9911796707
TMI Blog2017 (11) TMI 2068X X X X Extracts X X X X X X X X Extracts X X X X ..... al or personal estate/properties. During the year under consideration, the business activities have not been started by the assessee. For the year under consideration, the assessee has shown income of Rs.94,62,276/- in the profit & loss account, the details of which are as under :- i. Interest income Rs.50,63,213/- ii. Dividend on units on mutual fund Rs.43,93,076/- iii. Profit on redemption of mutual fund Rs.5,987/- Total Rs.94,62,276/- 4. However, when the details were called for and examined by the Assessing Officer, he found that during the year under consideration, the assessee has earned interest amounting to Rs.12,52,71,157/- and the assessee paid interest amounting to Rs.12,02,07,944/-. In the profit & loss account, the assessee has shown only the net interest i.e., Rs.50,63,213/- (Rs.12,52,71,157 - Rs.12,02,07,944). The Assessing Officer raised the query regarding the allowability of interest paid by the assessee amounting to Rs.12,02,07,944/-. After considering the assessee's submission, the Assessing Officer was of the opinion that payment of interest cannot be set off against the interest income. The conclusion of the Assessing Officer is in paragra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while considering the interest received by the assessee. She stated that on the facts of the assessee's case, the decision of Hon'ble Apex Court in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd. Vs. CIT - [1997] 227 ITR 172 (SC) would be squarely applicable and, in view of the above decision, the interest payment would not be allowed even while computing the income from other sources. She further submitted that the Assessing Officer has held that interest income is disallowable u/s 14A. Learned CIT(A), without properly appreciating the factual as well as legal position, held that no disallowance is required u/s 14A. In support of her contention for disallow-ability of interest income u/s 14A, she relied upon the decision of Hon'ble Jurisdictional High Court in the case of Indiabulls Financial Services Ltd. Vs. DCIT - [2016] 76 taxmann.com 268 (Delhi) and also the following decisions of the ITAT :- (i) DCIT Vs. Viraj Profiles Ltd. - 46 ITR 626. (ii) NYK Line India Ltd. Vs. ACIT - 175 TTJ 180. (iii) Super Auto Forge (P) Ltd. Vs. ACIT - 156 ITD 467. (iv) Vipin Malik Vs. ACIT - 45 ITR 589. 8. The learned counsel for the assessee, on the other hand, stated tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial placed before us. The Revenue has heavily relied upon the decision of Hon'ble Apex Court in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd. (supra). The facts in that case were that for the purpose of setting up of the factories, the company had taken term loans from various banks and financial institutions. That part of the borrowed funds which was not immediately required by the company was kept invested in short-term deposits with banks. Such investments were specifically permitted by the memorandum and articles of association of the company. The company had also deposited certain sums with the Tamil Nadu Electricity Board. It had also given interest-bearing loans to its employees to purchase vehicles. Up to the assessment year 1980-81, interest earned by the company from the various loans given by the company and also from the bank deposits was shown as income and was taxed accordingly. For the accounting year ending on June 30, 1981 (assessment year 1982-83), the assessee received a total amount of interest of Rs. 2,92,440/-. In its return of income filed on June 22, 1982, the company disclosed the said sum of Rs. 2,92,440/- as "income from other sour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y from some persons and has advanced it to others. He paid interest to the persons from whom the money was borrowed and charged interest from the person to whom the money was advanced. The details of the persons from whom money was borrowed and to whom money was advanced are at page 111 of the assessee's paper book. The same is reproduced below for ready reference :- "Mahalaxmi Designs Private Limited Assessment Year 2010-11 Details of Other Liabilities as on March 31, 2009 Party Name Amount J R Modi Finance P.Ltd. (25,000,000) Narendra Gehlaut (32,500,000) Virendra Dhingra (20,000,000) Pradeep Burman (30,000,000) Rajiv Rattan (2,794,450,000) Audit Fees Payable 224,720 Saurabh Mittal 800,000 Aarchi Properties P. Ltd. 805,000,000 Gungan Properties P. Ltd. 750,000,000 Gurvit Properties P. Ltd. 750,000,000 Siddhidayak Properties P. Ltd. 600,000,000 Total 4,074,720 12. In the above list, the last four parties are parties from whom the assessee has borrowed the money and first five parties are the parties to whom the money has been advanced. When the borrowed money and the money advanced is set off, it is found that except Rs.40,74,720/-, the entire b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of earning of interest income is allowable u/s 57(iii). In the case under appeal before us, we find that the borrowed money has been utilized for the purpose of giving advances to others. There is a direct nexus between the money borrowed by the assessee and money advanced by the assessee. The assessee paid interest on the money borrowed by it and has received the interest on the money advanced by it. Therefore, we have no hesitation to hold that the interest paid by the assessee was incurred wholly and exclusively for the purpose of earning of interest income and therefore, the same was rightly claimed u/s 57(iii) and the learned CIT (A) rightly directed for allowing the same. 16. On these facts, the decision of Hon'ble Jurisdictional High Court in the case of Vodafone South Ltd. Vs. CIT - [2015] 378 ITR 410 (Delhi) would be squarely applicable, wherein Hon'ble Jurisdictional High Court held at page 420 of the report as under :- "The sum of Rs. 25 crores drawn by the assessee on December 24, 2001, in terms of HSBC's sanction letter was transferred to SCL on the very same date. Without the facility of credit by the HSBC, the assessee could not have advanced the loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s well as reserve and surplus of Rs.99 crores and share capital of Rs.1 crore. No interest was paid on any of the above funds which were invested in shares. The above submission made by the assessee has not been controverted before us. In view of the above, we do not find any justification to disturb the finding of the learned CIT (A) that no borrowed money was utilized for investment in shares. 19. Learned DR has relied upon various decisions to buttress her claim that disallowance u/s 14A read with Rule 8D is called for. However, as we have already mentioned that Assessing Officer has not made any disallowance under Rule 8D. He has made the disallowance of interest while computing the assessee's income from other sources and alternatively observed that interest paid by the assessee is also disallowable u/s 14A because borrowed money is utilized for investment in shares. Therefore, the limited issue open for our examination is whether the borrowed money has been utilized for the purpose of investment in shares. Learned CIT (A) has recorded the finding that no borrowed money was utilized for investment in shares. After considering the facts of the case and submissions of both the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
