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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI ASHWANI TANEJA
Instant appeal by the assessee is directed against the order dated 4th September 2013, passed by the learned Commissioner (Appeals)–17, Mumbai, for the assessment year 2010–11.
Department has raised following grounds:–
On the facts and in the circumstances of the case and in 1. law, the CIT(A) erred in upholding the claim of the assessee that the interest received is business income, ignoring the fact that the assessee had no systematic, regular business activity of financing.
Shri Gautam Ahuja 2
On the facts and in the circumstances of the case and in 2. law, the CIT(A) erred in upholding the claim of the assessee that the interest received is business income, ignoring the fact that the assessee had merely borrowed funds from relatives and group concerns and invested the same with sister concerns only in the form of FCDs and thus, no finance business has been carried out by the assessee. On the facts and in the circumstances of the case and in 3. law, the Ld. C!T(A) erred in upholding the claim of the assessee that the interest received is business income, ignoring the fact that there is no risk element involved in the investments made by the assessee to term it as a business activity.
At the outset, learned Counsel for the assessee submitted before us that the tax effect on the ground raised by the Department is nil as the only issue in dispute is interest income whether is to be treated as business income as claimed by the assessee and accepted by the learned Commissioner (Appeals) or income from other sources, as held by the Assessing Officer.
Learned Counsel for the assessee submitted whether it is assessed as business income or income from other sources, there is no impact on the tax payable by the assessee. To demonstrate such fact, assessee has submitted a working of tax effect as under:–
Total Expenses claimed in Profit and Loss account a) Interest expenses ` 1,08,25,390 b) Other business expenses ` 12,86,675 ` 1,21,12,065
Shri Gautam Ahuja 3 1) AO treated business income as income from other sources a) Disallowed entire other ` 12,86,675 business expenses which is also confirmed by CIT(A) b) Out of total interest expenses ` 1,08,25,390 i) Interest expenses disallowed ` 20,96,189 since no nexus Balance interest expenses where ` 96,48,417 nexus established Interest expenses disallowed due ` 75,52,228 to rate of interest, though nexus established Balance interest expenses allowed ` 11,76,973 by A.O. ii) CIT(A) – whether business income or income from other sources ` 1,08,25,390 Out of total interest expenses Interest expenses confirmed ` 20,96,189 where no nexus Interest expenses where nexus ` 20,96,189 found – deleted disallowance made on account of rate difference – ` 75,52,228 ` 87,29,201
He, therefore, submitted, as there is no tax effect or nil tax effect in the dispute raised by the Department, the appeal need not be entertained in view of the CBDT Circular no. Circular no.21 of 2015 dated 10th December 2015.
The learned Departmental Representative has not controverted the aforesaid factual position.
Shri Gautam Ahuja 4 9. Having considered the submissions of the parties and perused the material on record and more particularly the working of tax effect submitted by the learned Counsel for the assessee, we are of the view that the appeal of the Department is covered by CBDT Circular no. Circular no.21 of 2015 dated 10th December 2015, as the dispute raised by the Department does not have any tax effect. Therefore, the appeal of the Department is not maintainable and, accordingly, grounds raised by the Department are dismissed. However, liberty is given to the Department to file miscellaneous application for recalling this order in case the Department finds that the tax effect in the dispute raised in grounds by the Department is above monetory limit fixed in the CBDT Circular referred to above and working of tax effect submitted by the assessee is not correct. We further make it clear that the Department is not precluded from raising the issue in dispute as referred to in the grounds of appeal in an appropriate case in any other assessment year as the instant appeal of the Department is dismissed only on tax effect without going into the merit of the issues.
In the result, appeal stands dismissed. Order pronounced in the open Court on 29.01.2016