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TMI Blog2018 (9) TMI 527X X X X Extracts X X X X X X X X Extracts X X X X ..... balance sheet, liability towards long term borrowings is Rs. 9,09,56,368/- as on 31/03/2012 and the corresponding figure as on 31/03/2011 was Rs. 8,25,10,213/-. The Assessing Officer observed that an amount of Rs. 1,40,49,375/- was debited towards interest on loans and interest bearing funds were utilized for purchasing land valuing Rs. 5,91,52,500/-. According to the Assessing Officer, the asset was not put to use for the purpose of the business, as such, it was not clear as to how the business of providing asset management solutions to individuals and financial institutions would require investment in land to the extent of Rs. 5.91 crore. The Assessing Officer observed that funds for investment in land were channled from the business and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vation of tapioca, which is exempt being agricultural income. It was submitted that once the income from cultivation of tapioca was claimed as agricultural income and exempt from income-tax, any expenditure attributable to such exempt income was not allowable/deductible from the taxable income of the assessee. It was submitted that the land had no role to play in the business of the company, i.e., providing asset management solution to individuals and institutions and the total cost of land covered 71% of the interest bearing long term borrowing funds. 5. On the other hand, the Ld. AR submitted that the assessee acquired land for business purpose and Revenue was increased by Rs. 2,14,67,528/- (321%). It was submitted that increase in incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of increase Revenue from operations 2,81,64,759 66,97,231 2,14,67,528 321% Finance Costs 1,41,66,974.93 66,51,500 75,15,474.93 113% Profit before Tax 1,11,79,809.27 7,77,744 1,04,02,065.27 1337% Income Tax 40,85,887 1,10,000 39,75,887 3614% Profit After Tax 70,93,922.27 6,67,744 64,26,178.27 962.37% Net Profit Ratio 25% 10% 15% Thus the Ld. AR stated that there was no addition of any fixed assets during the year. Further the Ld. AR gave the details of Fixed Assets and Long Term borrowings as follows: Particulars Fixed Assets Long Term Borrowings Opening Balance 7,57,53,541 8,25,10,213 Closing Balance 7,34,44,336 9,09,56,368 Difference (23,09,205) 84,46,155 Thus it was submitted that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that the assessee paid interest to the following Parties: Interest Amount (in Rs) TDS (in Rs) Roy M Mathew 49,18,856 4,91,886 Mini Muthoottu Nidhi Kerala Ltd 79,63,220 7,96,322 TOTAL 1,28,82,076 12,88,208 5.5 It was submitted that the assessee claimed the interest expenses after deducting TDS in compliance with the provision of Income Tax Act and the recipients of interest have included the income in their filed returns of income tax and have already paid tax. According to the Ld. AR, the assessee accounted the interest expenses in previous assessment years and the Assessing Officer allowed such expenses as a business expenses. The Ld. AR relied on the judgment of the Supreme Court in the case of CIT vs. M/s. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agricultural income. The contention of the assessee is that the said land was shown as business asset in the balance sheet and the land was also used for the purpose of the business of the assessee. However, there was no iota of evidence to show that the land was used for the purpose of the business of the assessee. On the contrary, it was used for agricultural purpose which yielded agricultural income which is exempt from income tax under section 10(1) of the I.T. Act. The assessee has not placed any evidence to show that the land had been used for the purpose of business. The assessee might have shown the agricultural land in its balance sheet as business asset but nothing has been proven on record to show that the assessee was at all us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be disallowed to that extent only and the total interest cannot be disallowed. We do not agree with the alternative contention of the Ld. AR. It is established clearly that the assessee used the borrowed funds for the purchase of agricultural land. The Assessing Officer has considered the proportionate interest funds used for the purchase of agricultural land and considered only Rs. 90,73,279/- out of the total interest paid of Rs. 1,39,31,775/-. Being so, there cannot be further allowance of any relief to the assessee. In other words, merely because the assessee did not earn agricultural income to the extent of disallowance of interest, disallowance cannot be reduced. It is not hard and fast rule that on each and every investment in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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