TaxTMI 
TaxTMI 
2025 (11) TMI 419
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....were selected for scrutiny. The receipt of Rs. 66,00,000/-from M/s. Smile Electronics Limited, in which the assessee was a Director, was treated as salary rejecting the claim of professional/technical service fee. The Assessing Officer held that in the absence of details regarding the nature of professional/technical services rendered to the company, the receipt of the same cannot be considered as income from profession/business. 3. Insofar as the interest of Rs. 45,26,956/- claimed as expenditure against the receipt of Rs. 66,00,000/-, the Assessing Officer held that there is no nexus of incurring interest expenditure for rendering professional service/business to M/s. Smile Electronics Limited. The Assessing Officer further held that unless expenditure is incurred in the course of the business or professional service, the assessee is not entitled to deduction, merely due to it being incurred on the amount borrowed and advanced to M/s. Smile Electronics Limited. Accordingly, the Assessing Officer disallowed both the claims. 4. Aggrieved by the same, the assessee preferred appeal before the Commissioner of Income Tax (Appeals) (for brevity, "the CIT(A)". The CIT(A) concurring....
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....s of the case. 7. Heard the learned counsel Sri. Chandrashekar V. for the appellant and the learned counsel Sri Ravi Raj Y.V. for the respondent and perused the entire appeal papers. 8. The learned counsel for the appellant/assessee contended that the order of the Tribunal is perverse for the reason that the Tribunal has failed to appreciate that after the revenue has held proceedings under Section 206 of the IT Act, the amount received by the assessee partakes the character of the professional charges and thus, it is not open to the revenue to take different contention in the assessment proceedings as both the provisions are highly interlinked. 9. He further contended that the payment received by the assessee was as professional charges and that the same is liable for service tax on reverse charge basis, for which the amount has already been discharged by the company and consequently, holding the same as salary by the I.T. Department in the hands of the appellant is unsustainable in law. 10. According to the learned counsel, there is nothing on record to indicate that the appellant was an employee and as such his income is from the business and not from salary. 11. ....
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....ve parties. 16. On careful perusal of the materials on record, even though the Assessing Officer granted sufficient opportunity to the assessee to place the details/materials and nature of professional and technical services rendered by the assessee to the company, the assessee has failed to produce the same. Without placing any document, the assessee cannot claim that he has rendered the services as a financial expert to the Company and he has received the professional fee and not the salary. 17. Further, the assessee had also been failed to prove the nexus of providing the loan to the Company which was taken in his own name. Hence, it is rightly observed by the Assessing Officer that getting paid by the Company as professional service and claiming that the loan has been taken in his own name leads to the conflict of interest. Further the Assessing Officer and the CIT(A) have rightly considered that when the charges towards professional and technical service rendered is considered as salary, it would be more beneficial for the assessee than the disallowance of interest expenditure. The Tribunal while dismissing the appeals observed in the impugned order in Para 6 to 10-10.4 ....
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....gs of the Income Tax Authorities. 9. We have heard rival submissions and perused the material on record. The issue to be decided are two folds, namely, (i) whether the receipt from company is to be assessed as professional income or salary income; (ii) whether the interest expenditure was allowable as a deduction. The assessee has not submitted the details of nature of professional and technical services rendered to the company. Even before the Tribunal, no efforts were made by the learned AR to substantiate the claim that the amount received by the assessee from the company are professional charges. A director may have duel capacity. He may be both director as well as employee. This principle is enumerated in the judgment of the Hon'ble Apex Court in the case of Ram Prashad v. CIT reported in (1972) 86 ITR 122 (SC). The relevant observation of the Hon'ble Apex Court reads as follows:- "Though an agent as such is not a servant, a servant is generally for some purposes his master's implied agent, the extent of the agency depending upon the duties or position of the servant. It is again true that a director of a company is not a servant....
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....ooks of account that the remuneration paid to the assessee are professional charges and deduction of tax at source is made u/s 194J of the Act is not the determinative to decide in the hands of the assessee whether the remuneration is salary income or income from business or aforesaid. Therefore, we have no hesitation to hold that the reciept from company is nothing but salary income. Moreover, interest expenditure cannot be deducted from the amount received from the company because there is no nexus between them. Only such expenditure which has been incurred wholly and exclusively to earn a particular income is allowable as a deduction from such income. In the instant case, there is no relation whatsoever between the interest expenditure from a mortgaged loan and the payment received for rendering certain services. Advancing interest free loans to the employer company cannot be a ground for claiming deduction of interest expenditure from the salary income received from it. 9.2 The reliance placed by the learned AR on the judgment of the Hon'ble Apex Court in the case of S.A. Builders (supra), is misplaced. The assessee in the case of S.A. Builders case, borrowed funds....
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....s raised this issue before the Tribunal. The learned AR reiterated the submissions made before the Income Tax Authorities. 10.3 The learned Departmental Representative was duly heard. 10.4 We have heard rival submissions and perused the material on record. The CIT(A) has granted partial relief to the assessee by reducing the disallowance u/s 14A of the Act from Rs.4,03,283 to Rs. 1,09,291. The CIT(A) has relied on various judicial pronouncements in granting relief to the assessee. The assessee has not made out a case that the CIT(A)'s order is erroneous. Therefore, we confirm the CIT(A)'s order as correct and in accordance with law. It is ordered accordingly." 18. The judgment relied upon by the learned counsel for the appellant in the case of Durga Kumar Nanda cited supra does not apply to the facts and circumstance of this case for the simple reason that, in the instant case, the assessee has failed to place any details and nature of professional and technical services rendered to the company and also failed to prove nexus with the business carried on by the assessee and raising of loan by mortgaging the assessee's property and advancing it to the....