SARANG R WADHAWAN,MUMBAI vs. ACIT CEN CIR 5(4), MUMBAI

PER OM PRAKASH KANT, AM

Shri Sarang R. Wadhawan Shri Sarang R. Wadhawan 2 ITA No. 851/M/2018

1) The Learned CIT (A) has erred in law & on facts in directing the The Learned CIT (A) has erred in law & on facts in directing the The Learned CIT (A) has erred in law & on facts in directing the learned A.O to disallow the business loss & not allowing i learned A.O to disallow the business loss & not allowing i learned A.O to disallow the business loss & not allowing it to be carried forward as claimed by the appellant as business loss to the carried forward as claimed by the appellant as business loss to the carried forward as claimed by the appellant as business loss to the tune of Rs.4,44,77,362/ tune of Rs.4,44,77,362/-, which is bad in law. 2) 2) The Learned CIT (A) erred has erred in law & on facts in not 2) The Learned CIT (A) erred has erred in law & on facts in not 2) The Learned CIT (A) erred has erred in law & on facts in not upholding the learned A.O's action of taking interest expenditure as upholding the learned A.O's action of taking interest expenditure as upholding the learned A.O's action of taking interest expenditure as Nil/-, as in the order of Income Tax passed by the Assessing Officer us. , as in the order of Income Tax passed by the Assessing Officer us. , as in the order of Income Tax passed by the Assessing Officer us. 143 (3) of the Income Tax Act, 1961 & directed the learned AO to 143 (3) of the Income Tax Act, 1961 & directed the learned AO to 143 (3) of the Income Tax Act, 1961 & directed the learned AO to recompute disallowance us 14A r.w.r 8D by considering the interest recompute disallowance us 14A r.w.r 8D by considering the interest recompute disallowance us 14A r.w.r 8D by considering the interest expenditure expenditure of Rs.3,56,18,156/- 2. Briefly stated, Briefly stated, facts of the case are that the assessee filed facts of the case are that the assessee filed return of income for the year under consideration on 28.09.2013 return of income for the year under consideration on 28.09.2013 return of income for the year under consideration on 28.09.2013 declaring Nil income. The return of income filed by the assessee was declaring Nil income. The return of income filed by the assessee was declaring Nil income. The return of income filed by the assessee was selected for scrutiny and statutory notices under the Income selected for scrutiny and statutory notices under the Income selected for scrutiny and statutory notices under the Income-tax Act, 1961 (in short ‘the Act’) and were issued and complied with. In the n short ‘the Act’) and were issued and complied with. In the n short ‘the Act’) and were issued and complied with. In the assessment completed u/s 143 assessment completed u/s 143(3) of the Act dated 28.03.2016, t (3) of the Act dated 28.03.2016, the Assessing Officer invoked invoked section 14A r.w.s. 8D of the Income section 14A r.w.s. 8D of the Income-tax Rules, 1961 (in short ‘the Rules’) Rules, 1961 (in short ‘the Rules’) and made disallowance of made disallowance of ₹1,98,87,499/-. The Assessing Officer also made addition of . The Assessing Officer also made addition of . The Assessing Officer also made addition of interest

Shri Sarang R. Wadhawan Shri Sarang R. Wadhawan 3 ITA No. 851/M/2018 income of ₹21,646/- which was reflected in Income- -tax Department data.

Shri Sarang R. Wadhawan Shri Sarang R. Wadhawan 4 ITA No. 851/M/2018

“5.3.9. There is merit in the contention that since demat charges has 5.3.9. There is merit in the contention that since demat charges has 5.3.9. There is merit in the contention that since demat charges has not be claimed as expenditure against any taxable income, the same not be claimed as expenditure against any taxable income, the same not be claimed as expenditure against any taxable income, the same cannot be disallowed u/ cannot be disallowed u/s 144. Further. it is noted that bank charges of s 144. Further. it is noted that bank charges of Rs 108,581/-is claimed against income from other sources. There are is claimed against income from other sources. There are is claimed against income from other sources. There are no admin expenses claimed at all except interest expenses and no admin expenses claimed at all except interest expenses and no admin expenses claimed at all except interest expenses and depreciation and hence such expenses cannot be disallowed by depreciation and hence such expenses cannot be disallowed by depreciation and hence such expenses cannot be disallowed by applying Rule 8D applying Rule 8D mechanically. It is however also noted that the mechanically. It is however also noted that the appellant has claimed loss from business at Rs 4,44,77.362/ appellant has claimed loss from business at Rs 4,44,77.362/ appellant has claimed loss from business at Rs 4,44,77.362/- From the details seen in the copy of accounts filed, the busine details seen in the copy of accounts filed, the business loss as per books loss as per books of Rs 4,44,77,362/ of Rs 4,44,77,362/- is computed as remuneration from Bassein is computed as remuneration from Bassein Industrial Dev Corporation against which interest of Rs 3,56,18,156 is Industrial Dev Corporation against which interest of Rs 3,56,18,156 is Industrial Dev Corporation against which interest of Rs 3,56,18,156 is claimed as loan from future and option, interest on vehicle loan Rs claimed as loan from future and option, interest on vehicle loan Rs claimed as loan from future and option, interest on vehicle loan Rs 135860/- and depreciation Rs 88,89,95 and depreciation Rs 88,89,950/- There is no trading in There is no trading in Future and Option nor is there any link or basis to claim such interest Future and Option nor is there any link or basis to claim such interest Future and Option nor is there any link or basis to claim such interest and depreciation expenses against any such income. In fact the and depreciation expenses against any such income. In fact the and depreciation expenses against any such income. In fact the Shri Sarang R. Wadhawan Shri Sarang R. Wadhawan 5 ITA No. 851/M/2018 remuneration of Rs 166605 is considered under the head Income from remuneration of Rs 166605 is considered under the head Income from remuneration of Rs 166605 is considered under the head Income from firms. The only major incom firms. The only major income in the year is capital gains which as per e in the year is capital gains which as per books is Rs 23,15,50,961 / on sale of shares. Thus it is the loss claimed books is Rs 23,15,50,961 / on sale of shares. Thus it is the loss claimed books is Rs 23,15,50,961 / on sale of shares. Thus it is the loss claimed as business loss of Rs 4,44,77,362/ business loss of Rs 4,44,77,362/- which is not correct and to that which is not correct and to that extent loss should not be allowed to be carried forward. Further, th extent loss should not be allowed to be carried forward. Further, th extent loss should not be allowed to be carried forward. Further, the balance sheet on the liability side shows a total of Rs 455 crores of balance sheet on the liability side shows a total of Rs 455 crores of balance sheet on the liability side shows a total of Rs 455 crores of which own capital is only Rs 91.86 crores and almost the entire which own capital is only Rs 91.86 crores and almost the entire which own capital is only Rs 91.86 crores and almost the entire balance amount Rs 363 crores is in form of loans. On the asset side the balance amount Rs 363 crores is in form of loans. On the asset side the balance amount Rs 363 crores is in form of loans. On the asset side the investment in shares is R investment in shares is Rs 380 crores and Rs 54 crores in properties Rs crores in properties Rs 4 crores in capital of firms in which appellant is partner. Thus some 4 crores in capital of firms in which appellant is partner. Thus some 4 crores in capital of firms in which appellant is partner. Thus some interest expenses are clearly allocable against the various investments interest expenses are clearly allocable against the various investments interest expenses are clearly allocable against the various investments from sale of which exempt income is claimed. The assessing officer has from sale of which exempt income is claimed. The assessing officer has from sale of which exempt income is claimed. The assessing officer has not considered and not considered and interest expenditure for disallowance under Rule interest expenditure for disallowance under Rule 8D nor under the business income. In light of the above, the Assessing 8D nor under the business income. In light of the above, the Assessing 8D nor under the business income. In light of the above, the Assessing Officer is directed to re Officer is directed to re-compute the disallowances. Ground of Appeal Ground of Appeal No.2 is partly allowed as above. No.2 is partly allowed as above.” 6.1 The Ld. CIT(A) has noted tha The Ld. CIT(A) has noted that despite no trading in Future & t despite no trading in Future & Option huge amount of interest expenses of Option huge amount of interest expenses of ₹3,56,18,156/ 3,56,18,156/- has been claimed by the assessee claimed by the assessee. As regard to the disallowance of interes s regard to the disallowance of interest expenses under Rule 8D(2)(ii), expenses under Rule 8D(2)(ii), the Ld. CIT(A) has noted that he Ld. CIT(A) has noted that investment in shares has bee shares has been made out of borrowed funds. Before n made out of borrowed funds. Before us, no explanation or evidence in support of claim of the assessee us, no explanation or evidence in support of claim of the assessee us, no explanation or evidence in support of claim of the assessee challenging the additions by way of the grounds challenging the additions by way of the grounds, has been filed and has been filed and Shri Sarang R. Wadhawan Shri Sarang R. Wadhawan 6 ITA No. 851/M/2018 therefore in absence of any material contrary t therefore in absence of any material contrary to the finding of the o the finding of the Ld. CIT(A), we are constraint to uphold the finding the Ld. CIT(A) on re constraint to uphold the finding the Ld. CIT(A) on re constraint to uphold the finding the Ld. CIT(A) on the issue-in-dispute. Accordingly, the grounds raised by the assessee dispute. Accordingly, the grounds raised by the assessee dispute. Accordingly, the grounds raised by the assessee are dismissed.