TMI Blog2017 (10) TMI 994X X X X Extracts X X X X X X X X Extracts X X X X ..... JAIN, ACCOUNTANT MEMBER For The Assessee : Shri P.C. Yadav, Adv For The Revenue : Shri T. Vasanthan Sr. DR ORDER The present appeal of the revenue arises from the order of Ld CIT(A) dated 08.02.2017 and relates to AY 2012-13. 2. The grounds of appeal as raised by the revenue in the memo of appeal are as under:- a) On the facts and under the circumstances of the case, the Ld CIT(A) has erred in law and the facts in deleting the addition made by the Assessing officer of ₹ 33,64,918/- on account of interest paid on share application money by ignoring the facts, that the above expense is capital in nature b) The appellant craves to be allowed to add any fresh ground(s) of appeal and/ or delete or amend any of the ground(s) of appeal. 3. Facts of the case, as emanating out from the orders of authorities below, are that the assessee is a company and engaged in the business of investment, to advance, lend or loan money on interest or without interest. It has filed its return of Income declaring an income of ₹ 13,01,580/-. Return filed by the assessee was picked up for scrutiny and assessment under section 143(3) of the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith interest to M/s Conquer Investment (Pvt) ltd. Therefore, the assessee company was forced to pay interest to M/s Conquer Investment (P) Ltd during F.Y 2011-12 pertaining to AY.2012-13 and also refunded the share application money of ₹ 5.55 Crore. The assessee submitted the copy of account of M/s Conquer investment. 6. Before the CIT(A), the assessee pointed out that the assessee is engaged in buying and selling of shares and securities, the receiving and giving of the monies as share application must be considered as part of normal business activity of the assessee company and, therefore, interest paid on share application money received deserves to be allowed. The assessee also pointed out that assessee has earned interest of ₹ 73,95,209/- on investment of these funds and this income has been taxed under the head business income and not income from other sources. 7. After hearing the assessee, the CIT(A) has observed as under:- I have gone through the facts of the case and the submissions made by the AR. It is noticed that the appellant company had received share application money from M/S Conquer Investment Finance Pvt. Ltd. Since 2008-09 and as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has wrongly paid interest and the same deserve to be disallowed under section 36(1)(iii) of the Act. Ld DR argued that there was no purpose for incurring these expenses and such an attempt is not permissible in view of the guidelines of SEBI. 9. The ld AR of the assessee argued and filed written synopsis, the same are reproduced hereunder: Ld DR has argued that matter should be restored to AO since the CIT(A) has accepted the additional evidence. In this regard it is submitted that it is the appeal of the revenue and no ground has been taken by the revenue wherein it has been contended that CIT(A) has admitted additional evidence. Further the revenue has not filed any paper book, in their appeal, to establish that finding of the CIT(A) are perverse, it is submitted that burden is on revenue to establish that the finding of the CIT(A) are perverse and not of the assessee since assessee is not in appeal, it is submitted that every time poor assessee has been made sufferer for pursuing his cases and revenue is not doing anything for protecting the interest of nation. It is submitted that if the Ld CIT(A) has done anything wrong then the duty of revenue is to produce the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that before the AO and CIT(A) assessee has pointed out that assessee is an investor and investing in various share and securities and has earned handsome income of interest by virtue of this investment, and this income has been offered as business income this income has not been taxed under the head income from other sources Page No-19 of the synopsis . However all these submissions were brushed aside by the AO. The AO has held that the expenses incurred in the field of capital and hence not allowable. It is submitted that in the case of Core Health reported in 298 ITR 195(SC), Hon ble Apex Court has held that for the purpose of section 36(1)(iii) capital and revenue expenses are on same footing- Without prejudice to the above it is submitted that it is also settled position of law that if own funds of the assessee are sufficient then no disallowance can be made under section 36(1)(iii) of the Act. It is submitted that a perusal of Page No-12 and 13 of the synopsis would show that assessee was having huge reserve and surplus amounting to ₹ 9,97,70,323/- was there as opening balance with the assessee and out of which an amount of ₹ 5,50,00,000/- had been returned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can step into the shoes of the AO for examining an issue and he can use his powers under section 250(4) of the Act and there is no need of any remand report particularly when something is filed for supporting a claim and CIT(A) has no doubt on that document. Ld DR has also alleged that filing of agreement before the CIT(A) for the first time is an afterthought but the DR has failed to prove any perversity in the order of the CIT(A). Ld AR rightly contended that it is the appeal of the revenue and burden is on revenue to prove that the order of the CIT(A) is perverse and the revenue ought to have file the paper book for proving the perversity of the order of CIT(A). But without there being any material produced on record, it is not permissible to say that the order of the CIT(A) is perverse. Be that as it may, be the AR of the assessee pointed out that every document was filed before the AO and CIT(A). c) On merit, s it is observed that assessee is an investor company and making investment and receiving interest is the main business of the assessee Company. From Page No-19 and 20 of the PB, it is observed that the assessee has received total interest of ₹ 1.58 Crore during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he entry constitutes contemporaneous evidence of the fact that the amount of ₹ 10 crores was invested in Strong as share application monies for purchase of 12 per cent non-cumulative redeemable preference shares. In the light of the contemporaneous entry made in the books of account maintained by the assessee in the regular course, which have not been rejected by the AO, it is not possible to hold that the advancement of the monies to Strong was not for the purpose of assessee s business. The letter dt. 15th March, 2002 written by the assessee to the AO shows that there was a condition that if the shares were not allotted, the monies will be returned by Strong together with interest at 12 per cent. The AO has not questioned this statement of the assessee made in writing. In fact, it does appears to us reasonable to infer that since the shares were to be issued with a dividend rate of 12 per cent as shown by the entry in the assessee s books of account, the return of the monies if the shares are not allotted would also have been agreed to by the parties to bear interest at the same rate. The assessee has actually credited the interest of ₹ 38,79,452 in its books of accou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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