TMI Blog2014 (4) TMI 532X X X X Extracts X X X X X X X X Extracts X X X X ..... s Held that:- The decision in Yum ! Restaurants (India) P. Ltd. Versus Additional Commissioner of Income-tax 2011 (5) TMI 852 - ITAT DELHI] followed - The AO has misread the approvals granted by the Govt. of India while arriving at a conclusion that assessee has not been remitting the payment as per the approvals - In the approval SIA has used expression royalty as well as fee for technical services loosely and interchangeably - Apart from all these things, the tax rate for remitting a royalty as well as fee for technical service is 15% plus the research and development cess - The assessee has paid both these amounts while remitting the payment - The expense is directly related to its business - It has been incurred wholly and exclusively for running the franchises within India Decided against Revenue. Deletion on account of administrative expenses Held that:- The decision in Yum ! Restaurants (India) P. Ltd. Versus Additional Commissioner of Income-tax 2011 (5) TMI 852 - ITAT DELHI] followed -The CIT(A) deleted the disallowance - YRMPL was incorporated on 8th June, 1999 - It is a 100% owned subsidiary of the assessee - It has been incorporated to carry out advertisement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h occasion did not arise to incur those expenses but that does not mean that when provision was made it was not bonafide - If some amount remained unutilized it will be offered for tax in the next asstt. Year Decided against Revenue. Disallowance of software expenses Capital expenses or Revenue Held that:- The expenditure of Rs.18,000/- for purchase of coral draw software and Rs.77,400/- for GIS Engine Map Info Software (single user license) were made but it is not clear whether the same was for an upgradation or it was for acquisition of a new software thus, the matter ir remitted back to the AO for fresh adjudication Decided in favour of Revenue. Disallowance of R&D expenses Held that:- The decision in Yum ! Restaurants (India) P. Ltd. Versus Additional Commissioner of Income-tax 2011 (5) TMI 852 - ITAT DELHI] followed - In its day to day operations, assessee is experimenting new dishes, where it incurred expenses on food items and spices etc. - On many of occasions, the flavor may not come to the expectation for commercialized use - Thus, these are the routine research work carried out by the assessee and no capital assets came into existence - DRP has erred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - The CIT (A) has upheld the disallowance of this expenditure in Assessment Year 2004-05 which is the year under consideration and directed to allow the same in Assessment Year 2003-0 - there is no fault in the order of CIT (A) decided against Assessee. Disallowance of settlement claim Held that:- The assessee submitted additional evidence before the CIT (A) - The CIT (A) did not admit the evidence and confirmed the finding of the AO that assessee has entered into a sham transaction and the liability has been falsely created - the CIT (A) was not justified in not admitting the additional evidence when assessee submitted certain documents before Assessing Officer and rest of these documents support the case of assessee - The documents were relevant with regard to the expenditure claimed by the assessee in the return of income wherein even the TDS had been deducted thus, the matter is remitted back to the AO for fresh adjudication Decided in favour of Assessee. Interest income treated as income from other sources Held that:- The decision in Yum ! Restaurants (India) P. Ltd. Versus Additional Commissioner of Income-tax 2011 (5) TMI 852 - ITAT DELHI] followed - The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting an addition of Rs.4,84,21,435/- as royalty paid without appreciating that such payments was not allowed by Ministry of Industry ( Secretariat for industrial Assistance) (SIA) and since constituted infraction of law". 3. "Without prejudice. to the above ground, the learned CIT (A) erred in allowing deduction for this payment of royalty where it was not permissible through automatic route". 4. "On the facts and circumstances of the case and in law the learned CIT(A) erred, in deleting an addition of Rs.5,90,56,874/- out of Administrative expenses, since these related to another company YRMPL, which had apparently no office and had not incurred any expenses". 5. "On the facts and circumstances of the case and in law the learned CIT(A) erred in not interpreting correctly the directions of Hon'ble ITAT in A.Y. 2002-03 and 2003-04 that the depreciation disallowed in A.Y. 1999-2000 would be considered for disallowances in this also, as complete relief to the assessee". 6. "On the facts and circumstances of the case and in law the learned CIT(A) erred in deletion an addition of Rs.1,27,61,225/- o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e did not require any annual purchase and provided creation of an asset which had the life of 4 to 5 years. 7. On the facts and circumstances of the case and in law the learned CIT(A) erred in deleting an addition of Rs.7,21,043/- made out of R D expenses without appreciating that the expenses for food fasting and trials were incurred to develop food items / flavors that would be used by the assessee for a number of years i.e. the expenses were incurred to develop items of enduring nature and should have therefore been capitalized. 8. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of appeal." Most of the grounds of both appeals filed by the revenue are same except the difference in figure. Therefore, we are adjudicating both the appeals together, however, we are taking the facts from ITA No.2678/Del/2012 for Assessment Year 2004-05 for the sake of convenience. 4. In the ground no.1 in both the revenue s appeal, the issue involved is whether income from receipt of services fee assessable under the head Profits and Gains of Business or to be treated as income from other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vides for provision of restaurant support services. He also relied on the case laws, viz., Mazagaon Dock Ltd vs. CIT (SC) (34 ITR 368); Barendra Prasad Ray vs. ITO (SC) (129 lTR 295); and Senairam Doongarmall vs CIT (SC) (42 ITR 392) for the proposition that a regular and continuous activity carried out with the intention to earn profits is to be regarded as business income. 6. We have heard both the sides on the issue. The ITAT in its order dated 31.05.2011 vide para 8 has held as under :- 8. We have duly considered the rival contention and gone through the record carefully. Ld. First Appellate Authority has reproduced the submissions of the assessee. The assessee in its submissions has pointed out that section 2 (13) provides the definition of expression business according to which business includes any trade, commerce, manufacture or any adventure or concern in the nature of trading, commerce or manufacture. In various authoritative pronouncement of the Hon ble Supreme Course and Hon ble High Court, meaning and scope of expression business has been propounded. It is not necessary to recite and recapitulate of those decisions, but on the strength of them, it would be suf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew that AO miserably failed to appreciate the facts and circumstance. The assessee has been offering income from consultancy etc. as a business income. It has duly been accepted by the department since 1998-99. The AO without assigning any valid reason concluded that it is an income from other sources. On the other hand, Ld. First Authority has considered this issue in right perspective. Therefore, we do not find any merit in this ground of appeal it is rejected. Since facts are same, therefore, respectfully following the decision of ITAT in earlier years, we dismiss ground no.1 of both revenue s appeal. 7. In the ground no.2 3 in ITA No.2678/Del/2012 and ground nos.2 2.1 in ITA No.2679/Del/2012, the issue involved is disallowing of royalty expenditure. The assessee s primary business operation relates to the operation and development of Pizza Hut and KFC restaurants in India through franchisee. For this purpose, the assessee has entered into a technology license agreement with KFC / Pizza Hut through which assessee has been granted the rights to use the technology and system in operation of restaurants in India. The assessee has also obtained approval from Secretariat SIA, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the liberalized policy, assessee may remit royalty under the automatic route within the prescribed limits. He further submitted that payment is in accordance with the SIA approval and within the prescribed limits. Additionally, Payment of royalty up to 5% of sales has been allowed by Government of India under automatic route in view of Press Note 2 of 2003 and he submitted that therefore, the royalty was paid in accordance with the policies of the Government. It was submitted that payments have been made through authorized dealer and thus cannot be under violation of any law or exchange control regulations. The TPO has also held the same to be an arm's length payment. Therefore, the payment of royalty cannot be treated as unreasonable or excessive as alleged by the AO. 8. We have heard both the sides on the issue. As mentioned by the ld. AR, the issue is covered in favour of the assessee by the decision of ITAT in the case of the assessee for assessment years 2002-03, 2003-04 and 2006-07, the relevant para of the said order is reproduced as under :- 20. With the assistance of Ld. Representative, we have gone through the record carefully. The main reason for disallowing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tribution towards advertising and marketing activities. As per the tripartite agreement, for the cost effective functioning of YRMPL, assessee provided YRMPL with any or all administrative support facilities. In case such facilities are extended by assessee to YRMPL, it would be required to reimburse assessee with such costs. Where on one hand assessee is entitled to receive money for such costs incurred by it, on the other hand it is also obliged to contribute to YRMPL for meeting its advertising, marketing and promotion activities budget deficit. The disallowance was made on the reasoning that the administrative expenses incurred by the assessee, proportionately also belong to YRMPL as the business is carried out from common premises and employees and YRMPL has not paid its share of administrative expenses to assessee for the common facilities used by it which belong to the assessee and also that there is no reduction in the AMP contribution to be made by the assessee to YRMPL in lieu of providing administrative support. Ld. AR submitted that the this issue is cove red in favour of the assessee by the decision of ITAT in assessee s own case for assessment years 2002-03, 2003-04 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penses should not be allocated to YRMPL at all, as its functioning is basically to make payments to third party advertising firms. Finally, he pleaded to dismiss this ground of revenue s appeal. 10. We have heard both the sides on the issue. We find that this issue is covered in favour of the assessee by the decision of ITAT in the case of the assessee for assessment years 2002-03, 2003-04 and 2006-07. The relevant para of the said order is reproduced as under :- 22. On appeal, Ld. CIT(A) deleted the disallowance. With the assistance of Ld. Representative, we have gone through the record carefully. It emerges out from the record that YRMPL was incorporated on 8th June, 1999. It is a 100% owned subsidiary of the assessee. It has been incorporated to carry out advertisement, marketing and promotion activities of the assessee as well as various franchise. The assessee had entered into a tripartite agreement with its franchise and YRMPL. As per this agreement, the franchise shall pay AMP contribution to YRMPL and assessee may not pay a separate contribution. In a way, YRMPL was to carry out the activities on no profit no loss basis. The AO has disallowed the expenses which are att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertakings (outlets) to its franchisees continue to remain in its books and depreciation claimed on the same. The ld. AR submitted that CIT(A) placing reliance on the judicial precedents set forth by the assessee has allowed the issue in favour of the assessee for assessment years 2004-05 and 2005-06. Complete depreciation has been allowed including depreciation of assets sold. He submitted that assets used by the employees would also be regarded as used for the purposes of business and hence eligible for claim of depreciation. He submitted that these were also taxed in the hands of the employees as perquisites and relied on the decision of Sayaji Iron and Engg Co vs. CIT (Gujarat HC) (253 ITR 749). He further submitted that under the block of asset concept, individual assets lose their identity when merged in the block and accordingly, actual physical possession and use of assets are not essential. He also relied on the decisions of CIT vs. Yamaha Motor India Pvt Ltd (Delhi HC) (ITA No 203/ 2009 and 601 2009): CIT vs Bharat Aluminium Co Ltd (Delhi HC) (ITA No 659/ 2007 and 1484/2006); Xerox India Ltd.. (Delhi ITAT) (ITA No. 680/Del/2006); CIT vs G.R. Shipping Ltd. (Bombay HC) ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cisions of Bharat Earth Movers vs. CIT (Supreme Court) (245 ITR 428); Calcutta Co. Ltd vs. CIT (Supreme Court) (37 ITR 1); and Metal Box Company of India Limited vs. Their Workmen (Supreme Court) (73 ITR 53). He submitted that excess provision made (if any) has been reversed in the next year and offered to tax leading to double taxation of the same. 14. We have heard both the sides on the issue. We find that this issue is covered in favour of the assessee by the decision of ITAT in the case of the assessee for assessment years 2002-03, 2003-04 and 2006-07. The relevant para of the said order is reproduced as under :- 31. On due consideration of the facts and circumstances, we do not see any reason to interfere in the order of Ld. CIT(A). The assessee has made the provision by keeping in view past experience and the possibility of certain expenses. It has filed the details exhibiting the nature of intending expenses. It is a separate issue that such occasion did not arise to incur those expenses but that does not mean that when provision was made it was not bonafide. If some amount remained unutilized it will be offered for tax in the next asstt. year. Hence, this ground of app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e agreed to treat the expenditure as capital in nature. After hearing, we find that these two expenditure of Rs.18,000/- for purchase of coral draw software and Rs.77,400/- for GIS Engine Map Info Software (single user license) were made but it is not clear whether the same was for an upgradation or it was for acquisition of a new software, therefore, we are unable to apply the ratio of decision of ITAT in the case of GE Capital Services India vs. DCIT reported in 106 TTJ 65 for granting the relief to the assessee. In view of these facts, we set aside the issue to the file of Assessing Officer to decide de novo after bringing the correct facts on the record. We allow this ground of revenue s appeal for statistical purposes. 19. In Ground No.7 in ITA No.2679/Del/2012, the issue is regarding the disallowance of R D expenses amounting to Rs.7,21,043/-. It was pleaded before us that no opportunity was afforded to the assessee to substantiate its claim. The Assessing Officer adjudged the expenditure to be of capital in nature. It was also pleaded that Assessing Officer held so without assigning any reason for the same. Such routine revenue expenses were disallowed by the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in upholding the addition of Rs.6,00,000 as notional interest income on account of security deposits placed by the appellant with M/s Mezbaan Hoteliers Pvt. Ltd for obtaining rent free accommodation for its managing director. In doing so, the Ld. CIT(A) has failed to correctly appreciate order of the ITAT for previous A Y s where a similar addition has been deleted. 3.1 That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring the documentary evidence placed on record by the appellant in support of its contention that the appellant has not incurred any interest expenditure. 4. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in upholding the addition of Rs.55,527 as notional interest income on account of security deposits placed by the appellant with Mrs. Sheetal and Mrs. Pushpa Bansal for obtaining rent free accommodation for its director. In doing so, the Ld. CIT(A) has failed to correctly appreciate order of the ITAT for previous A Y s where a similar addition has been deleted. 4.1 That on the facts and circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar addition has been deleted. 3.1 That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring the documentary evidence placed on record by the appellant in support of its contention that the appellant has not incurred any interest expenditure. 4. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in upholding the addition of Rs.55,527 as notional interest income on account of security deposits placed by the appellant with Mrs. Sheetal and Mrs. Pushpa Bansal for obtaining rent free accommodation for its director. In doing so, the Ld. CIT(A) has failed to correctly appreciate order of the ITAT for previous A Y s where a similar addition has been deleted. 4.1 That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring the documentary evidence placed on record by the appellant in support of its contention that the appellant has not incurred any interest expenditure. 5. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in upholding the disallowance of arbitration award settlement claim amounting to Rs.1,15,74,099/- paid to M/s. Shubhmang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se rentals paid to related party. Only part rentals up to Rs.20,000 per month were allowed on the basis of ITAT order for past years. 26. In the case of Director, Mr. Ajay Bansal, lease rentals paid by the assessee were for a property which was already being occupied by the director without payment of any rent. No concession was given in the rentals paid as the property was also being utilized by the mother of the director. 27. Ld. AR submitted that in the case of property provided to Director, Shri Ajay Bansal, the issue was remitted back to the AO by ITAT to determine fair rent of the property in the AY 2002-03, 2003-04 and 2006-07. He submitted that the AO has allowed the rent paid by assessee for director's property as fair rent of the property based on valuation certificates produced by assessee for Assessment Years 2002-03, 2003-04 and also for 2007-08. Ld. AR submitted that for the house provided to MD, Shri Sandip Kohli, ITAT had allowed a payment of Rs.2,40,000 per annum as fair rent of the property and the balance payment of rent was disallowed for Assessment Years 2002-03, 2003-04 and 2006-07. He referred to paras 45 and 46 at page 47 of the ITAT order for Assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of Shahzada Nand Sons vs. CIT (SC) (108 ITR 358) and CIT vs. Panipat Woolen General Mills Co Ltd (SC) (103 ITR 66) where it is held that commercial expediency to be decided from the stand point of assessee and not tax department. He submitted that tax can be imposed only on real income and not on notional income. He submitted that therefore, AO has grossly erred in adding notional interest income and in this regard referred to the decisions of Godhra Electricity Co. Ltd. vs. CIT (SC) (225 ITR 746); CIT vs. Calcutta Discount Company Ltd (SC) (91 ITR 8) and Seth Madan Lal Modi vs. CIT (Delhi HC) (261 ITR 49). The ld. DR relied on the order of the authorities below. 28. We have heard both the sides on the issue. These disallowances have been made by invoking the provisions of section 40A(2)(b) of the Act is on account of excessive rental paid to the related parties. First, we would like to put some facts with regard to this disallowance in summary. In the tax audit report, the assessee has disclosed three parties covered under the provisions of section 40A(2)(b) of the Act and these were Shri Sandeep Kohli, Managing Director, Shri Ajay Bansal, Director and the YRMPL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he disallowance of Rs. 21 lacs for the residence for Mr. Sandeep Kohli. The assessee had incurred a sum of Rs.4,20,700 on the residence of Shri Ajay Bansal. In this case also, payment was made to Mrs. Pushpa Bansal and Sheetal Bansal who are the wife and mother of Ajay Bansal. Assessing Officer has also found a security deposit paid by the assessee and he estimated the notional rent on such deposit at Rs.50,900. The disallowance has been worked out to Rs.4,71,600. 46. There is no dispute that the payments have been made to the persons who are covered under sec. 40A(2)(b) of the Act. Under this section, if it is established that assessee has paid an amount in excess, then the one available in open market for availing such services from a person or entity falling within the ambit of this section then such excess amount would be disallowed to the assessee. We fail to understand how a house property giving a rent of Rs.20,000 to the original land owner would immediately fetch a rent at Rs.1,50,000. This much of rent has been given by the assessee after incurring a huge sum of Rs.22,50,000 on repair which gives an indication that if this sum of Rs.22,50,000 was not incurred then it wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal purposes. At this stage, there is no dispute that the payment has been made to the persons who are covered by section 40A(2)(b) of the Act. In the case of M/s. Mezbaan Hoteliers Pvt. Ltd., it is well established that payments had been made in excess for which such goods and services were available. It is apparent from the rentals paid by M/s. Mezbaan Hoteliers Pvt. Ltd. It is very clear that a property which is fetching Rs.2,40,000/- per annum to the landlord has been further let out for Rs.15,00,000/- per annum which had been further increased to Rs.24,70,000/-. This clearly establishes that the assessee company has extended extra peculiar benefits to its Managing Director who is covered by the provisions of section 40A(2)(b) of the Act. We are of the firm opinion that anything in excess to Rs.2,40,000/- per annum paid to M/s. Mezbaan Hoteliers Pvt. Ltd. by a collusive method is excessive and has to be disallowed. Thus, the rent paid for the residence of the Managing Director, Shri Sandeep Kohli will be allowed only to the extent of Rs.2,40,000/- per annum. However, there is no scope for disallowance of notional rent worked out on the basis of interest free security deposits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance. As far as the other amounts are concerned, we find that these relates to medical expenses of Mr. Sandeep Kohli who is a director and the expenses incurred on the uniforms of his driver. These expenses are to be termed as expenses relating to the day to day business of the assessee. Thus, the ground of appeal raised by the assessee as well as of revenue are rejected. 30. We have heard both the sides on this issue. We find that the ld. AR has claimed that this was an expenditure relating to the business and allowable as business expenditure and it was also claimed that this issue was covered by earlier decision of ITAT in the Assessment Year 2003-04. After hearing both the sides, we find that in this year, the issue is not covered by ITAT decision as it was personal expenditure incurred on house maintenance and computer maintenance of the employees. In the earlier decision of ITAT, the issue was with regard to fees paid for Shri Rajiv Kumar for pursuing MBA course and which was treated as personal and not for the purpose of business and other expenditure which was related to medical expenses of Shri Sandeep Kohli, MD and uniform of his driver was found to be related to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, this ground of appeal stands dismissed. 31. Ground No.6 in ITA No.2421/Del/2012 is against the disallowance of expenditure amounting to Rs.42.775 held as capital expenditure. The details of the alleged capital expenditure are as follows: S.No. Amount Particulars 1 11,500 Purchase Computer Switch 2. 7,500 Purchase - Laptop Battery 3. 23,775 Purchase Laptop Card Ld. AR submitted that without any independent application of mind, the Assessing Officer relied on the description of similar disallowances made in the previous years alleging that purchase of chairs and fire extinguisher' cannot be of revenue nature. He further submitted that it would be pertinent to observe that such description of purchases made was for Assessment Year 2003-04 and not Assessment Year 2004-05. The Assessing Officer had wrongly held that nature of expenditure is such that its benefit would accrue in the subsequent years as well. 32. Ld. AR further submitted that the expenditure incurred is not in the nature of capital expenditure being routine repair and maintenance of existing assets. He submitted that no new assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pay crystallized only when the invoices were received by the assessee i.e. in the current year. He further submitted that the claim of assessee has been supported by the Hon'ble Delhi High Court in the case of CIT vs Vishnu Industrial Gases (ITR No. 229/1988) and Hon'ble Bombay High Court in the case of CIT vs Nagri Mills Co. Ltd (33 ITR 681) wherein it has been held that for an allowable expenditure the year of allowance is not a relevant consideration given the tax rates are constant in case of corporate assessee's. He further relied on the decisions of Nonsuch Tea Estate Limited vs. CIT - (Supreme Court) (98 ITR 189); CIT vs Egmore Benefit Society Limited (Madras High Court) (148 CTR 158); CIT vs Gowar Sons Publication (P.) Ltd. (Delhi High Court) (250 ITR 461); Navin Bharat Industries Limited vs DCIT (Mumbai ITAT) (90 ITD 1); and Toyo Engg. India Limited vs CIT (Mumbai ITAT) (5 SOT 616) in support of the aforesaid contention. 36. We have heard both the sides on this issue. This expenditure was disallowed on account of non-furnishing documentary evidence to establish that liability to pay for these expenses incurred and crystallized during the year under consideration. Aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence to substantiate the genuineness of the transaction. The disallowance was made as the copy of the agreement on the basis of which the liability arises and other relevant documents regarding the grant of compensation have not been produced. On the basis, it is held that the assessee has entered into a sham transaction and a liability has been falsely created. 38. Ld. AR submitted that the Assessing Officer never expressed a view of reviewing any document as alleged in the assessment order. He submitted that the documents submitted by YRIPL (TDS certificate and letter of correspondence) were sufficient enough to corroborate the actual existence of the transaction and its payment along with the fact that the accounts of the assessee were duly audited by a reputed firm of chartered accountants. Ld. AR submitted that however, with regard to such allegation of non-furnishing of documents, assessee has subsequently submitted as additional evidence before ITAT; a certified true copy of the Arbitral Tribunal's order and Development Agreement to substantiate the genuineness of the transaction along with the letter of correspondence and copy of Form 16A issued to M/s Shubhmangal Mer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted additional evidence before the CIT (A). The CIT (A) did not admit the evidence and confirmed the finding of the Assessing Officer that assessee has entered into a sham transaction and the liability has been falsely created. In our considered view, the CIT (A) was not justified in not admitting the additional evidence when assessee submitted certain documents before Assessing Officer and rest of these documents support the case of assessee. These documents were relevant with regard to the expenditure claimed by the assessee in the return of income wherein even the TDS had been deducted. In our considered view, it shall be appropriate to restore the issue to the file of the Assessing Officer and to decide afresh after considering all relevant documents to be submitted before him. The assessee shall be at liberty to file necessary documents in support of this claim before the Assessing Officer. This ground of assessee s appeal is allowed for statistical purposes. 40. In the Ground No.6 in ITA No.2422/Del./2012, the ld. CIT (A) has erred in treating the interest income earned by the assessee amounting to Rs.41,85,032/- as income from other sources . The details of the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under :- 103. We have duly considered the rival contentions and gone through the record carefully. The decisions relied upon by the assessee are not applicable on the facts of the present case. The decision of Hon'ble Mumbai High Court in the case of Puneet Commercial was in respect of treatment of interest income while computing the deduction under sec. 80-HHC of the Act and it talks about operational profit. The view of Hon'ble Delhi High Court in the case of Sri Ram Honda Equip reported in 289 ITR 475 is contrary to this decision, wherein Hon'ble Delhi High Court has held that interest income for the purpose of sec. 80HHC has to be treated as income from other sources. The assessee has nowhere indicated as to how this interest income is linked with its business activity. It has simply surplus fund which has been deposited in the bank giving rise to interest income. Learned DRP has rightly treated this income as income from other sources. This ground of appeal is rejected. In our considered view, interest earned on FDR is not limited to the business of assessee. Similarly, interest on loan to employees is also not related to assessee s business. In view of these facts, we fin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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