TMI Blog2017 (9) TMI 1217X X X X Extracts X X X X X X X X Extracts X X X X ..... he Department even in scrutiny assessments, as evident from the assessment orders passed for assessment years 2012–13 and 2013–14. Therefore, it cannot be held that the assessee has never carried out business in financing and investment. Since, these aspects have not been examined or properly looked into by the Departmental Authorities, we deem it proper to restore the issue back to the file of the Assessing Officer for fresh adjudication after due opportunity being heard to the assessee. Ground no.1 is allowed for statistical purposes. Non giving credit for TDS on interest earned - Held that:- The assessee on 26th February 2014, has made a claim for allowing credit for TDS on the interest earned of ₹ 12,88,776. In this context, he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer in the assessment proceedings and the corresponding interest income was duly offered in the income tax return. 3. As far as ground no.1 is concerned, brief facts are, the assessee a partnership firm is engaged in trading of Stainless Steel Wire Rods. For the assessment year under consideration, the assessee filed its return of income on 23rd September 2011, declaring nil income. During the assessment proceedings, the Assessing Officer noticing that the assessee had debited interest expenditure of ₹ 31,51,334, called upon the assessee to furnish the details of interest account. On verifying he details furnished by the assessee, the Assessing Officer found that in the relevant previous year, the assessee has received interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 23.22 crore in the partnership firm being towards share capital it cannot be treated as loans and advances. Thus, the assessee submitted that no disallowance out of interest expenditure should be made. However, the Assessing Officer did not find merit in the submissions of the assessee. He observed, the business of the assessee is confined to trading in stainless steel wire rod and as per the partnership deed, the assessee is not authorised to carry on financing and investing activity. He also observed that new partnership firm where the assessee has invested funds towards share capital is also not doing any business and investments by the assessee were out of borrowed funds. Thus, on the aforesaid analysis of facts, the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the financial statements for assessment year 2009 10 and subsequent years. Learned Authorised Representative submitted, in subsequent assessment year also, the interest income earned has been shown under the head business and interest expenditure claimed have been allowed in scrutiny assessments. In this context, he drew our attention to assessment orders passed under section 143(3) for the assessment year 2012 13 and 2013 14. He submitted, even in the impugned assessment year also, the assessee had adopted the same accounting method and after adjusting the interest expenditure with the interest income earned during the year, the net interest expenditure has been debited to the Profit Loss account. He submitted, the Assessing Officer, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessment order reveals that the disallowance of interest expenditure is fundamentally on the basis of alleged interest free advance of ₹ 23.22 crore made by the assessee to Shree Ranka Kothari Kanugo Realtors. However, a perusal of the financial statement of the assessee for the impugned assessment year indicates that assessee had earned interest income of ₹ 1,73,26,935, from various parties and has paid interest of ₹ 2,04,79,269 and has debited net interest payment of ₹ 31,51,334 to the Profit Loss account. Notably, the Assessing Officer has not made any change to the character of interest income or expenditure shown by the assessee under the head business. As observed earlier, the Assessing Officer has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proper to presume it to be a loan and not a contribution towards share capital without properly examining the facts and merely going by the nomenclature given in the financial statement. Similarly, the observations of the Assessing Officer that assessee has never been involved in business of financing and investment appears to be a general observation without proper enquiry. It is also evident from material placed before us that in the past years the assessee has shown considerable interest income against which interest expenditure was set off. It also appears that the assessee s claim has been accepted by the Department even in scrutiny assessments, as evident from the assessment orders passed for assessment years 2012 13 and 2013 14, sub ..... X X X X Extracts X X X X X X X X Extracts X X X X
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