ITO 8(2)(2), MUMBAI vs. GAUTAM AHUJA, MUMBAI

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.

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.

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

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.