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TMI Blog2021 (12) TMI 507X X X X Extracts X X X X X X X X Extracts X X X X ..... 5-2016. Common issue is raised in these appeals, hence, they were heard together and are being disposed of by this consolidated order. 2. The common issue raised for all the three assessment years is that whether the Income Tax Authorities is justified in treating income received by the assessee from company as salary income instead of professional income claimed by the assessee, thereby disallowing the interest paid to M/s.Sundaram BNP Paribas Home Finance Limited. For assessment year 2015-2016, apart from the above issue, the assessee has raised grounds regarding disallowance u/s 14A of the I.T.Act. 3. We shall first adjudicate the common issue, which is raised for assessment years 2013-2014 to 2015-2016. 4. The facts pertaining to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imited v. CIT reported in 288 ITR 1 (SC), since SML had utilized the funds so advanced for the purpose of the business. 5. The A.O., however, rejected the contentions of the assessee. The A.O. held that the assessee has not rendered any professional or technical services to the company. It was further held by the A.O. that the amount so received by the assessee from SML even if it is taken as professional charges, the assessee has not been able to prove the nexus of interest expenditure with the receipt from the company for claiming the deduction. 6. Aggrieved by the order of assessment, the assessee preferred an appeal to the first appellate authority. The CIT(A) confirmed the view taken by the Assessing Officer. The relevant finding of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and financials for the relevant assessment years, copies of the proceedings of Central Excise Authorities in the case of the company etc. The learned AR by referring to the Central Excise proceedings (refer pages 1 to 18 of the paper book), contended that when one arm of the revenue, namely, Central Excise has treated the payment made by the company to the assessee as professional fees, the Income Tax Department has erred in re-characterizing the same as salary income. As regards the allowability of interest, the learned AR reiterated the submissions made before the Income Tax Authorities. 8. The learned Departmental Representative strongly supported the findings of the Income Tax Authorities. 9. We have heard rival submissions and peruse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also has the persona of an employee, or an agent depending upon the nature of his work and the terms of his employment. Where he is so employed, the relationship between him as the managing director and the company may be similar to a person who is employed as a servant or an agent, for the term " employee " is facile enough to cover any of these relationships. The nature of his employment may be determined by the articles of association of a company and/or the agreement, if any, under which a contractual relationship between the director and the company has been brought about, whereunder the director is constituted an employee of the company, if such be the case, his remuneration will be assessable as salary under section 7. In other word ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r profession. Therefore, we have no hesitation to hold that the receipt from company is nothing but salary income. Moreover, the interest expenditure cannot be deducted from the amount received from the company because there is no nexus between them. Only such expenditure which has been incurred wholly and exclusively to earn a particular income is allowable as a deduction from such income. In the instant case, there is no relation whatsoever between the interest expenditure from a mortgaged loan and the payment received for rendering certain services. Advancing interest free loans to the employer company cannot be a ground for claiming deduction of interest expenditure from the salary income received from it. 9.2 The reliance placed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m above common issue, for assessment year 2015-2016, the assessee has also raised grounds relating to disallowance u/s 14A of the Act. The A.O. noticed that the assessee was in receipt of dividend income of Rs. 1,09,291, which was claimed as exempt. During the course of assessment proceedings, the assessee was asked to explain the details of the expenditure incurred on the exempt income. In response, the learned AR contended that the assessee has not incurred any expenditure for earning exempted income. However, the contention of the assessee was rejected and the A.O. by applying the provisions of section 14A of the Act r.w. Rules 8D of the I.T.Rules, computed the disallowance of Rs. 4,03,283. 10.1 Aggrieved, the assessee filed appeal to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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