TMI Blog2021 (12) TMI 507X X X X Extracts X X X X X X X X Extracts X X X X ..... d any evidence to prove that the services rendered by him to the company are of professional in nature. The treatment in the company s books 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 factor to decide in the hands of the assessee whether the remuneration is salary income or income from business or profession. Therefore, we have no hesitation to hold that the receipt from company is nothing but salary income. Moreover, the 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. In the instant case, it is not established that funds borro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6, directed the assessee to explain why professional income of ₹ 66 lakh received from M/s.Smile Electronics Limited (SML) (assessee is a Director in SML) should not be treated as income from salary. Further, the assessee was directed to explain how interest expenditure could be deducted from ₹ 66,00,000 received from SML. The assessee filed explanation vide his letter dated 23.03.2016. The assessee explained that he is a financial expert and was advising SML on financial management. It was submitted that professional fees cannot be treated as salary income in absence of employee-employer relationship. In this context, the assessee relied on various judicial pronouncements. Further, as regards the expenditure of ₹ 45,26,956, it was submitted that the assessee had borrowed money by mortgaging his property and amounts so borrowed were advanced to SML. It was stated that the assessee did not receive any interest on the amounts advanced to SML. It was contended that interest paid on borrowed funds is an allowable deduction as per the judgment of the Hon ble Apex Court S.A.Builders Limited v. CIT reported in 288 ITR 1 (SC), since SML had utilized the funds so advanced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18 of the paper book), contended that when one arm of the revenue, namely, Central Excise has treated the payment made by the company to the assessee as professional fees, the Income Tax Department has erred in re-characterizing the same as salary income. As regards the allowability of interest, the learned AR reiterated the submissions made before the Income Tax Authorities. 8. The learned Departmental Representative strongly supported the findings 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 Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement, whereby the assessee receives remuneration from the company is not on record. When an assessee insists that he is rendering professional / technical services to a company, the burden is on him to prove the same. As mentioned earlier, the assessee has not furnished any evidence to prove that the services rendered by him to the company are of professional in nature. The treatment in the company s books 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 factor to decide in the hands of the assessee whether the remuneration is salary income or income from business or profession. Therefore, we have no hesitation to hold that the receipt from company is nothing but salary income. Moreover, the 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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