TaxTMI 
TaxTMI 
2023 (2) TMI 250
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....4.2011 vide order dated 22.08.2013 of Hon'ble High Court of Madras. The assessee is stated to be engaged in making strategic investments in real estate space and having objective to invest in large projects both in commercial and residential space. The assessee's case was reopened for this year and an assessment was framed after making certain additions. The same was confirmed by Ld. CIT(A). Aggrieved, the assessee is in further appeal before us. 1.2 The grounds raised by the assessee read as under: The order passed by the Commissioner of Income-tax Appeals ["CIT(A)"] under section 250(6) of the Income-tax Act, 1961 (" the Act") confirming the order of the Assessing Officer ("AO") passed is not in accordance with law, contrary to the facts and circumstances of the present case and is in violation of principles of equity and natural justice. Treatment of compensation as interest income 2.1 The learned CIT(A) and AO failed to appreciate that the real intent of the agreement entered by the appellant with Sahara India Commercial Corporation Limited ("SICCL") was to derive value by execution of larger project, which on completion would have reflected on the appellant's abilit....
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....come, certain amount of expenses need to be spent, thereby, erred in not allowing any expense against the income determined. As is evident, the grievance of the assessee is two-fold i.e., (i) Treatment of compensation as interest income; (ii) Head of income under which interest earned by the assessee would be assessable. 1.3 The Ld. AR advanced arguments assailing the findings rendered in impugned order which has been controverted by Ld. CIT-DR. Having heard rival submissions and after perusal of case records, the appeal is disposed-off as under. 2. Assessment Proceedings 2.1 The original return of income filed by the assessee at Rs.218.71 Lacs was processed u/s 143(1). However, the case was reopened pursuant to survey action u/s 133A on 22.07.2010 and accordingly, an assessment was framed u/s 143(3) r.w.s. 147 on 22.12.2011 determining the income of Rs.3228.71 Lacs. 2.2 The survey findings revealed that the assessee entered into a transaction with M/s Sahara India Commercial Corporation Ltd. (SICCL) and received compensation of Rs.35 Crores in AY 2008-09 which has been treated by the assessee as capital receipt and not offered to tax. The same is the subject matter of this ap....
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.... lands, shares, demand promissory note, post dated cheques etc in favour of the loan facility arrangements. f. It was clearly spelt about the return on the loan facility (Clause 5) and agreed for an annual Return of Rs.135 crores for Rs.400 crores loan or in proportion to the Disbursed loans, pro-rated Return shall be payable by the Borrower to the Lender, Further it was stated that the return shall be calculated on the basis of number of days elapsed from Drawdown Date. g. The non-payment of the facility and the appropriate return accrued will result in unrestricted right to the lender to transfer or sell the securities offered that too without the intervention of court, (Clause 6.1,2). h. The details of all securities to be offered in favour of loan facility is inclusive of the Deposit of the Title Deeds of the Immovable Properties (Clause 7). i. Further, the Borrower covenants with the Lender that, it shall utilize the amounts borrowed under the Facility only for the business purpose of the Borrower (Clause 10). j. The conditions under Clause 13.4 on further assurances & undertakings do not vitiate the loan facility and in fact it is in the nature of an additional prot....
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.... has entered into a facility agreement with SICCL to acquire rights in land held by that group. The assessee committed financial participation to the extent of Rs.400 Crores to acquire the rights. The terms could not fructify and the assessee is stated to have received compensation of Rs.35 Crores as a compensation for breach of specific performance of the agreement. The same was claimed to be a capital receipt. However, Ld. AO, after analyzing the terms of the agreement, came to a conclusion that it was merely a loan facility agreement for extending the loan to borrower by the assessee. The sum was advanced as inter-corporate deposit at the urgent need of the borrower. The assessee was to receive annual return of Rs.135 Crores for Rs.400 Crores of loan based on number of days from drawdown dates. The non-payment would result into unrestricted right to the lender to transfer or sell the securities offered. The funds so borrowed were to be used for the business purposes of the borrowers. As against this, the assessee did not recognize any revenue during this year since the inception of agreement on 29.12.2006. It was clear that the assessee did not lose any source of income or any p....
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....n as for AY 2007-08, shall mutatis-mutandis apply to this year also. The interest income would be assessable as 'Business income' and the assessee would be eligible to claim business expenditure against the same. The corresponding grounds as well as the appeal stands partly allowed. 8. Another issue in this year is of factoring charges. The assessee claimed factoring charges of Rs.782.68 Lacs in the Profit & Loss Account. It transpired that the assessee took unsecured loan from its holding company M/s Siva Ventures Ltd. (SVL) and advanced the same to its subsidiary company M/s Vantage Reality Pvt. Ltd. (VRPL). The assessee also obtained loan of Rs.100 Crores from M/s Easy Access financial Services Ltd. (EAFSL) and paid factoring charges of Rs.782.68 Lacs by pledging receivables from M/s VRPL. The Ld. AO held that factoring charges was nothing but interest and therefore, the deduction of which would not be allowed to the assessee in terms of Sec.40(a)(ia), inter-alia, for want of deduction of tax at source. The Ld. CIT(A) confirmed the stand of Ld. AO against which the assessee is in further appeal before us. 9. From the facts, it emerges that the assessee has availed factoring fa....