9911796707
TMI Blog2019 (7) TMI 1490X X X X Extracts X X X X X X X X Extracts X X X X ..... der consideration the assessee filed its return of income on 25th September 2010, declaring income of Rs. 16,14,158. In the course of assessment proceedings, the Assessing Officer, after calling for various details and examining them, observed that the assessee was in the process of developing Special Economic Zone (SEZ), however, even in the impugned assessment year the whole project is at the stage of work-in-progress. Thus, he was of the view that assessee's business operation has not yet commenced. Further, he observed, assessee's claim of commencement of business was not accepted while completing the assessments in assessment years 2008-09 and 2009-10. Further, he observed, except interest income and profit on redemption of current investment, no other income has been credited to the Profit & Loss account. Thus, ultimately, he concluded that the interest income credited to the Profit & Loss account cannot be treated as business income, but has to be assessed as income from other sources. Consequently, he disallowed various expenditures claimed by the assessee. Being aggrieved with the aforesaid decision of the Assessing Officer, the assessee preferred appeal before the first a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We have considered rival submissions and perused the material on record. Though, the Assessing Officer has treated the interest income received by the assessee as income from other sources on the reasoning that assessee's business has not yet commenced, however, learned Commissioner (Appeals) has given a factual finding that assessee's business has commenced. Further, learned Commissioner (Appeals) has also accepted assessee's claim of interest earned on fixed deposits with bank as business income. The only reason on which he has rejected assessee's claim of interest earned on ICDs as business income is, the assessee is not in money lending business. In our view, the aforesaid reasoning of the learned Commissioner (Appeals) defies logic. There is no dispute that the assessee has parked surplus business funds, which is not immediately required for utilization in business, in short term deposits with bank or IDCs. The entire purpose of such deposits was not to keep the funds idle and earn some income. If the aforesaid reasoning of the assessee is valid for the interest earned on fixed deposits, the same cannot be invalid or unacceptable in case of interest earned on ICDs. When it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peals). 13. We have considered rival submissions and perused the material on record. Undisputedly, learned Commissioner (Appeals) has accepted assessee's claim that its business has already commenced. The only reason on which the learned Commissioner (Appeals) has disallowed interest expenditure on borrowed fund is, it is not directly related to the interest income earned on ICDs. It is a fact on record that the assessee had borrowed the funds for development of the SEZ project. Therefore, the interest on such borrowed funds is allowable as business expenditure. It is also relevant to observe, learned Commissioner (Appeals) has accepted that the assessee had mixed funds. On a careful perusal of the order of learned Commissioner (Appeals), it is also noticed that he has completely overlooked assessee's main claim that the interest expenditure should be allowed as business expenditure. When there is no dispute that the borrowed funds were utilized for the purpose of business, the interest expenditure on such borrowed funds has to be allowed as business expenditure. In any case of the matter, since while deciding ground no.1, we have held that the interest earned on ICDs is to be tre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 693 of 2015, judgment dated 21st November 2017. In view of the aforesaid, we delete the disallowance made by the Assessing Officer and sustained by learned Commissioner (Appeals). This ground is allowed. 18. Grounds no.6, 7 and 8, being general in nature, no separate adjudication is required, hence, dismissed. 19. In addition to the aforesaid grounds, the assessee, vide letter dated 4th July 2019, has raised the following additional grounds:- "The CIT(A) erred in confirming the view of the Assessing Officer in disallowing differential interest of Rs. 44,23,836, without appreciating the facts of the case placed before him during the appellant proceedings." 20. At the outset, we must observe that the issue raised in the additional ground arises out of the order of the Departmental Authorities. Therefore, the additional ground is admitted for adjudication. 21. Brief facts are, during the assessment proceedings, the Assessing Officer noticed that while the assessee has borrowed funds by paying interest @ 8%, it has made investment by way of ICDs in a sister concern viz. Dharti Investments and Holdings Ltd. @ 6%. Relying upon the assessment order passed for the assessment year 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed. Additional ground is allowed. 26. In the result, assessee's appeal is partly allowed. ITA no.2830/Mum./2017 Revenue's Appeal - A.Y. 2011-12 27. The Revenue has filed this appeal being aggrieved with the decision of learned Commissioner (Appeals) in holding that assessee's business has commenced. 28. It is relevant to observe, while deciding assessee's appeal in assessment year 2003-04, the Tribunal has held that assessee's business has already commenced. Following the aforesaid decision of the Tribunal, learned Commissioner (Appeals) while deciding the assessee's appeal for the assessment year 2010-11 and 2011-12 has held that assessee's business has commenced since the assessment year 2003-04. In fact, the aforesaid decision of learned Commissioner (Appeals) has been accepted by the Revenue in assessment year 2010-11. In view of the aforesaid, we do not find any infirmity in the order of the learned Commissioner (Appeals). Ground is dismissed. 29. In the result, Revenue's appeal is dismissed. ITA no.3073/Mum./2017 Assessee's Appeal - A.Y. 2011-12 30. Ground no.1, is identical to ground no.1 of ITA no.4939/Mum./ 2014, decided in the earlier part of the order. Fol ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
