TaxTMI 
TaxTMI 
TaxTMI 
2021 (2) TMI 422
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....nvestment P. Ltd., (2017) [165 ITD 27] (Delhi) (SB) has already decided the same in assessee's favour. The assessee therefore gets relief to this limited extent at this stage. 4. We now advert to the main component of the impugned disallowance. The Assessing Officer's assessment order dt.07- 03-2016 invoked Section 14A r.w. Rule 8D(2)(ii) of the Income Tax Rules in arriving proportionate interest expenditure disallowance of Rs. 3,37,63,307/-. Case records and more particularly para 3.4 of the assessment order suggests that the assessee was found to have made investments of Rs. 17,41,46,612/- relating to its exempt income from dividends to the tune of Rs. 7,91,07,443/- in the relevant previous year. As against that, we notice that it had interest free funds of Rs. 13,02,47,08,990/- representing share capital followed by Rs. 7,49,10,320/- of reserves and surplus; respectively. Meaning thereby that assessee's non-interest bearing funds exceed more than its exempt income's investment. We quote CIT Vs. Reliance Utilities & Power Ltd., [313 ITR 340] and CIT Vs. HDFC Bank Limited [366 ITR 505] (Bom) that the necessary presumption that flow in such an instance is that of utilisation of no....
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....hat the Assessing Officer who is aware of the decision should be aware of the facts and application of such ratio to such facts. What the apex court in fact held is that where the business of the assessee has not commenced and no profit and loss account Is drawn, it is required to assess the interest income separately under the head "other sources" and not in a case where a profit and loss account is drawn. In the appellant's case a profit and loss account is drawn and loss of Rs. 47, 43,37,983/- is claimed. Even if the interest income is assessable under the head "Other sources" once there is loss under the head business the same is permitted to be set off under the provisions of Sec.71. 5.4 I have considered the submissions of the appellant and the findings of the Assessing Officer. There are certain aberrations in the submission of the Appellant. 5.5 To begin, one has to understand the decision of the Hon'ble Apex Court in the case of Tuticorin Alkali Chemicals and Fertilizers Limited vs. CIT 227 ITR 172 (SC), wherein it was held that: "interest earned short term investment of funds borrowed for setting up of factory during construction of factory before commenc....
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....ollowing cases: a) CIT Vs. Autokast, (2000) [248 ITR 110] (SC) : The question that was before the High court, whether, on the facts and in the circumstances of the case, the interest income is not assessable to tax in the hands of the appellant? The Hon'ble High Court answered the question against the revenue and the department was in appeal by special leave. In reference to the Tuticorin Alkali Chemicals and Fertilizers Limited vs. CIT 227 ITR 172 (SC), the civil appeal allowed in favour of the Revenue. In other words, the interest income is assessable to tax in the hands of the assessee and held that the interest which occurred to the assessee was assessable under the head 'Income from other sources' and cannot be set off against preoperative expenses as claimed by the assessee. b) Chandapur Sugar Company Limited vs. CIT (2004) [197 CTR 381] (Allahabad High Court): In this case, the assessee claimed that interest received should be set off against the interest payment. Hence no interest income is assessable in hands. The ITO has rejected the claim and was assessed under Income from other sources. The court held that interest earned by the appellant has rightly b....
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....ng the interest income received as income from business, was obviously made for the purpose of deduction of a major portion of the expenses incurred. The court held it is not sufficient merely to look at the Memorandum of Association and to find out of the business at profits. It is also necessary to determine further whether the particular act done by the company was done in pursuance with the objects enumerated in the Memorandum or Articles of Association. In my opinion on the facts of the case, it is impossible to hold the deposit of the share, money in certain money was an investment made by the appellant to the objects specified by other clause. The appellant was not a banking company, hence money deposited by the company with the business was not in the ordinary course of business. Hence, income received on the deposits cannot be regarded as income under the head Income' from Profit and gains of the business and, this clearly is a Income from other Sources u/s. 56 of the IT Act, 1961. h) In the case of CIT Vs. Seshasayee Paper & Boards Limited, Hon'ble Madras High Court held that "the interest earned by the assessee on investment of share capital in call deposits h....