TMI Blog2018 (12) TMI 332X X X X Extracts X X X X X X X X Extracts X X X X ..... om the firm on payment of interest, which cannot be taken to be a business carried on by the assessee-firms. The advances obtained by the partners were not in the nature of business carried on by the assessee and, hence, there could be no claim of business expenditure insofar as the interest paid to the depositors, the public. We, hence, answer the other questions of law framed against the assessee and in favour of the Revenue. We delete the order of the Tribunal insofar as the allowance of interest expenditure u/s 37. The order of the AO disallowing the expenditure on interest paid to the depositors is sustained on the grounds herein above mentioned as distinguished from the view taken by the AO. The appeals would stand partly allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct in interfering with the protective addition? 2. On facts, it has to be noticed that the respondent-assessee in I.T.A.Nos.136 and 147 of 2011 carries on a Multi Speciality Hospital and the respondent-assessee in I.T.A.Nos.140 and 142 of 2011 carries on Real Estate business. The Multi Speciality Hospital had a Resources Division and the Real Estate firm also had such a division which accepted deposits from the public. The amounts so deposited by the public were withdrawn by the partners and invested in other sister concerns which were doing business in finance. The partners, on their advances from the assessee-firms, paid 12% interest to the assessee-firms. The assessee-firms, on deposits from the public, paid 5 to 12 percent interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the AO were mutually destructive. If the assessee was engaged in the business of finance and earned interest income far in excess of that received by the assessee-firms from its partners; then necessarily the expenditure by way of interest paid to the public who had deposits with the assessee-firms was to be allowed under Section 37 of the IT Act was the finding; with which we agree on principle. 5. Before the Tribunal, separate appeals were filed by the assessee and the Revenue. The Tribunal in the appeal of the assessees, deleted the addition made finding that there could not have been a speculative computation of interest earned based on the investment made by the partners who had merely taken an advance from the assessee-firms. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the present appeals. With respect to the present appeals and the assessments made on the assessee-firms, we are of the definite opinion that there could be no addition made under Section 145. We uphold the order of the Tribunal insofar as deleting the additions made. We answer the first question of law to the extent that it speaks of interference of substantive additions made to the interest income received by the assessee-firms, in favour of the assessee and against the Revenue. We uphold the findings of the Tribunal on that aspect. 8. The questions of law raised in addition to the interference with the substantive additions made on best judgment are with respect to the dis-allowance of expenditure under Section 37(1). There canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nance carried on by the Firms and the partners had merely taken advances from the firm, the application of which was not the concern of the firm. 9. We, hence, find that the advances obtained by the partners were not in the nature of business carried on by the assessee and, hence, there could be no claim of business expenditure insofar as the interest paid to the depositors, the public. We, hence, answer the other questions of law framed against the assessee and in favour of the Revenue. We delete the order of the Tribunal insofar as the allowance of interest expenditure under Section 37. The order of the AO disallowing the expenditure on interest paid to the depositors is sustained on the grounds herein above mentioned as distinguished ..... X X X X Extracts X X X X X X X X Extracts X X X X
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