TMI Blog2016 (3) TMI 587X X X X Extracts X X X X X X X X Extracts X X X X ..... SUPREME Court) wherein it was held that if income cannot be taxed under any of the heads mentioned in Sec.14 of the Act, then it cannot be taxed at all. The AO in coming to the conclusion that the sum of ₹ 5,51,362 had to be taxed separately had not made any reference to any provision of law in the Act under which he is resorting to such a course. Consequently, even assuming the income in question is not treated as income from business, it has to be treated as income from other sources. If so treated, there can be no tax on the said income separately without set off of loss from business u/s.71 of the Act. Thus the levy of tax on the sum of ₹ 5,51,362/- cannot be sustained. Therefore of the view that the addition made by the AO cannot be sustained and the same is directed to be deleted. Decided in favour of assessee Addition for deemed interest income of the appellant - Held that:- The entire basis of addition made by the AO was erroneous. It is not the case of the AO that borrowed funds on which interest was paid were not used for the purpose of business and therefore the interest expenditure cannot be allowed u/s.36(1)(iii) of the Act. Therefore the non-payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsacted in commodities through a broker by name Pushpkant Commodities Private Limited, a registered member (No.12790) of Multi commodity Exchange of India Ltd. The Assessee had transacted under client code CSC0026. The AO issued notice u/s.133(6) of the Income Tax Act, 1961 (Act) to Multi Commodity Exchange of India Ltd., and from their replies found that the Assessee was not registered as client either with Pushpakant Commodities (P) Ltd., or any other member of the exchange. The AO confronted the reply so received to the Assessee and called upon the Assessee to show cause as to why the income in question should not be treated as Income from other sources instead of the claim of the Assessee that the income in question was from business. The Assessee explained that the document in the form of contract not and receipt of payment from Pushpakant Commodities (P) Ltd., was sufficient explanation and in any event the sum in question is already offered to tax as income and no addition need to be made. The AO however was of the view that in the light of the reply from Multi commodity Exchange of India Ltd., the claim of the Assessee that the income in question is from business cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax. This aspect is clear if one reads the decision of the Hon ble Supreme Court in the case of Nalinikant Ambalal Mody Vs. CIT 61 ITR 428 (SC) wherein it was held that if income cannot be taxed under any of the heads mentioned in Sec.14 of the Act, then it cannot be taxed at all. The AO in coming to the conclusion that the sum of ₹ 5,51,362 had to be taxed separately had not made any reference to any provision of law in the Act under which he is resorting to such a course. Consequently, even assuming the income in question is not treated as income from business, it has to be treated as income from other sources. If so treated, there can be no tax on the said income separately without set off of loss from business u/s.71 of the Act. Thus the levy of tax on the sum of ₹ 5,51,362/- cannot be sustained. I am therefore of the view that the addition made by the AO cannot be sustained and the same is directed to be deleted. Ground No.1 and 2 are accordingly allowed. 8. Ground No.3 raised by the Assessee reads as follows: 3. FOR that the Ld. CIT(A) erred in upholding the addition of ₹ 60,938/- made for deemed interest income of the appellant. The appellant ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 60,938/- (Rs.69,407/- minus ₹ 8,469/-) remains undisclosed which he added as undisclosed income of the Assessee. 9.1 The Assessee submitted before CIT(A) appellant respectfully submits that the very method adopted by the A.O. for determining the amount and the basis of the addition was illogical and misconceived. At the out-set it was submitted that simply because interest is not charged on some loans income from interest cannot be presumed from such loans and treated as undisclosed income, it is entirely volition of the Assessee as to whom interest free loan is to be given and to whom it is not to be given. It was pointed out that the A.O. has totally ignored the following particular facts of thr case. i) That the total interest received by the Assessee during the year was ₹ 7,19,115/- and the interest paid was ₹ 4,14,114/-, thus there was net income of ₹ 3,05,00l/- from interest during the year. ii) Interest free loan of ₹ 2 crores was received from M/s. Correo Marketing Pvt. Ltd. on 09.04.2007 which was repaid on 01.09.2007 and no interest was paid on this loan. The interest @ 8% on this amount alone works out to ₹ 6,35,616/- w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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