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TMI Blog2016 (1) TMI 1072X X X X Extracts X X X X X X X X Extracts X X X X ..... as a result of the borrowed capital. Where the money borrowed had been utilized for the business purposes as also earning income under the residuary head “income from other sources” the interest paid on the money so borrowed should be bifurcated proportionately between the “business income” and “other source of income” H.K (Investment) Company pvt. Ltd. vs CIT (1993 (12) TMI 19 - GUJARAT High Court ). The totality of facts clearly indicates that the assessee did not establish the nexus between the borrowed funds and the investment so made with a clear intention to conceal the income by furnishing inaccurate particulars of such income, therefore, in our view, penalty was rightly imposed by the Assessing Officer. The stand of the Revenue is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of penalty and even the Assessing Officer has not recorded his satisfaction, during assessment proceedings that the assessee has either concealed the income or furnished inaccurate particulars of such income. Reliance was placed upon the decision in the case of Shri Hafeez S. Contractor vs ACIT (ITA No.6222 and 6223/Mum/2013) order dated 02/09/2015, M/s Sheetal Manufacturing Company vs JCIT (ITA NO.7107/Mum/2011) order dated 28/09/2012, Mehta Brothers Gems Pvt. Ltd. vs ACIT (ITA No.6245/Mum/2010) order dated 25/01/2012 the decision from Hon ble Bombay High Court in CIT vs Reliance Utilities and Power Ltd. 313 ITR 340 (Bom.). 2.1. We have considered the rival submissions and perused the material available on record. The facts, in brief, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noticed that the assessee paid interest of ₹ 13,89,28,290/- on export/import working capital availed from the bank. The stand of the Revenue is that the assessee cannot use such working capital funds for the purposes of making investment to generate tax free income. The Assessing Officer computed the taxable income at ₹ 6,00,65,950/- against the income of ₹ 5,12,99,150/-. It was noticed by the Assessing Officer that the assessee advanced ₹ 12.18 crores for the property in Bharat Diamonds Bourse and ₹ 25 crore for the property in Oshiwara, Mumbai. The amount of ₹ 25 crores was advanced from 09/07/2008 to 26/08/2008. As per the agreement with the developer, in case, if timely possession of the property is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has taken huge borrowed funds on which substantial amount of interest of ₹ 14.17 crores was paid to the bank. It is also noted that the assessee right from assessment stage never proved the nexus of funds advanced towards purchase of property whether the investment was made out of own funds or borrowed funds. It is also noted that the ld. Assessing Officer specifically asked the assessee to prove the nexus of funds advance towards purchase of property which was not proved. It is also undisputed fact that own funds and borrowed funds were kept in the same basket and at any stage, the assessee did not prove that the funds advanced towards purchase of property was out of own funds and not from the borrowed funds. It is noteworthy th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided that any amount of interest paid, in respect of capital borrowed for acquisition of asset for extension of existing business or profession (whether capitalized in the books of accounts or not) for any period beginning from the date on which the capital was borrowed for the acquisition of asset till the date on which such asset was first put to use, shall not be allowed as deduction. Section 36(1)(iii) has to be read on its own terms as it is a code by itself. All that section requires is that the assessee must borrow capital for business purposes, carried out by the assessee in the year of account. Unlike section 37, which expressly excludes an expense of capital nature, section 36(1)(iii) emphasizes the user of the capital and not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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