TMI Blog2018 (6) TMI 889X X X X Extracts X X X X X X X X Extracts X X X X ..... has been earned from surplus fund lying with the company. Similar issue was also decided against the assessee in the earlier years. No infirmity in the action of the CIT(A) in holding that this income has to be taxed as income from other sources. Disallowance of expenditure u/s 57 against the income under head income from other sources - Held that:- this ground is misplaced inasmuch as the CIT(A) has directed the AO to verify this aspect as to whether finance cost pertains to the earning of the interest income and thereafter decide the issue - hence we do not find any infirmity in the direction of the CIT(A) in this regard - thus allowed for statistical purpose. Disallowance u/s. 14A - Held that:- We find that the CIT(A) has actually remitted the issue to the file of the AO to examine certain claims of the assessee and assessee should be granted adequate opportunity of being heard - thus allowed for statistical purpose. - I.T.A. No.806/Mum/2016 And I.T.A. No.693/Mum/2016 - - - Dated:- 14-6-2018 - SHRI SHAMIM YAHYA, AM AND SHRI RAVISH SOOD, JM For The Assessee : Dr. Prayag Jha And Shri Vikrant Rajopadhye For The Revenue : Shri B. Sriniwas ORDER Pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d requisite permission from Government and was in the process of consolidating the land holding in respect of which expenses were met including employees remuneration, administrative and other expenses, finance cost etc. However, Assessing Officer was not satisfied with the explanation furnished and he went on to hold that the assessee's whole project was in a nascent stage and hence, its business could not be said to have commenced during the year 4. Upon the assessee s appeal, the ld. Commissioner of Income Tax (Appeals) noted that the issue of commencement of business was already settled by the ITAT in assessee s own case for assessment year 2007-08 in ITA No. 4224/Mum/2011 vide order dated 04.01.2013, it was held as under: 5. After considering the submission and perusing the material on record, I found thai this issue should go back to the file of the AO to examine the same afresh, I noted that no doubt, one project was going on, however, many projects were in pipeline, ft is seen that the assesses had entered into various agreement of Urban Development and entered into an agreement with the land owner for redevelopment of a prime property in the suburbs of Mumbai t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income Tax (Appeals). Accordingly, the Revenue s appeal stands dismissed. Assessee s appeal: 8. The grounds of appeal read as under: 1. On the facts and circumstances of case and law, the Ld. CIT(A) erred in confirming that Interest from ICD amounting to ₹ 1254.84 Lakhs and Interest from debenture amounting to ₹ 908.63 Lakhs is assessable under the head Income from other sources instead of Income from business and profession . 2. WITHOUT PREJUDICE TO ABOVE:- On the facts and circumstances of case and law, the Ld. CIT(A) failed to appreciate that even interest income is assessable under the Head Income From Other Source then also business expenditure required to be set-off against the Income from Other Source as per the Provision of Set-off and Carry Forward . 3. WITHOUT PREJUDICE, the learned CIT(A) failed to appreciate that the Assessing Officer has erred in not allowing deduction of any expenditure under section 57 of the Act, against the income under the head Income from Other Sources 4. On the facts and circumstances of case and law, the Ld. CIT(A) erred in confirming the disallowance u/s 14A r.w.r 8D. 5. On the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the head 'Income from other sources1 instead of 'Profits and Gains of Business or Profession' as claimed by the appellant. While doing so, Ld. AO also held that revenue expenditure and interest and finance charges were to be capitalised rather than allowed as revenue expenditure. As regards the ICD, Ld AO has stated that the interest income was earned from the surplus funds lying with the company. Similarly, the appellant had earned interest income from banks on account of funds kept under FD and as such were taxable under the head 'Income from other sources'. He also states that the appellant had earned interest from deposits on account of funds lying with the company and invested with other companies. Similarly, it had earned interest income on income tax refunds and hence, all these items were held to be taxable under the head 'Income from other sources'. Thereafter, Ld. AO went on to hold that the appellant company had debited ₹ 1201.41 lacs under the head 'Finance cost' against interest bearing borrowed funds shown as unsecured loans in the Balance Sheet. He also observed that the appellant company had also given advances to various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax (Appeals) in holding that this income has to be taxed as income from other sources. 13. However, as regards the ground raised by the assessee that even if interest income is assessable under the head income from other sources, then also business expenditure is required to be set off against the income from other sources as per the provision of set off and carry forward. We find that the above is consequential issue to our adjudication as above, and no special direction in this regard is required. The Assessing Officer shall consider the same as per law. 14. As regards the other ground raised by the assessee the ld. Commissioner of Income Tax (Appeals) failed to appreciate that the Assessing Officer has erred in not allowing deduction of any expenditure u/s. 57 of the Act, against the income under head income from other sources, we find that this ground is misplaced inasmuch as the ld. Commissioner of Income Tax (Appeals) has directed the Assessing Officer to verify this aspect as to whether finance cost pertains to the earning of the interest income and thereafter decide the issue. We do not find any infirmity in the direction of the ld. Commissioner of Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Tax (Appeals) has actually remitted the issue to the file of the Assessing Officer to examine certain claims of the assessee. In our considered opinion, on the facts and circumstances of the case, the issue needs to be remitted to the file of the Assessing Officer with following further directions: 1. Disallowance u/s. 14A cannot be made in relation to investments which do not yield any dividend income during the year. (Hon'ble Bombay High Court decision in the case of CIT vs. Ballarpur Industries Ltd. [2017] 85 taxmann.com 37 (Bom). 2. Disallowance of interest is permissible only if the assessee s claim that it has sufficient own fund to make the investment is not correct. (Hon'ble Bombay High Court decision in the case of Reliance Utilities Power Ltd. [2009] 178 taxmann 135 (Bom)). 19. Hence, we direct the Assessing Officer to consider the issue afresh keeping in mind our above observations which duly have the mandate of Hon'ble jurisdictional High Court in various case laws. Needless to add, the assessee should be granted adequate opportunity of being heard. 20. In the result, the appeal by the assessee is allowed for statistical purpose and the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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