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TMI Blog2020 (3) TMI 429X X X X Extracts X X X X X X X X Extracts X X X X ..... dmitted factual position is that though the Assessee was a partner in two firms, it did not receive any share income from those firms and therefore there was no income which does not form part of the total income under Chapter III of the Act that was earned by the Assessee. The Assessee also did not earn any other exempt income, more importantly any dividend income. Perusal of the return of income filed by the Assessee shows that the Assessee has earned no income which does not form part of the total income under the Act. The Profit and Loss Account of the Assessee also shows that it had not earned any income like dividend or share income from firm of which it was partner. It was submission of the Assessee before the CIT(A) that the Assessee has not earned any income which is exempt. The CIT(A) in his order while dealing with a decision of Hon'ble Delhi High Court in the case of Cheminvest Ltd. Vs. CIT 378 ITR 3 (Delhi) cited by the Assessee before him, in which it was held that if there is no exempt income then there can be no disallowance of expenditure u/s.14A of the Act, merely observed that the Assessee earned share income from partnership which is exempt. In paragraph 5.2 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e had been earned by the assessee in the relevant assessment year ? The court referred to the decision of this court in Maxopp Investment Ltd. (supra) and to the decision of the Special Bench of the Income-tax Appellate Tribunal in this very case, i.e., Cheminvest Ltd. v. CIT [2009] 317 !TR (AT) 86 (Delhi) [SB]. The court also referred to three decisions of different High Courts which have decided the issue against Revenue. The first was the decision in CIT v. Lakhani Marketing Incl. (decision dated April 2, 2014, of the High Court of Punjab and Haryana in I. T. A. No. 970 of 2008)--since reported in [2015] 4 ITR-OL 246 (P&H)-- which in turn referred to two earlier decisions of the same court in CIT v. Hero Cycles Ltd. [2010] 323 ITR 518 (P&H) and CIT v. Winsome Textile Industries Ltd. [2009] 319 ITR 204 (P&H). The second was of the Gujarat High Court in CIT v. Corrtech Energy (P.) Ltd. [2014] 223 Taxmann 130 (Guj) ; [2015] 372 1TR 97 (Guj) and the third of the Allahabad High Court in CIT v. Shivam Motors (P) Ltd. (decision dated 5th May, 2014, in T.A. No. 88 of ITA No.1 1071Bang12016 2014). These three decisions reiterated the position that when an assessee had not earned any taxa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e following interest free loan to the following related parties:- 9. Since borrowed funds on which interest was paid was not used for the purpose of business but used for giving interest free loan to sister concerns, the AO disallowed interest expenditure to the extent of such diversion of funds for non-business purpose i.e., to the extent of Rs. 1,62,30,738/- as given in the chart above. The same was added to the total income of the Assessee. 10. Before CIT(Appeals), the Assessee submitted that it had, its own funds in the form of share capital, free reserves, interest free rental deposits from tenant when interest free advances were given to the related parties and therefore the borrowed funds on which interest was paid cannot be said to have been not used for the purpose of business of the Assessee. The Assessee could not demonstrate before CIT(A) nor before the Tribunal, the correctness of the aforesaid plea. Apart from the above, the Assessee submitted that each and every loan given to the related parties were given for the purpose of business of the Assessee only. We shall deal with each of the 9 related parties, whose details are given in the chart given in the earlier pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies or before the Tribunal and therefore the order of the CIT(A), in so far as these two parties are concerned, is also confirmed. 13. As far as interest free loan to Global Biz Prop Ventures Pvt.Ltd., is concerned, the plea of the Assessee was that this company was a group company and did not have sufficient funds to maintain minimum balance with ICIC Bank, Bangalore-1. Therefore the interest free loan was given so that the image of the Assessee in the eyes of the public does not suffer. In our view this explanation was rightly rejected by the CIT(A) because the business purpose of the interest free loan has not been established by the Assessee. 14. As far as interest free loan to Mysore Logistics Pvt.Ltd., is concerned, the plea of the Assessee was that the loan was given by it to Mysore Logistics Pvt.Ltd., to enable the later to make payment to Karnataka Udyog Mitra for the purpose of paying fees for single window clearance for setting up Logistic Park at Bhaktipura and the project was to be developed by the Assessee. The aforesaid claim has not been substantiated with any credible evidence whatsoever, except the selfserving statement of the Assessee. What is Assessee's intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land. So giving advance for purchase of agricultural land cannot be considered as to be for the purpose of the business of the appellant. The argument of the appellant is that the Director would transfer such land after obtaining necessary 'change of land use' is also without any merit. By making this argument the appellant is admitting that it is circumventing the law of land by such means. Further this is just a presumption of the appellant that the Government would allow it change of land use for business purposes. So the advance given by the appellant to its Director cannot be considered as business exigency of the appellant. Further the land meant to be purchased would not be used for the existing business of the appellant but for the purpose of expansion of its business and any expenditure in relation to that can only be of capital nature and not revenue expense. So even on this account proportionate expenditure on account of interest would need to be disallowed even if the loans/advances are considered for business purposes." 17. The stand taken by the Assessee has not been established with credible evidence. There is no agreement between G.Susheela and the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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