TaxTMI 
TaxTMI 
2026 (6) TMI 871
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.... 2. Ground of appeal filed by the assessee are reproduced as under: "1. The action of the ld. CIT (A)-42 and assessing officer for disallowing Rs. 2,74,12,700/- claimed as expense u/s 57 of the act is unjust, arbitrary and against the fact as necessary documents were filed serving as an evidence for the claim. 2. The Ld CIT (A) and assessing officer has failed to appreciate the fact that if the amount borrowed would have been repaid in whole then the assessee won't be able to earn interest income. Hence, the claim of expense has a direct nexus with the income earned 3. The Ld CIT (A) and assessing officer has failed to appreciate the fact that in any case the Interest from bank amounting to Rs. 18,99,812/- was earned on borrowed funds which remain unutilized for some period and the assessee has earned interest in his bank account. 4. That the Ld CIT (A) and AO erred on fact and in law in passing the impugned assessment order without appreciating the facts of the case of the appellant. The disallowance of expense claimed under section 57 should be allowed. 5. The action of the Ld CIT (A)-42 and AO for addition made u/s 112(1) of th....
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.... also the ratio of decision in the case of M/s Abhinitha Foundation Pvt Ltd. [2017] 249 Taxman p37 (Madras) was not applicable in the instant case being distinguishable on facts as in that case the assessee had produced details during the course of assessment. 4. The appellant craves to add. amend, modify or alter any grounds of appeal at the time or before the hearing of the appeal." 2.2 As common issues are involved in both these appeals and these are being disposed off by a common order. 3. Brief facts of the case are that the assessee filed his return for A.Y. 2013-14 declaring income of Rs. 1,02,000/-. The case was selected for scrutiny and assessment was completed u/s 143(3) vide order dated 31.03.2016 at an income of Rs. 99,74,85,880/-after making the following additions: (i) Long term capital gain Rs. 96,32,75,392/- (ii) Disallowance out of interest u/s 57(iii) Rs. 3,32,08,483/- (iii) Disallowance of claim of deduction u/s 54F Rs. 1,32,74,74,160/- (iv) Set off of short-term capital loss not allowed Rs. 2,25,85,713/- 3.1 Aggrieved, the assessee preferred an appeal before the CIT(A). vide order dated 08.05.2018, the CIT(A)....
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....sessee has earned interest of Rs. 3,32,08,483/- against which he has claimed deduction of Rs. 3,32,08,483/- u/s 57 reducing the income from other sources to NIL. During the assessment proceedings, the assessee has furnished interest income vide submission dated 21.03.2016 as under:- S. NO. Particulars Amount 1 Interest from M/s Birdie & Birdie Realtors Pvt. Ltd. 3,13,08,671/- 2. Interest from Saving Bank 18,99,812/- Total Interest Earned 3,32,08,483/- 5.4 The appellant made interest payment of Rs. 33,13,86,521/- during the year. The details of the same are tabulated below: S. No. Name & Address of whom loan has been taken Interest paid during the year 1. Adept Creation Pvt. Ltd. 4,64,73,501/- 2. Best Health Care Pvt. Ltd. 7,03,91,277/- 3. Fern Healthcare Pvt. Ltd. 7,03,91,276/- 4. Vitoba cosmetic Pvt. Ltd. 4,55,58,114/- 5. Modland Wears Pvt. Ltd. 1.22.12,566/- 6. RHC Holdings Pvt. Ltd. III 5,44,25,500/- 7. Religare Securities Ltd. 3,19,34,287/- Total 33,13,86,521/- 4.4 The observations of Ld. CIT(A) in respect of the three components o....
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.... 40 Crore:- 5.11 As regards the Loan of Rs. 40 crore, the appellant clarified that the same was advanced to M/s Birdie & Birdie on 07.01.2011 out of sale proceeds of 27.6 lakh shares of REL for a consideration of Rs. 125.58 crore (@Rs.455/- per share) on 07.01.2011. The appellant furthermore explained that 27,60,000 REL shares were sold out of 62,50,000 shares of REL. which were acquired on 02.06.2006 at rate of Rs. 10/-per share out of the borrowed fund of M/s RHC Holdings Pvt Ltd. 5.12 I find that the immediate source of financing loan of Rs. 40 Crore to M/s Birdie & Birdie was out of sale proceeds of REL shares. The appellant contended that the REL shares were purchased on 02.06.2006 out of borrowed funds. I find that the major component of sale proceeds of REL shares on 07.01.2011 include 'capital gain' on sale of shares. Therefore, it is wrong on the part of the appellant to conclude that the loan of Rs. 40 crore to M/s Birdie & Birdie was out of borrowed funds. In other words, there is no interest expenditure incurred by the assessee in order to earn the interest income of Rs. 1,56,71,233/- on loan of Rs. 40 crore to M/s Birdie & Birdie. Since, the a....
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....deposits and FDR's, the assessee has submitted vide letter dated 08/08/2017 that the interest on saving fund account has been earned by the assessee on the amount borrowed by him which remained unutilized in his bank account for few days and saving interest accrued to the assessee on theses borrowed funds which establish direct nexus between the interest paid and the interest earned. The appellant has also submitted the bank statement vide annexure no. 2 of his reply dated 08.09.2017 & detail of bank and FDR interest vide annexure no. 3 of his reply d 22.09.2017. I find that the appellant has borrowed Rs. 100 crore from M/s Religare Securities Ltd. during the subject year and the same amount has been transferred out of the bank account on the same date of receipt of the loan. The plea of the assessee, that the deposits in serving bank account are out of receipt back of funds from Smt. Shabnam Dhillon, which in turn are out of borrowed funds, cannot be accepted in absence of any documentary evidence. Accordingly, I do not find any direct linkage of borrowings with the saving deposits & FDR account. Since, the appellant has failed to meet the basic condition of Section 57(iii) of....
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....l Gain on Sale of Shares (Rs. 96,32,75,392/-) & Ground no. 2 of Revenue's appeal: Allowance of Deduction u/s 54F 5. Brief facts are that the assessee held 96,73,013/- equity shares of M/s Religare Enterprises Ltd. (REL) out of which he gave 31,73,013/- shares to his mother on loan. The AO held the transaction to be a transfer on which Capital Gains were computed by adopting deemed value to consideration by invoking provisions of section 50D of the Act. It was held by the AO that ownership of shares could not have remained with the assessee since shares were transferred to the mother's demat account. 5.1 In appeal, the Ld. CIT(A) agreed with the findings of the assessee and held as under: "7.8 I find that with the dematerialization of share certificates, the moment any share has been transferred from Demat Account of any person to the Demat Account of the other person, the right to sell that particular share lies with the recipient of the share. The transferor of shares has no control on any transaction in respect of the transferred shares once it is transferred out of the demat account of transferor. Therefore, it is evident that right of sale of share has passed ....
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....ngs and modified the Nil returned income, the assessee has subsequently submitted before the CIT(A) that he was entitled to claim the set-off of the loss against the additions made by the AO. The CIT(A), in this regard, has held as under: "9.3 The above issue was referred to the AO vide letter dated 15.11.2017 and reminder dated 25.04.2018 for necessary comments. However, no reply in this regard has been received from the AO till date. I find that in this case the assessee has not made any claim for carry forward of loss and the benefit of set off of loss is to be allowed only for the year under consideration. It may be relevant to note that Section 139(3) of the Income Tax Act provides that the loss if any should be carried forward under sub section 1 of Section 72 or sub section 2 of Section 73 or sub section 2 of Section 73A or sub section 1 or sub section 3 of Section 74, or sub section 3 of Section 74A only if the return of loss has been furnished within time allowed under sub section of 1 of Section 139 of the IT Act. It nowhere bars the set off of loss provided as per the provisions of Section 70 & 71 of the IT Act. Accordingly, the AO is directed to allow the benef....