TMI Blog2015 (8) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... ain part of which was taxable i.e. ₹ 78.48 lakhs as against exempt income of ₹ 8.95 lakhs, we deem it appropriate to restrict the disallowance to the extent of ₹ 20,000/-. Decided partly in favour of assessee. Taxing of interest - business income OR income from other sources - Held that:- If the assessee is engaged in the business of financing in addition to the business of trading in shares, the interest earned on loans and advances are liable to tax as business income. However, where the assessee is having interest income out of the surplus fund deployed with bank or party, the same is liable to be taxed as income from other sources. It is not in dispute that assessee has substantially earned interest income out of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax Act,1961 without properly considering the fact that the appellant is having substantial Business Income of ₹ 78,48,948/ - as compared to the tax free dividend income of ₹ 8,95,949/-. 2. The learned Commissioner of Income Tax (Appeals) has erred in law and on facts in confirming the interest income of ₹ 22,55,865/- as Income from Other Sources instead of Business Income as claimed by the appellant in view of the facts that the appellant is carrying on finance business as per Partnership Deed. 3. The learned Commissioner of Income Tax (Appeals) has erred in law and on facts in confirming the re-computations of remuneration to partners and restricting the same to ₹ 12,91,855/- instead of ₹ 21,96,072/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t paid on investment or the depository/ custodial charges could be disallowed by invoking section 14A- The AO cannot merely allocate the expenses in relation to trading results by proportionately disallowing the same. The assessee further relies on judgement of Hon'ble Bombay High court in the case of CIT Vs. Reliance Industries Ltd.[2011] 39 ITR 632 (Bom). On the other hand, ld. DR relied on the orders of the lower authorities. 6. We have considered rival contentions and found that during the year assessee has received dividend income of ₹ 8,95,949/-, interest income of ₹ 22,55,865/- and other income of ₹ 4,352/-. In the profit and loss account, assessee has claimed following expenses :- Sl.No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,93,045.84 By applying rule 8D, the AO had disallowed the entire business expenditure on the plea that same was incurred for the earning of exempt income, ignoring the fact that assessee was having taxable business income of ₹ 78,48,948/-, as compared to the tax free dividend of ₹ 8,95,949/-. The relevant assessment year is 2006-07, wherein rule 8D is not applicable but at the very same time, reasonable disallowance is warranted as per decision of the Hon'ble jurisdictional High Court in the case of Godrej Boyce Mfg. Co. Ltd., 328 ITR 81. Considering the amount of expenditure incurred for earning the total income main part of which was taxa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing interest income out of the surplus fund deployed with bank or party, the same is liable to be taxed as income from other sources. It is not in dispute that assessee has substantially earned interest income out of the financing business undertaken by it. Accordingly, we do not find any merit in the action of the lower authorities for treating the income earned in its financing business as income from other sources. 8. The assessee is also aggrieved for reducing partners remuneration by excluding the interest income from income by treating the same as income from other sources in place of business income. We have considered rival contentions. In view of our finding given in para 7 hereinabove, we direct the AO to treat the interest inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2006-07, section 43(5) has been amended by inserting the clause D, clarify that F O trading is not in the nature of speculation. The auditor of the assessee has also reported in note to account 3(1/1) that firm is carrying on business of share trading including F O treating and filing return of income declaring F O trading under the head business income. In view of this the earlier year losses are treated as speculation and not allowed to set off against the current years income under the head business income. 10. By the impugned order, the CIT(A) allowed assessee's claim after having the following observations :- 6.4 I have carefully gone through the assessment order, the submissions made on behalf of the appellant and the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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