TaxTMI 
TaxTMI 
2026 (1) TMI 242
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....ho passed the assessment order & Date of order 2566/Del/24 2010-11 NFAC, Delhi 22.03.2024 ITBA/NFAC/S/250/2023-24/1063205290(1) 22.03.2024 DCIT, LTU, New Delhi, 31.01.2013 2567/Del/24 2011-12 NFAC, Delhi 22.03.2024 ITBA/NFAC/S/250/2023-24/1063206067(1)22.03.2024 DCIT, Circle -1, LTU, New Delhi, 31.12.2013 2568/Del/24 2012-13 NFAC, Delhi 22.03.2024 ITBA/NFAC/S/250/2023-24/1063206349(1)22.03.2024 DCIT, Circle -1, LTU, New Delhi, 11.03.2015 2569/D/24 2013-14 NFAC, Delhi 22.03.2024 ITBA/NFAC/S/250/2023-24/1063206656(1)22.03.2024 DCIT, CC-1, New Delhi, dated 07.03.2016 2570/D/24 2015-16 NFAC, Delhi 22.03.2024 ITBA/NFAC/S/250/2023-24/1063206922(1)22.03.2024 DCIT, CC-1, New Delhi, dated 13.12.2017 2571/D/24 2016-17 NFAC, Delhi 22.03.2024 DIN & Order No : ITBA/NFAC/S/250/2023-24/1063207133(1) 22.03.2024 ACIT, CC-1, New Delhi, dated 17.12.2018 2572/D/24 2017-18 NFAC, Delhi 22.03.2024 DIN & Order No : ITBA/NFAC/S/250/2023-24/1063207672(1) 22.03.2024 ACIT, CC-1, New Delhi, dated 19.12.2019 2573/D/24 2018-19 NFAC, Delhi 22.03.2024 DIN & Order No : ITBA/NFAC/S/250/2023-24/1063207944(1) 22.03.2024 NFA....
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.... in energy generation from renewable sources and energy efficiency for sustainable development. 3. During the assessment year 2010-11, the year under consideration, the assessee had total (gross) business income of Rs. 345,25,02,758, from its core business operations of financing, which was, in the audited financial statements, for the purposes of presentation classified in two different schedules as under: Sr. No. Schedule Amount Rs. Pg. No. of PB 1. Schedule K: Income from Operations 320,99,96,239 36 2. Schedule L: Other Income 24,25,06,519 37 Total 345,25,02,758 4. In the previous year relevant to the assessment year 2010-11, the assessee filed return of income on 29.09.2010 declaring total income of Rs. 129,63,24,480/-. In the return of income, the assessee claimed deduction of Rs. 29,53,53,159/- under section 36(1)(viii) of the Act, being 20% of the profits from long-term financing business. Ld. Counsel explained the said deduction was computed as under: (A) Firstly, the assessee only considered Rs. 320,32,47,862 [eligible amount] for the purposes of claiming deduction, i.e., income from operations as....
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....rization of following incomes as 'income from other sources' against 'business income' claimed by the assessee is erroneous. 2(a) Interest on short term deposits. 2(b) Interest on staff loans. 2(c) Incomes under the head business service charges which includes following: Business Service Charges Refund of management fees Rs.78,26,350/- Lead institution fees Rs. 85,453/- Fees based activity Rs.25,10,326/- Miscellaneous Income- others Rs.1,20,26,745/- Interest rate swap income Rs.2,04,96,481/- 7.2 Issue No. 3:The issue arises out of appeal of department as to if, ld. CIT(A) committed error in considering the following incomes as business income against income from other sources held by ld. AO. 3(a) Interest on foreign deposits 3(b) miscellaneous income (transfer from UNDP grant) 7.3 Issue No. 4:Whether the disallowance u/s 14A relevant in AY: 2017-18 and 2018-19 is justified. 7.4 Issue No. 5: Whether the depreciation on building, residential flat at Jungpura, New Delhi is erroneously allowed by Ld. CIT(A). Issue is common in all the appeals of the Revenue. 7.5 Issue No. 6: Whether the ....
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....ead of business income but the fact remains that the primary object of the assessee company is to work as a financial corporation engaged in providing long term finance for industrial or agricultural development or development of infrastructure facility in the form of financial projects in new and renewable sources of energy. Accordingly the corresponding grounds arising out appeals of the department deserve no merit. Same are rejected. Issue No. 2: 9. In regard to this issue it is undisputed that the assessee-company is engaged in the business of promoting, developing and extending financial assistance for setting up projects relating to new and renewable sources of energy and energy efficiency/conservation. The business activities of the assessee, thus, necessarily include the following: * Arranging funds from various sources, like capital, loans, deposits, grants, etc.; * Administering the available funds/ monies optimally to maximize returns and wealth of the stakeholders; * Advancing funds as financial assistance in various forms like capital, loans, debentures, bonds, securities, properties, etc., after processing/ evaluating/ analyzing the pr....
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....on short-term deposits and government securities-also mitigates the cost of interest expenditure payable by the assessee to the bond holders, which in turn would reduce the overall financing cost of the new projects. 10.1 We are satisfied with submissions of ld. Counsel that the act of keeping money with the banks was merely a mode of keeping the available funds as inextricable/ inseparable part of finance/ investment business of the assessee. No doubt in case of a finance/ investment business, funds and fund flow management is the heart and soul of the entire business activity. Such funds inter alia, kept in bank deposits to be utilized progressively for finance and investment activity to third parties. Such funds kept in bank deposits would necessarily yield interest/ other income, which cannot be separated from the principal business of investment and finance. 10.2 It appears that the CIT(A) erroneously applied the principle of "derived from" without appreciating that in so far as the aforesaid streams of income is concerned, the dispute is not at all whether the same is derived from long-term finance eligible for deduction under section 36(1)(viii) of the Act. The CIT(A) ....
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....he Tribunal in the case of Maruti Udyog Limited V. DCIT: [2005] 92 ITD 119 also held assessee wherein it has been held that interest on loan/advances to employees is assessable as 'business income'. 12. Taking the case of income from business service charges, we find that in AY: 2010-11 this head involves the following: Sr. No. Details of Income Amount (a) Refund of management fees Rs. 78,26,350 (b) Lead institution fees Rs.85,453 (c) Fees based activity Rs.25,10,326 (d) Interest rate swap income Rs.2,04,96,481 (e) Miscellaneous income - others Rs.1,20,26,745 Total Rs.4,29,45,355 12.1 As with regard to head of refund of management fee of Rs. 78,26,350:23. The assessee's counsel explained that for carrying out the business activity, the assessee, in addition to financial support from Govt. of India, also secures finance from various bilateral and multilateral agencies such as World Bank, Asian Development Bank (ADB), International Bank for Reconstruction and Development (IBRD), Kreditanstaltfuer Wiederaufbau (KfW) etc. In line with the above policy, the assessee had availed line of credit of Euro 50 million ....
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....d loan or financing deal, covering its significant coordination, structuring, and administrative work and is determined as a fixed percentage of the loan amount, which is separate from standard interest. In the relevant assessment year, the assessee inter-alia earned/ received lead institution fees of Rs. 85,453in terms of a consortium lending agreement entered into with Meenakshi Power, wherein the assessee acted as the lead lender. Such lead institution fees was duly offered to tax as business income by the assessee. 12.3.1 The assessing officer, proceeded to recharacterize the aforesaid amount refunded as income from other sources' and further, the CIT(A) confirmed the aforesaid variation made by the assessing officer on the premise that the assessee was unable to provide any explanation in respect of the said amount. As explained above the lead institution fee of Rs. 85,453 undisputedly has direct nexus with the financing/lending activity of the assessee being earned as part of consortium financial action and directly related to the lending/financing activity undertaken by the assessee. 13. In regard to head of fee based activity, we find that in the course of its len....
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....ct titled "Roadmap for implementation of REC mechanism in India". In this regard, copy of letter dated 04.02.2013 was filed by the assessee before the assessing officer giving detailed explanation on amount received and expended on account of REEEP which is filed @ pages 114 to 117 of the Paper Book (Refer pages 115 to 116).The aforesaid amount of Rs. 16,47,826 being thus received by the assessee in the regular course of its financing business, was rightly offered to tax as business income, and ld. Tax authorities failed to appreciate its true nature. 14. In regard to head of interest rate swap income we find that in the relevant assessment year, the assessee had inter-alia entered into an Interest Rate Swap (IRS) agreement with Standard Chartered Bank for KfW line of credit, denominated in Euros, for hedging purposes on account of which interest Rs. 2,04,96,481/- was earned. The same pertains to currency and interest rate swap availed by the assessee with a view to reduce the burden of high interest rate on the foreign denominated line of credit. The appellant contracted with Standard Chartered Bank whereby the assessee swapped fixed-rate payments for floating-rate payments and....
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....income. Since this surplus is arising out of primary purpose of encouraging Renewable Energy the aforesaid amounts finds direct nexus with the lending/financing activities undertaken by the assessee, the same was rightly offered to tax as business income. We also find substance in contention that even otherwise, the aforesaid amounts being in the nature of capital grants were in any case in the nature of capital receipt, not liable to tax under the provisions of the Act and could not have been assessed to tax under the head 'income from other sources'. 15.2 Interest saving on early repayment of loan has arisen out of differences that surface in the closing balance of the loan accounts as per the assessee and as per the lender banks at the closure of financial year. Such differences occur on account of various reasons such as difference in charge of interest on the outstanding loan amount etc. We find that by offering such differential amount as income, the assessee in essence only reduces its claim of interest expenditure as accounted for in its books of account and in reality, no actual income arises to the assessee. 15.3 Stale cheques reversed has been offered as pa....
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...., when the interest expenditure in respect of all these foreign currency loans was duly allowed as taken by the AO while computing the business profits. The ld. AR has pointed out that in fact in the immediately preceding assessment year 2009-10, loss on interest rate swap amounting to Rs. 4,65,32,259/- was debited to the profit & loss account and claimed as business deduction, which was allowed as such by the assessing officer in the assessment order dated 28.11.2011, passed under Section 143(3) of the Act. 17. Coming to the issue of miscellaneous income transferred from UNDP Hilly Hydro Capital Grant sustained in favour of assessee. The background to same is that the Government of India, had accorded sanction for creation of revolving fund equivalent to $1.4 million and amount equivalent to Rs. 601.44 lacs was disbursed to the assessee in December' 1997 (Financial Year 1997-98). As per the terms and conditions of the sanction letter, the fund had to be primarily utilized to finance, in order of priority, the following small hydroelectric (hydel) projects: (a) Demonstration projects identified and recommended by INDHHP/ MNRE; (b) Other pipeline projects id....
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....0/- essentially represents interest earned on loans advanced by the assessee to small hydro projects in hilly areas and is thus income directly generated from financing and lending activities undertaken by the assessee Accordingly, any interest accruing to the assessee on such grant was inextricably linked with the main business activity undertaken by the assessee which is providing long-term finance to power generation/distribution projects. 17.4 What is material is that in the impugned assessment order dated 31.01.2013 the assessing officer while considering the head of Miscellaneous Income (transfer from UNDP grant) amounting to Rs. 6,46,89,710/- held the same to be taxable under the head "Income from other sources" contrary to "business income" as declared by the assessee. On appeal, the CIT(A) though benefitted the assessee but completely misconceived the facts and presumed that the said amount represented grant received from World Bank for acquiring fixed assets instead of interest accrued on loans advanced to small hydro projects and incorrectly directed the assessing officer to verify as to whether the said amount was reduced by the assessee from the cost of assets purch....
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....ssessing Officer as to how the disallowance made by the assessee on suo moto was incorrect and non of the financials of the assessee have been discussed in that regard while law as stand settled require recording of satisfaction by the Assessing officer to disturb the suo moto disallowance for which relevance can be placed on the decision of Hon'ble Delhi High Court in the case of Coforge Limited Vs. ACIT, 436 ITR 546 (Delhi). Even otherwise when there was no exempt income no disallowance was required. Thus, the issue in corresponding grounds in AY: 2017-18 & 2018-19 raised by the assessee deserves to be sustained. Issue No. 5 19. The issue arises out depreciation of building disallowed during the assessment year 2010-11, the assessee claimed depreciation of Rs. 6,89,411 in respect of building viz., residential flat at Jangpura, New Delhi, which was not yet registered in the name of the assessee. The assessing officer, in the impugned assessment order, disallowed the said claim of depreciation on the ground that the building was not registered in the name of the assessee. On appeal preferred against the aforesaid order, the CIT(A), deleted the disallowance made by the assessi....