2011 (5) TMI 451 - AT - Income Tax

Disallowance u/s 14A - Addition made by TPO - TDS credit - It was the submission that from the financial results of TTSL clearly showed that it would not be turning the corner into a profit any time in the near future - It was the submission that during the relevant assessment year the assessee did not have any income which did not form part of the total income under the Act and therefore no disallowance by invoking the provisions of section 14A could be made on the assessee - one of the main principles are that section 14A is to prevent claims of deduction of expenditure in relation to income which does not form part of the total income of the assessee - In the present case it is noticed that none of the investments made by the assessee has generated any dividend income which has been claimed by the assessee to be not to form part of the total income - If the assessee does not have any income as falling within the scope of "total income" during any year the provisions of the Act could not be applied to him

A perusal of the order of the TPO clearly shows that the assessee had raised the funds by way of issuance of 0 per cent optional convertible preferential shares - assessee has given the loan to the Associated Enterprises in US dollars - As it is noticed that the average of the LIBOR rate for 1-4-2005 to 31-3-2006 is 4.42 per cent and the assessee has charged interest at 6 per cent which is higher than the LIBOR rate - Decided in favor of the assessee

Regarding TDS credit - It was the submission that before the DRP the issue had been raised and the DRP called for a remand report and the remand report was received on 27-8-2010 as per para 16 of its order and the remand report had not been granted for its rebuttal - As it is noticed that the remand report has been received by the DRP on 27-8-2010 and the same has not been granted to the assessee for its rebuttal, this issue is restored to the file of the Assessing Officer for re-adjudication - Appeal is allowed for statistical purpose