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TMI Blog2018 (11) TMI 793X X X X Extracts X X X X X X X X Extracts X X X X ..... es of earning profit. The lower authorities have disallowed the expenditure because the assessee has not earned any profit from its business activity. The disallowance is on false premise. As mentioned elsewhere, the expenditure has to be incurred for the purpose of business and not for the purposes of earning profit. The expenditure has been incurred in furtherance of business activity of the appellant company and deserves to be allowed. Direct the Assessing Officer to allow expenditure. Taxing of interest earned on fixed deposits - “income from other sources” OR “Profits and gains of business or profession” - Held that:- The fixed deposits were purchased by the appellant company out of share application money received from group concer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 13,59,729/- (i.e. Employees benefit expenses of ₹ 11,48,400/-, Finance cost of ₹ 45,528/-, Depreciation of Rs.l,65,801/-) u/s 37 of the I.T. Act on account of and further erred in sustaining the disallowance of ₹ 7,86,508/- under the head administrative expenses u/s 37 and that too by recording Incorrect facts and findings and without observing the principles of natural justice. 2. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making addition of ₹ 32,31,550/- by treating it as income from other sources instead of income from business profession as claimed by the assessee and that too by recording incorre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Finance cost 45,528 3. Depreciation 1,65,801 4. Administration and other expenses 8,08,490 Total 21,68,219 5. The Assessing Officer was of the opinion that the expenses claimed by the assessee has no relevance with the interest income earned. Therefore, the assessee was asked to justify its claim of expenditure. 6. In its reply, the assessee stated that all the expenses have been incurred wholly for the purpose of business only. The assessee stated that Standby Letter of Credit [SBLC] was taken for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come of the assessee. Since interest income have been earned on bank FDs which were made for the purpose of obtaining SBLC for another company, therefore, interest income was taxed under the head income from other sources . 9. The assessee agitated the matter before the ld. CIT(A) but could get only relief of ₹ 21,910/- and the balance expenditure of ₹ 21,46,309/- was confirmed. 10. Before me, the ld. AR stated that for securing funds from PNB International, London, net worth of the assessee company was not adequate for doing business. Therefore, the assessee company redefined its share business and decided to float another group company i.e. Vishal Cruise Pvt. Ltd. (VCPL) and Passat Kreuzfahrten GmbH (Passat) in Germany ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indings of the Assessing Officer stated that there is no nexus between earning of interest on fixed deposits and claim of expenditure against the same. 9. I have carefully considered the orders of the authorities below. There is no dispute that the appellant company restructured its share business by floating two group companies, namely, M/s Vishal Cruises (P) Ltd. i.e. VCPL and Passat Kreuzfahrten GmbH, Germany. It is also not disputed that the fixed deposits made by the assessee was used for the purposes of obtaining SBLC. This in itself proves that the SBLC was issued by the bank for the business purpose of the assessee company. In my understanding of the facts, promoting business of subsidiaries/group companies in itself is business ..... X X X X Extracts X X X X X X X X Extracts X X X X
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