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TMI Blog2019 (7) TMI 424X X X X Extracts X X X X X X X X Extracts X X X X ..... or the sake of convenience, the facts relating to AY. 2013-14 are discussed hereunder: 2.1 Brief facts of the case are, assessee filed its return of income for the AY. 2013-14 on 21-09-2013, declaring income of Rs. 44,020/-. The case of the assessee was taken up for scrutiny and issued notice u/s. 143(2) of the Income Tax Act [Act] and served on the assessee on time. Subsequently, notice u/s. 142(1) of the Act was also issued. 3. During the assessment proceedings, Assessing Officer noticed that assessee has admitted gross receipts of Rs. 29,09,874/- on account of providing assistance for overseas university for admission of candidates and against these receipts, related expenditures were claimed along with interest expenditure of Rs. 9,10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e u/s. 36. viii. The proviso to sec. 36(i)(iii) is applicable to a capital asset acquired which was put to use for the purpose of business and it shall not apply to stock in trade. ix. The provisions of sec. 14A are not applicable as the intention of the assessee is not to derive income under the head dividend and the provision can apply only when income exempt from tax was derived during the year. x. In view of the decision of the Hon'ble AP High Court in the case of Commissioner of Income Tax Vs. Peninsular Investment Ltd., 265 CTR 601, the assessee is eligible for interest u/ s. 36(l)(iii). 3.1. According to the assessee, shares were acquired as a part of business activity but the assessee has shown the above investment as non ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computation of income. As regards the dividend, the same does not fall under income from other sources as the dividend income is exempt because of the withholding tax u/s. 115-O. Therefore, the investment would not yield any income in relation to profit and gains as per business and profession and therefore the assessee cannot claim the said expenditure u/s. 36(1)(iii) of the I.T. Act at all on such investments and further the expenditure is not allowable u/s. 57 as the income from dividend will not fall u/s. 56 because of the exemption. Therefore the AO has rightly disallowed the expenditure u/s. 36(1)(iii) and the assessee is not eligible for the claim under any other head. In view of the same the addition is upheld. Hence Ground nos. 3 & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r admission of students. He objected to the action of AO that assessee has not carried out any business of buying and selling of shares and in disallowing the interest expenditure relevant for the investment in shares. He contended that this action of the AO is against the main objects of the company. Therefore, he prayed that since the interest expenditure is relating to the business activity of the assessee, the same should be allowed u/s 36(1)(iii) of the Act. 8. On the other hand, ld. DR relying on the orders of tax authorities, submitted that assessee is not into the business of buying/selling of shares. It only made investment in long term, on which, the income is exempt and gains are taxable under capital gains. 9. Considered the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come from capital gains' and not under the head 'business income'. 9.2 In the given case, assessee has declared income and can claim expenditure to the extent of the income earned i.e. relating to the business providing assistance to overseas universities. But, with regard to investment in shares, assessee has made long term investment, the income can only be exempt under Income-tax Act. The relevant expenditure to that extent is not allowable even though the expenditure can be classified as business expenditure considering the object clause. Therefore, assessee has to carry on the business activities separately for exempt and taxable. We have already explained that the activities carried on by the assessee cannot come under business head, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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