TMI Blog2011 (3) TMI 1641X X X X Extracts X X X X X X X X Extracts X X X X ..... ance made under section 14A read with Rule 8D of the Income Tax Rules. The second dispute relates to the disallowance of interest under section 14A while computing the book profit for the purposes of section 115JB of the Act. Since both the issues are interconnected, they are dealt with in a consolidated manner. The brief facts in this connection are that the assessee debited interest of ₹ 43,58,464/- in the Profit and Loss Account. The Assessing Officer while completing the assessment noticed that the assessee s investment in the partnership firm in which the assessee was a partner amounted to ₹ 5,52,46,045/- as on 31.03.2005 and the assessee s 70% share of loss was ₹ 28,58,955/-. In the background of these facts, the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the Assessing Officer also invoked section 14A in support of the disallowance. He noted that the assessee s main sources of income were as under: - (1) Hotel activities fees from Kamat Hotels (India) Ltd. ₹ 51,69,209/- (2) Wind Power activities ₹ 50,04,918/- (3) Financing activities (including ₹ 1,72,43,939/- dividend of ₹ 1,04,38,584/-) He further noted that there was practically no hotel activity because the only expenditure claimed was depreciation on furniture and fixtures and vehicle expenses. According to him, except for power generation there was no other business activity which required finance for which interest was payable. The dividend was exempt from tax. Even the share of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Secured loan from Allahabad Bank 1,60,00,000 Nil 5,00,000 1,10,00,000 18,88,083 ABN Amro Bank Nil 2,90,532 44,604 2,45,928 12,204 Total 43,58,464 So far as the interest paid to Allahabad Bank is concerned, our attention was drawn to page 9 of the paper book. Under the head Secured loans in Schedule C to the accounts the assessee has made a Note which, inter alia, states that it was taken for Wind Energy Farm Project at Satara. Such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid to earn share of profits and dividends which were exempt from tax The Assessing Officer had also stated that the need for interest arose only because the internal accruals were not used for the assessee s own expansion. The facts brought to our notice on the basis of the contents of the paper book, however, indicate that the loans were utilized not for the purpose of investing in the partnership firm or for earning tax free dividends, but they were utilized to earn taxable income from the wind energy business and the business of financing the hotels. These facts should be verified by the Assessing Officer before any decision is taken regarding the allowability of the interest. In the interest of justice we therefore set aside the orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the assessment years 1998-99 and 1999-2000 in ITA Nos: 1147/Mum/2002 and 1479/Mum/2003, dated 06.01.2004. In paragraph 18 of the said order it has been held that the interest on non-convertible debentures is assessable as business income because the debentures were held as trade investments held on account of business. Respectfully following this decision of the Tribunal in the assessee s own case, we direct the Assessing Officer to assess the interest under the head Business . 11. Ground No: 2 is that the CIT(A) erred in deleting the interest of ₹ 52,50,977/- on account of interest free loans given by the assessee to V V Kamat, HUF, which is a major shareholder of the company. This issue had also come up before the Tribunal in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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