TMI Blog2014 (4) TMI 313X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be an allowable expenditure - In case, if the dividend income received by the assessee from Tellicherry Medical Foundation & Infrastructure Ltd would not form part of the total income of the assessee then the interest on the borrowed funds for making such investment cannot be allowed as expenditure - the factual aspect needs to be verified – thus, the order of the AO is set aside and the matter is remitted back to the AO for fresh adjudication as per the law laid down in Commissioner of Income Tax Versus Popular Vehicles and Services Ltd. [2010 (1) TMI 730 - Kerala High Court] – decided in favour of Revenue. - I.T.A. No. 404/Coch/2013 - - - Dated:- 4-4-2014 - Shri N. R. S. Ganesan (JM) And Shri B. R. Baskaran (AM),JJ. For the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation Infrastructure Ltd is that of construction of multi storeyed buildings. The recipient of the amount is not engaged in same line of business as that of the assessee, but the CIT(A) observed that they are engaged in same line of business. According to the ld.DR, the advance made by the assessee is not for any business expediency. A co-operative society is a different entity and a private limited company is altogether different as it is an artificial entity. Therefore, both cannot be sister concern to each other. A co-operative society under the Co-operative Societies Act has to function under the provisions of the Cop-operative Societies Act as per the decision taken by majority of the members of the society. Therefore, the recipien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material available on record. The only issue arises for consideration is disallowance of interest of Rs.36,58,000 on the investment made by the assessee in Tellicherry Medical Foundation Infrastructure Ltd. The investment made by the assessee is from borrowed funds. When the borrowed funds were diverted for non business purpose, the interest payable on such borrowed funds cannot be claimed as expenditure in the hands of the assessee. In this case, the assessee claims that the assessee made an investment to the extent of Rs.2,21,74,000 in the preferential shares of Tellicherry Medical Foundation Infrastructure Ltd. It is also the claim of the assessee that the dividend received from Tellicherry Medical Foundation Infrastructure Ltd was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 14A(1) expressly bars allowance of any expenditure on earning income which does not constitute part of the total income of the assessee. Since the assessee, before the Kerala High Court advanced interest free loan to the partnership firm in which it was a partner and it did not receive any interest from the same and that the only benefit was receipt of share income from such firm, did not constitute income of the assessee u/s 10(2A) of the Act. In this case also, the assessee has not received any interest from Tellicherry Medical Foundation Infrastructure Ltd. The assessee is entitled only for the dividend on the investment made in preferential shares. The question arises for consideration is whether the dividend income received by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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