TMI Blog2015 (2) TMI 355X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee that the AO has not recorded his satisfaction while invoking rule 8D is not correct, thus the disallowance to the extent of ₹ 72,000/- is upheld. - Decided partly in favour of assessee. Assessment of interest income - "income from other sources" or "Business Income" - Held that:- The interest is not earned out of surplus money. The assessee had an obligation to repay its debentures holders etc. and was acting under the directions of the Hon’ble Delhi High Court and Hon’ble Mumbai High Court in the process of fulfilling its financial obligations certain interest is earned. On this factual matrix in our view the interest is assessable only under the head "income from business" but not under the head "income from other sources". The assessee is a NBFC and money in its stock in trade. Interest income received from fixed deposits, is business income. - Decided in favour of assessee. - ITA No.3041/Del/2013, ITA No.3560/Del/2013 - - - Dated:- 21-11-2014 - SHRI J.SUDHAKAR REDDY AND SHRI C.M. GARG,, JJ. For the Appellant : Shri Suresh Anantharaman, CA For the Respondent : Smt. Parwinder Kaur, Sr. DR ORDER Per: J Sudhakar Reddy: These are cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n behalf of the assessee. 6. On a careful consideration of the facts and circumstances of the case and a perusal of the papers on record and the orders of the authorities below we hold as follows:- 6.1. We first take up the assessee s appeal. Ground No. 1 and 2 are on disallowance made u/s 14A. The main contentions of the assessee are that there is no finding by the AO that the assessee has incurred interest expenditure relatable to earning of exempt income. He argued that in the absence of such a finding, the question of disallowance does not arise. He demonstrated that the assessee has not made any fresh investments during the year to prove his contention that the disallowance is bad in law. Relied on the decision of the Delhi Bench of the Tribunal in the case of Raj Shipping Agencies Ltd. Mumbai vs. Assessee 54 SOT 356. Ground No. 3 4 are on the issue as to whether the interest income in question has to be assessed under the head income from other sources or under the Head Income from Business . The Ld. Counsel for the assessee argued that the assessee is a NBFC and it was burdened by court orders and that it has a financial crunch. He submitted that the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is that the assesee has not incurred any interest expenditure. There is no charge to the profit and loss account on account of interest. The investments in equity shares were made in the earlier year and not during the current year. There is no fresh investment during the year. The AO by invoking the provisions of Rule 8D has disallowed interest expenditure of ₹ 59,485/- under Rule 8D(2)(ii). As already stated the assessee has not claimed any expenditure under the head interest expenditure. When the AO could not demonstrate that the assessee has incurred interest expenditure for earning income which does not form part of total income, the question of applying Rule 8D(2)(ii) does not arise. Thus the disallowance has to be necessarily deleted by applying the preposition laid down by Jurisdictional High Court in the case of Maxopp Investments Ltd. 247 CTR 162 (Del). 11. As regards disallowance computed under Rule 8D (2)(iii) on account of administrative charges, the Ld. CIT(A) has upheld the computation made by the AO. The argument of the assessee that the AO has not recorded his satisfaction while invoking rule 8D is not correct. In para 8 at page 3 of the assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Mumbai High Court in the process of fulfilling its financial obligations certain interest is earned. On this factual matrix in our view the interest is assessable only under the head income from business but not under the head income from other sources . The assessee is a NBFC and money in its stock in trade. Interest income received from fixed deposits, is business income. Under these circumstances we uphold the contention of the assessee and allow this ground of appeal. 14. In the result both the appeals of the assessee are allowed in part. 15. We now take up the revenue appeal in ITA No. 3560/Del/13. The grounds raised by the revenue are as follows :- i) Whether the CIT(A) under the facts and circumstances of the case and in law was justified in treating income of ₹ 94,65,686/- as income from house property as against income from Other Sources as assessed by the AO? ii) Whether the CIT(A) under the facts and circumstances of the case and in law was justified in holding that the AO has wrongly worked out the computation of income and directed the AO to re-work out income after reducing the figures of ₹ 1,44,84,868/- and expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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