2017 (5) TMI 1218 - AT - Income Tax

Interest from bank - income from other sources OR income from business - Held that - As nothing has been brought on record to prove that the assessee was in the business of earning interests from fixed deposits, so, we do not want to disturb the finding of the FAA that the interest income was to be assessed under the head income from other sources - Decided against assessee Disallowance made u/s.36(1)(iii) - Held that - FAA held correctly that it had received loan from Federal bank as on 31.3.2008, that it had advanced loans to three entities, that it had paid interest to the bank, that it had advanced loans to other companies without charging any interest,that the borrowed funds were not utilized for the business purposes. Case of Soma Sundaram and Bros (1998 (8) TMI 59 - MADRAS High Court) held that interest paid by the assessee was not allowable u/s. 36(1)(iii) of the Act.- Decided against assessee Disallowance of depreciation - assessee had not carried out any business activity during the year under appeal - Held that - FAA observed that the AO had given a specific opportunity to the assessee to submit complete details for furniture,AC and motor car on which depreciation had been claimed, that no documentary evidences was furnished before him to prove the genuineness of the claim, that even during the appellate proceedings the assessee had filed papers without any evidence of use of the assets for the business,that it had failed to submit to substantiate its claim. Finally,he upheld the order of the AO. As nothing has been produced before us that could lead to the conclusion that decision of the AO/FAA is factually legally incorrect - Decided against assessee Addition made u/s.14A - Held that - FAA after considering the submissions of the assessee and the assessment order held that the provisions of section 14A were applicable for the year under appeal, that assessee had received exempt income. Referring to case of Godrej and Boyce Manufacturing Company Ltd. (2010 (8) TMI 77 - BOMBAY HIGH COURT)the FAA upheld the ad hoc disallowance of ₹ 73, 705/-. There is nothing on record to prove that order of the FAA suffers from any infirmity - Decided against assessee Additional u/s.41 - Held that - As assessee did not file complete details with confirmation,that it had submitted some photocopies without name and address of the parties,that the so-called confirmations were filed without any supporting evidences,that the assessee had stopped its business and liability is had been shown on account of interest payable for the last for many years which was not paid but claimed that expenses in the earlier years, that no documentary evidences had been filed to prove the genuineness of those papers, that for claiming any deduction the onus was on the assessee, that it had failed to submit confirmation of the parties, that it had failed to discharge its onus,that only book-entry was shown as liability, that the provisions of section 41 were applicable to the facts of the case, that the AO had allowed the credit of interest receivable, that the AO were justified in making addition - Decided against assessee Computation under the MAT provisions vis a vis disallowance u/s.14A - Held that - FAA had decided the issue against the assessee following the order of the Tribunal in the case of R B K Shares Broking Ltd.(2013 (12) TMI 74 - ITAT MUMBAI ). Considering the above,we are of the opinion that there is no need to disturb the findings of the FAA. - Decided against assessee

Issues:
1. Classification of interest income from bank as income from other sources instead of income from business.
2. Disallowance under section 36(1)(iii) of the Act.
3. Disallowance of salary and conveyance expenses.
4. Disallowance of depreciation claimed.
5. Addition made under section 14A of the Act.
6. Disallowance under section 41 of the Act.
7. Disallowance of certain expenses.
8. Disallowance of interest expenditure under section 36(1)(iii) of the Act.
9. Disallowance of depreciation claimed.
10. Disallowance under section 14A of the Act.
11. Computation under MAT provisions vis-a-vis disallowance under section 14A of the Act.

Issue 1:
The Appellate Tribunal ITAT Mumbai considered the classification of interest income from a bank as income from other sources instead of income from business. The AO concluded that the interest income was not derived from industrial undertaking/business and had no direct nexus with deposits on which interest was earned, following precedents like Pandian Chemicals and Sterling Food. The First Appellate Authority upheld the AO's decision, determining that the interest income should be assessed under the head income from other sources. The Tribunal dismissed the appeal as no evidence was presented to challenge the factual findings.

Issue 2:
The disallowance under section 36(1)(iii) of the Act was analyzed by the AO, who found a direct nexus between borrowed funds and loans advanced to entities, disallowing the claimed interest amount. The First Appellate Authority concurred, citing cases like Soma Sundaram and M.M. Ali to support the disallowance. The Tribunal upheld the FAA's order, as no new evidence was presented to challenge the factual findings.

Issue 3:
Regarding the disallowance of salary and conveyance expenses, the AO disallowed 50% of the expenses due to lack of supporting evidence. The FAA affirmed this decision, emphasizing the assessee's failure to provide complete details. The Tribunal upheld the FAA's order as no evidence was presented to contest the factual findings.

Issue 4:
The disallowance of depreciation claimed was based on the assessee's failure to show business activity during the year under appeal. The FAA upheld the AO's decision, noting the lack of documentary evidence to substantiate the claim. The Tribunal dismissed the appeal as no evidence was presented to challenge the findings.

Issue 5:
An addition made under section 14A of the Act was scrutinized, with the AO disallowing a specific amount after the assessee received dividend income. The FAA upheld this disallowance, citing the provisions of section 14A and relevant case law. The Tribunal confirmed the FAA's order due to the absence of evidence challenging the decision.

Issue 6:
The disallowance under section 41 of the Act was assessed based on interest accrued and due. The AO and FAA found discrepancies in the documentation provided by the assessee, leading to the disallowance under section 41. The Tribunal upheld the FAA's order, as no evidence was presented to refute the findings.

Issue 7:
The Tribunal dismissed the appeal against the disallowance of certain expenses under the head income from other sources, as no evidence was presented to challenge the FAA's decision.

Issue 8:
The Tribunal dismissed the appeal regarding the disallowance of interest expenditure under section 36(1)(iii) of the Act, following a previous decision for the earlier year.

Issue 9:
The Tribunal dismissed the appeal against the disallowance of depreciation claimed, as there was no evidence to dispute the findings of the AO and FAA.

Issue 10:
The Tribunal upheld the disallowance under section 14A of the Act, as no discrepancies were pointed out by the assessee to challenge the decision.

Issue 11:
The Tribunal confirmed the disallowance under section 14A of the Act, as no evidence was presented to prove the decision was incorrect.

Issue 12:
The Tribunal agreed with the FAA's decision regarding computation under MAT provisions vis-a-vis disallowance under section 14A of the Act, citing a relevant case law. The appeals filed by the assessee for both assessment years were dismissed.

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