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2018 (1) TMI 667 - AT - Income TaxNature of income - busniss income or income from other sources - Held that:- It is not denied by the learned DR, even though he has vehemently relied on the order of the authorities below that main business of the assessee is shipping business and the assessee has also taken loan from SCICI Ltd. for the purchase of ship and charting in vessels. The assessee since could not immediately acquire the ship, has advanced the money from its own sources as well as from the money borrowed to its subsidiary company, which were also engaged in the similar business. Since these companies to whom the assessee has given temporary loan for acquiring ship is also the subsidiary company of the assessee therefore even on the basis of commercial expediency, the assessee is bound to assist those companies. We, therefore, set aside the order of the CIT(A) on this issue and direct the AO to treat the sum of ₹ 3,41,10,001/- out of the sum of ₹ 3,64,92,593/- as income from business. The rest of the income i.e. interest on staff loan, interest on securities, miscellaneous earning, rent received as well as income tax refund to the extent sustained by us, cannot be regarded as income from business. We, therefore, do not find any illegality or infirmity in the order of the CIT(A) to the extent that these income as assessed under the head “Income from other sources.” Addition respect of interest and other expenses attributable to the tax free income - Held that:- It is not a case where the AO has applied the provisions of section 14A but just allocated the various expenses between the exempt income as well as taxable income. It is not denied that the assessee is having own funds to the extent of ₹ 39,74,69,549/- while investment on tax free securities was to the extent of ₹ 16,01,31,377/- as is apparent from page 87 of the paperbook (balance sheet). We noted that the disallowance has simply being made by the AO on estimate basis. In view of the decision of Hon’ble Jurisdictional High Court in the case of HDFC Bank Ltd.[2014 (8) TMI 119 - BOMBAY HIGH COURT] we are of the view that no such disallowance can be made as the natural inference will be that the assessee made investment in tax free securities out of its own funds. We, therefore, delete the said disallowance. Thus, additional ground stands allowed. Claim of deduction towards the expenses as well as treating the interest received from subsidiary company and inter corporate loans, bill discounting to be part of profit of shipping business - Held that:- Since while disposing of additional ground no.1, we have directed the AO to treat the interest received from subsidiary as well as interest and discounting charges on trade bills as “Income from business” of the assessee as part of shipping business, the natural inference will be that the interest paid as well as other expenses which has been disallowed to the extent of ₹ 2,23,17,217/- will automatically be allowed as deduction out of the income computed from business. Thus, to that extent ground 1 and 2 are allowed. Loans of barge division - Held that:- AR was fair enough to concede that this issue is duly covered against the assessee by the decision of this Tribunal in the case of DCIT vs. Orion Agencies Ltd. [2009 (6) TMI 680 - ITAT MUMBAI]. We accordingly, dismiss this ground.
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