TMI Blog2018 (1) TMI 667X X X X Extracts X X X X X X X X Extracts X X X X ..... ell as income tax refund to the extent sustained by us, cannot be regarded as income from business. We, therefore, do not find any illegality or infirmity in the order of the CIT(A) to the extent that these income as assessed under the head “Income from other sources.” Addition respect of interest and other expenses attributable to the tax free income - Held that:- It is not a case where the AO has applied the provisions of section 14A but just allocated the various expenses between the exempt income as well as taxable income. It is not denied that the assessee is having own funds to the extent of ₹ 39,74,69,549/- while investment on tax free securities was to the extent of ₹ 16,01,31,377/- as is apparent from page 87 of the paperbook (balance sheet). We noted that the disallowance has simply being made by the AO on estimate basis. In view of the decision of Hon’ble Jurisdictional High Court in the case of HDFC Bank Ltd.[2014 (8) TMI 119 - BOMBAY HIGH COURT] we are of the view that no such disallowance can be made as the natural inference will be that the assessee made investment in tax free securities out of its own funds. We, therefore, delete the said disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orrowed should be deducted from PROFIT OF SHIPPING BUSINESS to arrive at shipping profits for the purpose of allowing deduction u/s.33AC of the Act and erred in deciding that interest received from SUBSIDIARY COMPANIES as well as interest received on INTER CORPORATE LOANS and BILLS DISCOUNTING to be considered as Income from Other Sources, overlooking the principles of NETTING OFF and not considering that interest received is on funds utilized from funds borrowed on which interest is paid and therefore amount of interest paid should be deducted from amount of interest received and erred in overlooking the principles of NETTING OFF settled by Supreme Court. 3. LOSS IN BARGE DIVISION . The Learned A.O. as well as Learned CIT(A) have erred in coming to the conclusion that for the purpose of arriving at the profit derived from the business of operation of ships for computing deduction u/s.33AC, the loss incurred in the operation of BARGES amounting to ₹ 28,64,444/- to be deducted, overlooking that loss incurred on BARGES given on LEASE on which Lease Rent is received IS not the PROFIT / LOSS OF SHIPPING and therefore the same is not profit / loss derived from business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer) erred in treating following incomes aggregating ₹ 3,64,92,593 as income from other sources as against business income considered by the appellants Sr. No. Particulars Amount (in Rs.) ( i) Interest from subsidiary companies ₹ 3,32,89,425 ( ii) Interest from securities Rs 1,24,761 ( iii) Interest and discounting charges on trade bills ₹ 28,34,996 ( iv) Miscellaneous earnings ₹ 2,29,911 ( v) Rent ₹ 13,500 ₹ 3,64,92,593 The appellants contend that on the facts and in the circumstances of the case and in law, the action of the Assessing Officer in holding aforesaid incomes as income from other sources is not tenable in law and ought to have been considered as business income. 2. The Assessing Officer has erred in apportio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequently withdrawn as is apparent from pages 158 to 161 of the paperbook. We therefore, reduce the addition to ₹ 7,55,931/-. Thus, this ground is partly allowed. 8. Now coming to the additional grounds taken up by the assessee vide letter dated 01.08.2017. Vide its first ground of appeal, the assessee has challenged the interest income received by it as Income from other sources as detailed below: A) Interest from Subsidiary Companies: ( i) Tolani Bulk Carriers Ltd. ₹ 1,08,39,116/- ( ii) Tolani Shipping Co. Ltd. ₹ 65.97,575/- ₹ 1,74,36,691/- B) Other Interest Income ( a) Inter Corporate Deposits ₹ 1,38,38,314/- ( b) Staff Loan ₹ 2,918/- ( c) Income-tax refunds ₹ 20,11,502/- S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of ship acquisitions as well as chartering in of vessels and meeting attendant working capital requirements besides strengthening the capital structure of the company. SCICI Ltd. (SCICI) is agreeable, in principle, to provide for the aforesaid scheme, a corporate loan of ₹ 10 crores. 9. The assessee could not utilize the loan immediately for the purchase of the ship and it was getting delayed. The assessee, therefore, out of the loan borrowed, temporarily invested in giving advance against Bill discounting and inter-corporate deposits to earn interest and save the burden of interest payable on the loan taken from SCICI Ltd. The assessee had accordingly given loan of ₹ 5 crores to M/s. Tolani Bulk Carrier Ltd., a subsidiary company of the assessee, for purchase of ship, M.V PrabhuMihikaa from M/s. Cereza World Line Inc. For a sum of ₹ 82,35,32,699/-. The financing of the ship acquisition included loan taken from the assessee as under: ( i) Loan taken by Tolani Bulk Carriers Ltd. From SCICI Ltd. on 6.1.1996 Rs.61,02,11,000/- ( ii) Loan from Appellant Company on 24 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e since could not immediately acquire the ship, has advanced the money from its own sources as well as from the money borrowed to its subsidiary company, which were also engaged in the similar business. Since these companies to whom the assessee has given temporary loan for acquiring ship is also the subsidiary company of the assessee therefore even on the basis of commercial expediency, the assessee is bound to assist those companies. We, therefore, set aside the order of the CIT(A) on this issue and direct the AO to treat the sum of ₹ 3,41,10,001/- out of the sum of ₹ 3,64,92,593/- as income from business. The rest of the income i.e. interest on staff loan, interest on securities, miscellaneous earning, rent received as well as income tax refund to the extent sustained by us, cannot be regarded as income from business. We, therefore, do not find any illegality or infirmity in the order of the CIT(A) to the extent that these income as assessed under the head Income from other sources. 10. Coming to the additional ground no.2, relates to the disallowance of ₹ 12073623 in respect of interest and other expenses attributable to the tax free income. After hearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound no.1 2 relates to the claim of deduction towards the expenses as well as treating the interest received from subsidiary company and inter corporate loans, bill discounting to be part of profit of shipping business. Since while disposing of additional ground no.1, we have directed the AO to treat the interest received from subsidiary as well as interest and discounting charges on trade bills as Income from business of the assessee as part of shipping business, the natural inference will be that the interest paid as well as other expenses which has been disallowed to the extent of ₹ 2,23,17,217/- will automatically be allowed as deduction out of the income computed from business. Thus, to that extent ground 1 and 2 are allowed. 12. Ground no.3 in the summarized ground relates to the loans of barge division. The learned AR was fair enough to concede that this issue is duly covered against the assessee by the decision of this Tribunal in the case of DCIT vs. Orion Agencies Ltd. 128 TTJ 524. We accordingly, dismiss this ground. 13. Ground no.4 is an alternate ground and relates to the claim of deduction in respect of interest paid on loan u/s. 57(iii) in case intere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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