/6/2010 and 30/6/2010 u/s.57(iii) of the Act. 7.3. I have carefully examined the facts of the case, the stand taken by the A.O in the assessment order, the grounds of appeal, the written submissions filed by the appellant during the hearing proceedings and the remand report of the A.O. 7.4 The appellant is an individual and has income from brokerage, commission and consultancy charges and from partnership firms namely, Everest Developers, Everest Heights and Everest Consultants. It has been admitted that the sale/ purchase of shares were made through brokers. I find that the A.O. has pointed out in the assessment order that some administrative expenditure was definitely attributable towards earning of the dividend income. After considering the claim of the appellant that no expense was incurred for earning of dividend income and the decisions with respect to applicability of section 14A to appellant's case, the ....
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.... any organized business venture. 7.4.2 The appellant has submitted that the A.O should have excluded the investment in capital of partnership firm while considering the average investment to compute disallowance under Rule 802(111). I find that the Appellant has income from the partnership firms and the same are claimed as exempt. So, the A.O has rightly included the same while considering the average investment. Reliance in this regard is placed on the decision of the IAT Mumbai in the case of Dharamsingh M. Popat vs ACIT, 127 TTJ (Mum) 61wherein it was held that since income is charged in the hands of a partnership firm but it is exempt in the hands of a partner, therefore section 14A would be applicable in computing the total income of the such partner in respect of his share in the profits of such firm. 7.4.3 In view of above discussion, the addition made by the A.O under Rule 8D(2)(iii) of Rs. 680,76011- is upheld. So far as the disallowance out of interest expenses is concerned, I am inclined to agree with the appellant that no such disallowance is required u/s.81D 2(u) since the own capital of the appellant is far in excess of the average investment in shar....
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....S Pharma Ltd by way of RTGS transfer to M/s.GIDPL on 29.6.2010 which has been repaid by cheque dated 16.7.2010. This transaction is duly recorded in the books of account. iii) Cash loan of Rs. 1.50 crores given by assessee M/s. GIDPL to M/s. Bliss GVS Pharma Ltd as evidenced from the notings made on the back side of the hundi/ bilis of exchange seized as Annexure A-1 35 to 46. The A.O. has made an addition of Rs. 1.50 crores in the case of GIDPL on account of unexplained investment in view of (iii) above. Further the A.O. has made an addition of Rs. 75 lacs (50% of Rs. 1.50 crores) in the case of the appellant Shri Ravi Gehi in view of (i) above. 8.4.2 I find that the documents seized from the office premise of M/s. Bliss GVS Pharma Ltd at Page No.35 to 46 are photocopies of six bill of exchange containing following details on its front and backside. On the front it is noted as under:- BILL OF EXCHANGE Rs. 25,00,000/- &....
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....liss GVS Pharma Ltd during the course of search u/s.132 on 16.11.2010 in which he stated as under: "I, S.N. Kamath, MD of Bliss Pharma Ltd and Proprietor of GVS Labs do not wish to ask anything or doubt anything as whatever slated by Vipul B Thakkar is correct and appropriate to the best of my know/edge. I have authorized him to state the facts on my behalf and on behalf of Bliss GVS Pharma L(d/G VS Labs (now taken over by BGVS PL since F.Y2OO6-07. (iii) Further in the statement given on 17.11.2010 it has been stated by Shri S.N. Kamath that he voluntarily offered additional income of Rs. 41.05 crores which include additional income of Rs. 1.25 crores in the hands of Bliss GVS Pharma Ltd for the F.Y.2010-11 for the hundies/cash. Subsequently vide letter dated 25.2.2011 it was admitted by Bliss GVS Pharma Ltd that the total_amount Qf hundi was Rs. 1.50 crores. (iv) An affidavit dated 18.2.2011 was flied before the A.O. by Shri S.N. Kamath stating that on 17.11.2010 during the course of search and seizure action a statement of oath was recorded by DGIT (Inv) wherein the answers to questions No.2,3,& 5 were recorded under duress and confusion. (v) i....
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....re A-1 containing pages 1 to 61 seized from the office premises of M/s. BGVSPL during the course of search on 16.11.2010. Please go through these pages and explain the contents re-Corded therein? Ans. Page nos.36,38,40,42,44 and 46 are Bill of exchange for the amount mentioned therein i.e. Rs. 25 lacs each. The same are signed by me in the capacity of Director of Ws. Growmore Investment and Developer Pvt. Ltd. Further, page n-os 35,37,39,41,43 and 45 are not written by me, neither I have any connections with these. It appears that these pages are signed by Mr. Vipul Thakkar of M/s. BGVSPL. I do not have any cash transactions as mentioned on these pages. (vii) An affidavit dated 28.1.2015 was filed by Shri S.N. Kamath in which it has been stated that the said six promissory notes of Rs. 25 lacs each issued b GIDPL as security for advance by Bliss GVS Pharma Ltd by way of RTGS transfer. The transaction of advance was executed at the hands of Mr. Vipul Thakkar who is the finance manager of the company Bliss GVS Pharma Ltd and the said undated promissory notes were kept in his possession. Mr. Vipul Thakkar, on the strength on the above promissory notes took a....
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....te 21.10.2010. These transactions, thus, pertain to sale agreement of 101, Hyde park, which was executed during this period of 23.7.2010 to 21.10.2010, i.e on 21.9.2010. 8.5.2. The sale of 102, Hyde Park has been made vide agreement dated 7.7.2010 and this lies between the period of advancing a sum of Rs. 1.50 crores, by way of RIGS transaction on 29.6.2010 by M/s. Bliss GVS Pharma Ltd to M/s. GIDPL and its return on 16.7.2010. The appellant's submission that the six bills of exchange of Rs. 25 lac each was given by M/s. GIDPL to M/s. Bliss GVS Pharma Ltd as a security is not found acceptable since there is no such mention on the seized document linking the same to the transaction of Rs. 1 50 crores made through banking channel. 8.5.3. Further, in the statement given by Shri S.N. Kamath in the course of search it was clearly admitted that cash payment of Rs. 1.5 crores (on money) was paid by M/s. Bliss GVS Pharma Ltd. In the cross examination Shri S.N. Kamath has admitted that there was an obligation to pay cash and the cheque of Rs. 1.50 crores was given to M/s. Growmore to meet this obligation and when the said obligation of making the cash payment was compl....
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....relating to transaction of the property at 101, Hyde park. Further, the admission of taking Rs. 1.50 crores against the hundies by Shri Thakkar for his personal use is only to explain the notings made on the back side of the hundi regarding receipt of cash by Bliss GVS Pharma Ltd. The fact remains that the hundi of Rs. 1.50 crore came into existence only as an instrument to settle the cash payment by M1/s. Bliss GVS Pharma Ltd to the appellant with respect to the transaction of the property at 102, Hyde park. 8.5.5. The appellant has submitted that no addition could be made in the case of appellant on the basis of documents/ loose papers without establishing that the said documents belong to the appellant. I find that this contention of the appellant may be correct in cases where the A.O invokes section 153C to hold that the document seized from some other searched person belongs to the assessed and then makes the addition. This is not so in this case as the assessment has been made u/s 143(3) by considering the material and evidence available with the A.O in the course of assessment proceedings. In view of above discussion, I am of the considered opinion that the....
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....irect link to the arranging of the funds for lending of funds to Supreme Mega Constructions and incurring interest expenditure. For the above proposition, he relied on the case of Rajendra Prasad Modi 115 ITR 519. Further he submitted that Ld CIT(A) raised the question on primary objective, he submitted that assessee has a primary mandate to arrange funds for making loan to M/s Supreme Mega Constructions and it is evident from the letter issued by them. He prayed that there is no denial that assessee has incurred the interest expenditure by taking or arranging loan from private parties for the purpose of lending the money to M/s Supreme Mega Constructions and prayed for deletion of the disallowance of interest expenditure. 16. With regard to 14A disallowance under rule 8D (2) (iii) relating to administration expenses, he submitted that assessee is an individual and managed investment portfolio without incurring any expenditure and has not made any new investment during this year. He submitted that provisions of section 14A has no application and submitted that this is the first year of disallowance made by AO, no such disallowances was made in any earlier assessment year. 17.....
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.... notice that assessee has received an offer for lending to a property developer for Rs. 20 crores. On the basis of bank statement submitted by the assessee, we notice that assessee has in fact made arrangement for an amount of Rs. 13.8 crores from internal source and also taken loan from other parties @ 9%. There is evidence that assessee has actually paid to M/s Supreme Mega Constructions LLP and there is evidence in the bank statement that assessee has borrowed funds from the parties i.e., M/s Khoobsurat and M/s Satellite Developers Ltd. The transaction with M/s Supreme Mega was not materialized due to the fact that the developer wanted one time payment and not in instalments. No doubt the interest expenditure incurred by the assessee has no link to the interest income earned by the assessee. However we notice that assessee is regularly into arranging funds for the lending business. Since as a continuous venture in earning the interest income, it is not necessary that all the expenditure like interest has to have direct link to earning of interest income. We notice that assessee has sufficient capital to make investment as well as lending the funds to earn interest income. The ob....
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....sultants. Before assessing officer, assessee has submitted that assessee has not incurred any expenditure in earning the above said exempt income. The assessing officer rejected the submissions of the assessee and invoked provisions of section 14A read with rule 8D (2) (iii) to disallow administration of funds of 0.5% of the average total investments as per balance sheet. After considering the submissions of the parties, we notice from the Income and Expenditure Account submitted by the assessee, which is part of paper book at page 27, the assessee has claimed expenditure for the business of brokerage, commission and consultancy charges to the extent of Rs.48,12,889/- (Rs. 86,69,066 - Rs. 38,56,177). The above expenditure includes direct expenditure and administration expenditure. The direct expenditure like sub- brokerage, compensation paid, business promotion expense, advertisement expenses and depreciation. After reducing these expenditure, we found that the administration expenses are only Rs. 15,39,003/-. 23. We notice that assessee has submitted that it has not incurred any expenditure to earn the exempt income, we do not agree with the above submission and no income can b....
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....wmore Investments were found and seized being copies of undated 6 numbers of hundies value of Rs. 25 lakhs each. These were executed between Growmore Investments and Bliss GVS Pharmaceutical and were signed by assessee representing as director of Growmore Investments. There is no dispute as far as the transaction between Growmore Investments and Bliss GVS Pharmaceuticals. When confronted with Shri S.N.Kamath representing M/s Bliss GVS, he confirmed that they have paid the cash of Rs. 1.5 crores to M/s Growmore Investments and offered the same as additional Income for the F.Y 2010-11. 26. When confronted with M/s Growmore Investment to explain the documents, it was stated that they received Rs. 1.5 crores thru RTGS transfer into their bank account and the same was refunded. The AO rejected the contention of the statement from M/s Growmore Investment and the AO, who is common officer for Growmore Investment and assessee, has observed in the assessment order passed u/s 143(3) in the case of Growmore Investment that first stream of financial transaction is that M/s Bliss GVS has purchased office premises No 102, Hyde Park from assessee and other co-owner in the financial year 201....
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..... 29. From the above transactions we noticed that a. Bliss GVS makes cash payment to assessee (an individual) for the on money consideration and there is no evidence whatsoever in the possession of the tax authorities. It is only a presumptions. b. Again Bliss GVS gives loan thru banking channels to Growmore Investments and the loan was closed by repayment again thru banking channel. It does not involve exchange of consideration for both sides. c. Growmore Investments makes cash payment to Bliss GVS. What for? Is there any transaction with Growmore Investment and Bliss GVS. 30. Why should Growmore Investments make cash loan to Bliss GVS? Is it resettlement of cash payment made to assessee on the capacity of individual. Even if it is so, what is that Bliss GVS would get. It purchased property and gives on money by cash and it is refunded back by Growmore Investment by cash. Where is the additional cost to the Bliss GVS on this purchase of property? 31. Come back to the case of assessee, even if accept the findings of revenue authorities that assessee has received on money over and above sale consideration in cash and why should the company, where ....