Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding


  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram

TMI Blog

Home

2017 (12) TMI 576

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... he assessee has got valid right over property on 05-10-2007, but not on 25-06-2005 and hence, the A.O. was right is treating surplus from surrender of booking right under the head short term capital gain. The CIT(A), without appreciating facts, held that the impugned asset is long term capital asset. Disallowance of interest paid on loan taken against security of fixed deposit - Held that:- Admittedly, in this case, the assessee is involved in the business of property management consultancy. The assessee has kept surplus funds in bank for a short period. Therefore, the interest income from fixed deposit is assessable under the head, ‘Income from other sources’. Though, the assessee claims to have paid interest to bank for loan taken against security of fixed deposit, loan proceeds have been utilized for advancing interest free loans to sister concerns. Therefore, the assessee is not eligible for deduction towards interest paid on loan against interest earned from fixed deposit. In this case, the assessee has paid interest to the bank for loan borrowed against security of fixed deposit. Admittedly, such loan has been utilized for advancing interest free advances to sister conc .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ainst the order of the CIT(A)-33, Mumbai dated 27-03-2015 and it pertains to AY 2009-10. Since, facts are common and identical issues are involved, for the sake of convenience, these two appeals were heard together and are disposed of by this common order. ITA No.3504/Mum/2015 2. In this appeal, the revenue has raised the following grounds of appeal:- 1. On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred ( i) Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) erred in directing the Assessing Officer to treat the capital gain arising from surrender of Rights by cancellation deed at ₹ 45,07,91,4821- as Long Term Capital Gain instead of Short Term Capital Gain of ₹ 77,23,00,8181- as assessed by the Assessing Officer . ( ii) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in directing the Assessing Of to treat the capital gain amounting to ₹ 45,07,91,4821- as Long Term Capital Gain . ( iii) Whether on the facts and the circumstances of the case and in law, the Ld. CIT(A) erred in directing the Assessing Of to treat the capital gain amou .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ors of NTCL held on 14- 09-2005, approved sale of said property to the purchaser, Kohinoor CTNL consortium for a sale consideration of ₹ 421 crores. Later, as agreed between the consortium partners vide their new resolutions dated 16-07-2005 and 28- 06-2005 formed a SPV known as Kohinoor CTNL Infrastructure Co Ltd for acquiring and development of the property of Kohinoor Mills No.3 . In the meanwhile, when the above process of acquisition of the property was in progress, the assessee firm has agreed to purchase 50,000 sq.ft. of area in the proposed building to be constructed by the Kohinoor-CTNL Infrastructure Co. Ltd by way of a letter dated 25-06-2005, addressed to M/s Kohinoor Projects Pvt Ltd. As per the letter, the assessee has agreed to purchase 50,000 sq.ft. building for a consideration @Rs.36,000 per sq.ft and assured to pay a sum of ₹ 40 crores advance in due course. Out of the above ₹ 40 crores advance, agreed to pay a sum of ₹ 4 crores by 19-07-2005. Further, as per the understanding between the assessee firm and the SPV, the assessee has paid an amount of ₹ 40 crores over a period from August, 2005 to December, 2006. Subsequently, the .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... he assessee further submitted that it has got right over the property when it had entered into an understanding / agreement for purchase of the property by paying an initial deposit of ₹ 1 lakh on 25-06-2005 which has been accepted by the seller. Therefore, the impugned asset is held for a period of more than 36 months and accordingly, it has rightly computed long term capital gain from surrender of booking rights in the property. In this regard, it has filed necessary correspondence between the SPV and the assessee and deed of cancellation dated 28-06-2008. 4. The AO, after considering necessary submissions of the assessee and also by taking into account the documents filed by the assessee during the course of hearing, observed that the assessee has got right over the property 5.10.2007, the MOU is signed by the assessee and the seller of the property, M/s Kohinoor-CTNL Infrastructure Co Ltd. The AO further observed that the assessee has entered into a MOU dt. 5.10.2007 for purchase of property specifying terms and conditions and also on payment of advance consideration on which date the assessee got right over the property. Though the assessee claims to have entered into .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... order, the assessee preferred appeal before CIT(A). Before the CIT(A), the assessee reiterated its stand taken before AO to argue that it has rightly computed long term capital gain on surplus from relinquishment of booking rights in the property as the holding period of the asset is more than 36 months from the date of agreement, i.e. 25-06-2005. The assessee further submitted that it has entered into an agreement cum understanding for purchase of 50,000 sq.ft. building to be constructed in Kohinoor Mills No.3 and paid advance sale consideration of ₹ 40 crores on various dates starting from 25-06-2005 to December, 2006. The assessee further submitted that its offer of purchase has been accepted by the seller by way of letter and terms and conditions of agreement has been ratified by way of a MOU dated 05-10-2007, otherwise, the right and interest in the property has accrued to the assessee when its offer of purchase has been accepted by the seller. The assessee referring to MOU and letter addressed to M/s Kohinoor Properties Pvt Ltd dated 25-06-2005 submitted that it has finalized purchase of property, however, a confirmamental agreement has not been entered into because .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... iscussed section 10 of the Contract Act, to hold that unless the particular law requires a contract to be in a prescribed form, a contract could be deduced from behavior of the parties correspondence between them and even their conversations, etc. The CIT(A), after discussing the law of contracts and the provisions of Transfer of Property Act, 1882 came to the conclusion that contract / agreement had already come into existence on 25-06-2005 while making an offer of purchase of property. Therefore, once such agreement / contract for purchase of the property in question is entered into by making an offer and its acceptance by way of written exchange of letters and making payment for the property purchased, the assessee firm had acquired certain bundle of rights in the property which was legally enforceable rights and the transfer of property is said to have taken place as provided u/s 2(47) of the Act. Therefore, it cannot be denied a right in that capital asset has been created in favour of the purchaser from the date of the agreement itself, which, in the present case is 25-06-2005. With these observations, the CIT(A) directed the AO to assess capital gains under the head Long T .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... , strongly supporting the order of the CIT(A) submitted that the holding period of the impugned asset is more than 36 months from the date of agreement / contract, i.e. on 25-06-2005 to the date of surrender of booking right, i.e. on 28-06-008 and accordingly, it has rightly computed gain from surrender of booking rights under the head Long Term Capital Gain. The Ld.AR further submitted that the AO has heavily relied upon the MOU entered into by the assessee with Kohinoor-CTNL Infrastructure Co Ltd, ignoring the fact that it had already entered into a valid agreement for purchase of property from one of the consortium partners, M/s Kohinoor Projects Pvt Ltd which fact has been confirmed by both the parties. The Ld.AR referring to the MOU dated 05-10-2007 submitted that it has entered into MOU only for the purpose of ratifying earlier terms and conditions of agreement dated 25-06-2005, but actual agreement took place between the parties on 25-06-2005 on which date the assessee has offered to buy property and its offer has been accepted by the seller. The assessee has written a letter specifying terms and conditions of agreement and the seller has acknowledged offer by way of an acce .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... for purchase of property on 25-06-2005, it has entered into a MOU on 05-10- 2007 with Special Purpose Vehicle formed by the consortium partners known as Kohinoor CTNL Infrastructure Co Ltd only to ratify earlier terms and conditions in writing. But, undisputed fact is that it has got right over the property on the date of agreement, i.e. on 25-06-2005. Therefore, holding period of the asset should be considered from the date of agreement. If holding period of the asset is considered from the date of agreement, i.e. on 25-06-2005 till the date of surrender of booking right on 28-06-2008, it is more than 36 months and hence, surplus from surrender of booking rights is assessable under the head Long Term Capital Gain . 12. The AO observed that holding period of the asset is less than 36 months which is evident from the fact that the assessee has entered into a valid MOU setting forth terms and conditions of conveying title and interest in the property on which date the right in the property accrued to the assessee. The AO further observed that the letter addressed by the assessee to Kohinoor Projects Pvt Ltd on 25-06-2006 is self serving document which does not have any legal .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... in the term necessary to constitute transfer should be certainly ascertained. The transferee should be taken possession of the property and has done something for furtherance of the contract. The transferor should be ready and willing to perform his part of contract. The provisions of section 2(47)(v) of the Income-tax Act, 1961 includes the term part performance referred to in section 53A of the Transfer of Property Act, 1882 for purpose of transfer of a capital asset. From the conjoined reading of section 2(47)(v) of The Income Tax Act, 1961 and section 53A of the Transfer of Property Act, 1882, for a valid conveyance of an immovable property, there should be an agreement in writing, signed by the transferor and transferee setting forth terms and conditions of Transfer of Immovable Property. The said provisions of section 53A further clarifies that any transaction involving allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882, would come under the definition of transfer of capital asset . Further, the provisions of sections 54 and 55 of the T .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ed upon letter written by Kohinoor Projects Pvt Ltd on 25-06-2005 accepting offer of the assessee for purchase of property by stating that they confirm the arrangement of purchase of property subject to receipt of payment on stipulated date. The assessee claims that as per the offer and acceptance between the parties, it had paid an advance consideration of ₹ 40 crores on various dates which has been accepted by the seller of the property. Therefore, it has got valid right in the property on the date of letter, i.e. on 25-06-2005. 15. There is no dispute with regard to the nature of asset. Whether booking rights is a capital asset and it is transferable or not is not disputed by both the parties. The only dispute is with regard to the date of acquisition of booking right and period of holding of the right. The assessee claims that it has got right over the property from 25-06-2005 when it made an offer for purchase of property by way of a letter addressed to Kohinoor Projects Pvt Ltd. The AO claims that the assessee has got right over the property on 05-10-2007 when a valid MOU was entered into between the assessee and the SPV setting forth terms and conditions of purchase .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... has been confirmed by NTCL board on 14-09-2005, as per the Board of Directors 195th Board meeting. We further observe that the consortium partners have formed an SPV known as Kohinoor-CTNL Infrastructure Co Ltd subsequent to the confirmation received from NTCL. NTCL has executed a valid sale deed in favour of the SPV on 11-10-2005 which is registered with the Sub Registrar. After receipt of valid title in the property, Kohinoor-CTNL Infrastructure Co Ltd has entered into a valid MOU setting forth terms and conditions of the property and agreed to convey title in the property in favour of the assessee on 05-10-2007. Therefore, we are of the view that when the seller of the impugned property itself did not have any right over the property, agreeing to convey the title in the property in favour of a third party appears to be impractical and unusual. Therefore, we are of the view that there is no merit in the claim of the assessee that it has got valid right and interest in the property on 25-06-2005 by way of a simple letter addressed to the proposed buyer of the property. We, further was of the opinion that right / interest in an immovable property could accrue only by way of an agr .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... licable. The assessee also relied upon Hon ble Punjab Haryana High Court in the case of Ms. MadhuKaul vs. CIT(2014) 363 ITR 54 (P H-HC). The Hon ble High court, considering fact of the case held that the mere fact that possession was handed over later date, does not detract from the fact that the allottee was conferred a right to hold property on issuance of allotment letter. In the case before, Hon ble Punjab Haryana High court, the property was identified and valid allotment letter was issued. In this case, the assessee addressed a letter to the prospective buyer of the property, on which date the seller does not even know whether he would succeed in bidding. Therefore, we are of the view that the case law relied upon by the assessee are not applicable to the facts of present case and hence, not followed. 18. Coming to the decision of Hon ble Delhi High Court, in the case of Gulshan Malik vs. CIT (2014) 223 Taxmann 243 (Delhi- HC). The Hon ble Delhi High Court has considered similar issue of whether booking rights in a property will accrue on the date of allotment letter or from the date of agreement to sell. The Hon ble High Court after considering relevant facts held tha .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... red here is the right to purchase the apartment and obtain title, termed 'booking rights'. Only that agreement which intends to convey these rights according to both parties can be considered as the source of accrual of rights to the assessee. The confirmation letter dated 6-8-2004 specifically states first, that no right to provisional/ final allotment accrues until the buyer's agreement is signed and returned to the builders and second, that no right to claim title/ownership results from the confirmation letter itself. Thus, it is clear that the builders do not intend to convey any right of provisional /final allotment or any right to claim title/ownership under the confirmation letter. There being no intention to convey rights in this document, it would be impermissible to find that the right to obtain title/'booking rights' emanated from the confirmation letter. These rights may only be located in buyer's agreement, and thus, the date of acquisition of the capital asset must be considered the date of signing of said agreement, i.e. 4-11-2004. [Para 8] These rights were transferred by.the assessee on 2-11-2007. Thus, the capi .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... 53A. Part performance Where any person contracts to transfer for consideration any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that the contract, though required to be registered, has not been registered, or, where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract: PROVIDED .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... nnexure 3). Consequent to this, regular payments were made per the payment plan of the builder. A buyer's agreement was executed on 4.11.2004 between DLF and the allottees i.e. the appellant and his wife. Per the payment schedule, a total payment of ₹ 87,12,500/- was made from 31.07.2004 to 03.08.2006 towards the purchase of the apartment. Following this, the appellant and his wife entered into an agreement to sell dated 2.11.2007 to sell their booking rights/rights or interest in the apartment to Smt. Srilekha Nayak for a sum of ₹ 1,44,87,500/-. The period between acquisition and sale of the booking rights in the apartment is claimed to be 39 months and 2 days, thus greater than 36 months, i.e. from 31.07.2004 to 02.11.2007. The appellant subsequently filed return of income on 31.3.2009 for the assessment year 2008-2009, with income declared to be ₹ 3,84,874/-. In the computation of income, the appellant had declared a long term capital gain of ₹ 31,35,740/- on the sale of booking rights/extinguishment of rights in the apartment. An exemption was claimed under Section 54 of the Act, 1961 as the same was invested in purchase of another apartment in June .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... o purchase the property /booking rights, which were extinguished by execution of the agreement to sell dated 2.11.2007 in favour of Smt. Srilekha Nayak, thus making his booking rights a long-term capital asset, held for a period of 39 months and 2 days. Alternatively, the appellant submits placing reliance on CIT v. Ved Parkash Sons (HUF) [1994] 207 ITR 14873 Taxman 70 (Punj. Har.) that rights in the apartment were acquired on the date of receipt of allotment letter i.e. 6.8.2004, by which the apartment was provisionally allotted to him, which rights were sold on 2.11.2007 thus making his right in the apartment a long-term capital asset. The two grounds for this submission are first, that Section 2(47) of the Act, which defines transfer in relation to a capital asset, is a wide and inclusive definition that encompasses even transfer of a right in property, thus including within its ambit, transfer of booking rights, second, that a combined reading of Sections 2(14) and 2(47) of the Act show that transfer of a capital asset is not restricted to transfer of ownership in immovable property alone. The learned counsel for the Revenue, on the other hand, relies on the order of the .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of an agreement (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights has been characterised as being effected or dependent upon or flowing from the transfer of a share or shares of a company registered or incorporated outside India .' 7. It is clear that a capital asset under the Act is property of any kind that is held by the assessee. Necessarily, a capital asset must be transferable. Thus, to understand what kind of property can be considered a capital asset, it would be apposite to refer to the definition of transfer in Section 2(47) of the Act. Section 2(47)(v) and (vi), and Explanation 2 make it adequately clear that possession, enjoyment of immovable property, as well as an interest in any asset are all transferable capital assets . The reference to acquisition by way of any agreement or any arrangement or in any other manner whatsoever establishes t .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... laim title/ownership results from the confirmation letter itself. Thus, it is clear that the Builders do not intend to convey any right of provisional/final allotment or any right to claim title/ownership under the confirmation letter. There being no intention to convey rights in this document, it would be impermissible for this Court to find that the right to obtain title/ booking rights emanated from the confirmation letter. These rights may only be located in the Buyer's agreement, and thus, the date of acquisition of the capital asset must be considered the date of signing of said agreement i.e. 4.11.2004 9. These rights were transferred by the assessee on 2.11.2007. Thus, this Court is of the opinion that the capital asset in the form of these rights was held for a period of 35 months and 28 days, i.e. a short-term capital asset thus rendering the profits from the transfer of this capital asset taxable as shortterm capital gains. 10. Ved Parkash (supra), in any event, can be distinguished from the facts in this case. In Ved Parkash (supra), the assessee sought to claim that the date of acquisition of the capital asset was the date of entering into the agreemen .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... Para-8 onwards, clearly held as under:- 8. This being the case, the only question that arises for consideration is whether the booking rights to the apartment accrued to the assessee on the date of application for allotment/confirmation of allotment or on the date of execution of the agreement to sell i.e. the buyer's agreement. This Court is of the opinion that a right or interest in an immovable property can accrue only by way of an agreement embodying consensus ad idem. The nature of the right sought to be transferred here is the right to purchase the apartment and obtain title, termed booking rights . Only that agreement which intends to convey these rights according to both parties can be considered as the source of accrual of rights to the assessee. The confirmation letter dated 6.8.2004 (Annexure 3) specifically states first, that no right to provisional/final allotment accrues until the Buyer's Agreement is signed and returned to the builders and second, that no right to claim title/ownership results from the confirmation letter itself. Thus, it is clear that the Builders do not intend to convey any right of provisional/final allotment or any right to claim .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... nterest was conveyed to the assessee in the instant case when the application for allotment was made/confirmation letter was received. The agreement to sell was considered to be the source of a beneficial interest to the assessee in Ved Parkash (supra) only because the right of possession had been transferred to the assessee along with the agreement to sell. There cannot be any parity between the allotment application/confirmation letter in the instant case and the agreement to sell in Ved Parkash (supra), since the confirmation letter specifically states that no right of provisional allotment/final allotment will result from it to the assessee. It is also noted that the assessee challenged the aforesaid decision of Hon'ble Delhi High Court before Hon'ble Apex Court, wherein, the SPECIAL LEAVE TO APPEAL (C) NO(S). 30670/2014 was dismissed, meaning thereby the case was decided in favour of the Revenue. No contrary decision was brought to our notice by the assessee. 2.4. So far as, the decision in the case of CIT vs Vimal Lalchand Mutha (1991) 187 ITR 0613 (Bom.) is concerned, the question before the Hon'ble High Court was with respect to validity of Long Ter .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... e, the letter addressed by the assessee is only a self serving document which does not have any legal sanctity. On the other hand, the evidence relied upon by the AO, i.e. the MOU is a valid document conferring title and interest in the property in favour of the assessee, which happened on 05-10- 3007, but not on 25-06-2005. We further noticed that though the assessee claims to have paid initial advance amount of ₹ 1,00,000/- along with letter on 25-6-2005, on perusal of details filed by the assessee, the assessee has paid ₹ 1,00,000/- on 25-7-2005. We further noticed that though the assessee claims to have paid ₹ 40,00,00,000/- advance on various dates starting from 25-06-2005 to December 2006, on perusal of payment details we find that the assessee has paid ₹ 4,01,00,000/- from its account and balance amount has been paid by some third parties. The assessee further claims that it had taken loan from some parties and they have directly paid to the seller for which it has paid interest. Assuming for a moment, but not accepting, even if date of first payment is considered for the purpose of reckoning holding period, the first payment was made on 19-7-2005 and .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... . The assessee also used loan proceeds to advance interest free loans to its sister concerns without charging any interest. The action of the assessee is not in conformity with the provisions of the Incometax Act, as interest under the head interest on fixed deposit is taxable under the head Income from other sources and not as Income from business or profession . Since, the assessee has not paid interest on loan borrowed against security of fixed deposit towards its business activity, netting of interest earned on fixed deposit cannot be permitted against interest paid on funds borrowed against security of fixed deposit. Aggrieved by the assessment order, the assessee preferred appeal before CIT(A). 22. Before CIT(A), the assessee reiterated its stand taken before the AO to argue that the AO was incorrect in denying setting off of interest paid on loans borrowed against security of fixed deposits towards interest earned on fixed deposit as the funds borrowed from the bank are used mainly for the purpose of advancing loans to sister concerns, which are in the nature of investments in subsidiaries out of commercial expediency. The assessee has rightly netted off interest pai .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... not eligible for deduction towards interest paid on loan against interest earned from fixed deposit. 24. The assessee has earned interest income of ₹ 2,93,67,955 from CKP Co-operative Bank on fixed deposit of ₹ 15 crores. Admittedly, the nature of interest earned from FDR is clearly in the nature of income from other sources. Any deduction of expenditure against income from other sources can be allowed, if expenditure pertains to earning of such interest income. In this case, the assessee has paid interest to the bank for loan borrowed against security of fixed deposit. Admittedly, such loan has been utilized for advancing interest free advances to sister concerns and associates. This fact has been admitted by the assessee before the lower authorities. Though the assessee claims to have advanced loans to sister concerns out of commercial expediency failed to prove any commercial expediency in advancing loans to sister concerns. Therefore, we are of the view that the AO was right in denying netting off of interest paid to bank for loan taken against security on fixed deposit against interest earned from fixed deposit from the same bank. The assessee has relied upon th .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... to the bank. 29. Having heard both the sides and considered material available on record, we find force in the arguments of the assessee for the reason that if at all any interest is charged on loans and advances from the parties and the same is part of receipts of the assessee for the relevant financial year, then the same needs to be set off against interest paid to the bank on loan borrowed against security deposit, if there is a direct nexus between loans borrowed from bank and loans and advances to other parties. Since, the assessee has raised the issue for the first time, and the lower authorities did not have an occasion to examine the claim of the assessee, we deem it appropriate to set aside the issue to the file of the AO for further verification of facts in the light of the claim of the assessee. In case, the claim of the assessee is found to be correct, then the AO is directed to allow set off of interest earned from loans of ₹ 31,94,644 against interest paid to bank for loan taken against security of fixed deposit. 30. As a result, additional ground raised by the assessee is allowed for statistical purpose. 31. The next issue that came up for our conside .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... nt has stopped business operations. There is no evidence placed on record by the Assessing Officer in this regard. The appellant is in the business of providing the project management services and during the period under consideration, it has not got any consultancy project for providing management services but the business as such has not stopped its operations. 77. Mere fact that there has been no receipts during the period cannot lead to an inference that there is no business activity. The infrastructure of an office has to be maintained and the connected minimum expenditure will have to be incurred in order to ensure that once the efforts of the management in obtaining business fructify, services can be rendered. There is no finding given by the Assessing Officer that the business of the appellant nature has been discontinued, his only observation is that there are no receipts in this year and no services were rendered in this year. 78. The fact of there being no receipts cannot be determinative of the allow ability of an expenditure. This proposition is supported by a number of judicial pronouncements such as CIT Vs Ralliwoif Ltd 121 ITR 262 (Bom) or CIT Vs Aspinte .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

 

 

 

 

Quick Updates:Latest Updates