TOLANI P. LTD, MUMBAI V. ADDL CIT SP RG 31, MUMBAI

ITA 5562/MUM/2013

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1046 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 1998-1999
• Appeal Filed On: 26-08-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V JUSTINE
• Keywords: Business income; Earning of tax free income; Commercial expediency
• Section: 143(3); 14A; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI P K BANSAL, VICE PRESIDENT & SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 5562/MUM/2013 ASSESSMENT YEAR: 1998-99 TOLANI PVT LTD. 10.A, BAKHTAWAR NARIMAN POINT MUMBAI 400021 VS. ADDL. CIT SPL. RANGE 31, MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJIV KHANDELWAL RESPONDENT BY : SHRI V. JUSTINE DATE OF HEARING : 19 . 12 .2017 DATE OF PRONOUNCEMENT : 4 .01.2018 O R D E R PER P K BANSAL, VICE-PRESIDENT: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-7, MUMBAI DATED 06.03.2013 FOR A.Y. 1998-99 BY TAKING AS MANY AS NINE GROUNDS OF APPEAL. SUBSEQUENTLY THE ASSESSEE F ILED SUMMARISED GROUNDS WHICH ARE GIVEN AS UNDER: - 1. THE LEARNED A.O. AS WELL AS LEARNED CIT(A) HAVE ERRED IN NOT CONSIDERING THAT APPELLANT COMPANY PAID INTEREST TO SCICI LTD. (NOW KNOWN AS ICICI BANK LTD.) (FINANCIAL INSTITUTI ON) FOR LOANS TAKEN FOR THE PURPOSE OF ACQUISITION OF SHIPS FOR T HE APPELLANT COMPANY AND ALSO FOR GROUP COMPANIES AS WELL AS INT EREST PAID ON AMOUNTS RECEIVED AS SHORT TERM DEPOSITS AND WHEN TH ERE WAS A DELAY IN PURCHASE OF SHIPS THE APPELLANT COMPANY UT ILIZED THE BORROWED FUNDS BY WAY OF INTER CORPORATE LOANS AND BILL ITA 3061, 3062, 3691&3602/MUM/2017 M/S. DISH TV INDIA LTD. 2 DISCOUNTING AS WELL AS LOANS TO SUBSIDIARY COMPANIE S ON INTEREST TO BE RECEIVED AND THEREFORE THE AMOUNT OF INTEREST RECEIVED SHOULD BE REDUCED BY THE AMOUNT OF INTEREST PAID ON THE PRINCIPLES OF NETTING OFF. 2. THE LEARNED A.O. AS WELL AS LEARNED CIT(A) HAVE ERRED IN DECIDING THAT GROSS AMOUNT OF INTEREST PAID ON LOAN S BORROWED SHOULD BE DEDUCTED FROM PROFIT OF SHIPPING BUSINESS TO ARRIVE AT SHIPPING PROFITS FOR THE PURPOSE OF ALLOW ING DEDUCTION U/S.33AC OF THE ACT AND ERRED IN DECIDING THAT INTE REST RECEIVED FROM SUBSIDIARY COMPANIES AS WELL AS INTEREST RECEI VED ON INTER CORPORATE LOANS AND BILLS DISCOUNTING TO BE CONSIDERED AS INCOME FROM OTHER SOURCES, OVERLOOKIN G THE PRINCIPLES OF NETTING OFF AND NOT CONSIDERING THAT INTEREST RECEIVED IS ON FUNDS UTILIZED FROM FUNDS BORROWED O N WHICH INTEREST IS PAID AND THEREFORE AMOUNT OF INTEREST P AID SHOULD BE DEDUCTED FROM AMOUNT OF INTEREST RECEIVED AND ERRED IN OVERLOOKING THE PRINCIPLES OF NETTING OFF SETTLED B Y SUPREME COURT. 3. LOSS IN BARGE DIVISION . THE LEARNED A.O. AS WELL AS LEARNED CIT(A) HAVE ER RED IN COMING TO THE CONCLUSION THAT FOR THE PURPOSE OF ARRIVING AT THE PROFIT DERIVED FROM THE BUSINESS OF OPERATION OF SHIPS FOR COMPUTING DEDUCTION U/S.33AC, THE LOSS INCURRED IN THE OPERAT ION OF BARGES AMOUNTING TO RS.28,64,444/- TO BE DEDUCTED, OVERLOO KING THAT LOSS INCURRED ON BARGES GIVEN ON LEASE ON WHICH LEASE RE NT IS RECEIVED IS NOT THE PROFIT / LOSS OF SHIPPING AND T HEREFORE THE SAME IS NOT PROFIT / LOSS DERIVED FROM BUSINESS OF OPERATING OF THE SHIPS AND THE LOSS ON BARGES CANNOT BE DEDUCTED FROM PROFIT ON OPERATING OF SHIPS AND FURTHER ERRED IN OVERLOOK ING THAT BARGES ARE VESSELS FOR LOADING AND UNLOADING OF SHI PS NEAR THE PORTS AND CANNOT BE CONSIDERED AS SHIPS FOR THE PUR POSE OF COMPUTATION OF DEDUCTION U/S.33AC AND FURTHER ERRED IN NOT CONSIDERING THAT BARGES WERE NOT OPERATED BY THE AP PELLANT COMPANY BUT OPERATED BY THE COMPANY TAKING BARGE ON LEASE. 4. ALTERNATIVELY, WITHOUT PREJUDICE, WHEN INTEREST RECEIVED IS CONSIDERED AS INCOME FROM OTHER SOURCES, THEN INTER EST PAID ON LOANS SHOULD BE DEDUCTED U/S.57(III) OF THE ACT FRO M INTEREST RECEIVED ON THE PRINCIPLES OF NETTING OFF. 5. INSPITE OF REPEATED REQUESTS THE LEARNED A.O. HA S NOT GIVEN SO FAR THE EFFECT OF THE APPEAL ORDER OF THE LEARNED CIT(A ) DATED 8.3.2013 FOR THE YEAR UNDER APPEAL. ITA 3061, 3062, 3691&3602/MUM/2017 M/S. DISH TV INDIA LTD. 3 2. THE ASSESSEE ALSO MOVED AN APPLICATION FOR FILING A DDITIONAL GROUND VIDE LETTER DATED 28 TH DECEMBER, 2015. THE SAID ADDITIONAL GROUND READ AS UNDER: - THE CONTENTION OF APPELLANT COMPANY IS THAT APPELL ANT RECEIVED INTEREST ON INCOME TAX REFUND U/S.244A TOTAL AMOUNT ING TO RS.20,11,502/- COMPRISING OF REFUNDS FOR THE ASSESS MENT YEAR 1994- 95, 1995-96 AND 1996-97 ON ACCOUNT OF COMPUTATION U /S.143(L) AND / OR U/S. 143(3) WHICH IS NOT TAXABLE IN THE YEAR U NDER APPEAL AS THE SAME HAS BEEN WITHDRAWN SUBSEQUENTLY ON ACCOUNT OF SCRUTINY ASSESSMENT U/S. 143(3) OR ASSESSMENT U/S. 147 BY RE OPENING THE ASSESSMENT AS THE PRACTICE OF THE DEPARTMENT IS THA T IN EVERY SUBSEQUENT ASSESSMENT ORDER INTEREST ALLOWED EARLIE R IS WITHDRAWN AND REVISED AMOUNT OF INTEREST IS ALLOWED FOR THE F ULL PERIOD AND THEREFORE THE ABOVE AMOUNT OF INTEREST OF RS.20,11, 502/- IS NOT TAXABLE IN THIS YEAR UNDER APPEAL, OTHERWISE IT WIL L AMOUNT TO DOUBLE TAXATION OF INTEREST ALLOWED U/S. 244A. 3. WE HEARD BOTH THE PARTIES ON ADMISSION OF THIS ADD ITIONAL GROUND AND HEARING THE RIVAL CONTENTIONS WE NOTED THAT THE ADD ITIONAL GROUND FILED BY THE ASSESSEE IS A LEGAL GROUND WHICH CAN BE TAKEN U P AT ANY TIME. IT DOES NOT REQUIRE INVESTIGATION OF ANY FACTS. WE, THEREFO RE, ADMIT THIS ADDITIONAL GROUND. 4. THE ASSESSEE AGAIN VIDE LETTER DATED 1 ST AUGUST, 2017 MOVE AN APPLICATION FOR ADMISSION OF THE FOLLOWING ADDITION AL GROUNDS: - 1. THE ADDL. COMMISSIONER OF INCOME-TAX, SPECIAL R ANGE - 31, MUMBAI (HEREINAFTER REFERRED TO AS THE ASSESSING OF FICER) ERRED IN TREATING FOLLOWING INCOMES AGGREGATING RS 3,64,92,5 93 AS INCOME FROM OTHER SOURCES AS AGAINST BUSINESS INCOME CONSI DERED BY THE APPELLANTS SR. NO. PARTICULARS AMOUNT (IN RS.) (I) INTEREST FROM SUBSIDIARY COMPANIES RS 3,32,89,425 (II) INTEREST FROM SECURITIES RS 1,24,761 (III) INTEREST AND DISCOUNTING CHARGES ON TRADE BILLS RS 28,34,996 ITA 3061, 3062, 3691&3602/MUM/2017 M/S. DISH TV INDIA LTD. 4 (IV) MISCELLANEOUS EARNINGS RS 2,29,911 (V) RENT RS 13,500 RS 3,64,92,593 THE APPELLANTS CONTEND THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ACTION OF THE ASSESSING OFFICE R IN HOLDING AFORESAID INCOMES AS INCOME FROM OTHER SOURCES IS NOT TENABLE IN LAW AND OUGHT TO HAVE BEEN CONSIDERED AS BUSINESS INCOME. 2. THE ASSESSING OFFICER HAS ERRED IN APPORTIONING THE INTEREST EXPENSE RS 1,20,73,623/- TO THE EARNING OF EXEMPT INCOMES, NAMELY, DIVIDEND AND INTEREST ON TAX-FREE SECURITIES AGGREGATING RS 4,69 ,92,994/-. THE APPELLANTS CONTEND THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ACTION OF THE ASSESSING OFFICE R IS INCORRECT INASMUCH AS THE OWN FUNDS (RS.39,74,69,549/-) ARE MORE THAN THE INVESTMENT IN SHARES ON WHICH DIVIDEND IS RECEIVED AND INVESTMENT IN TAX -FREE SECURITIES AGGREGATING RS.16,01,31,377. WE HAVE HEARD THE RIVAL SUBMISSIONS FOR ADMISSION O F THE GROUNDS AND WE NOTED THAT THESE GROUNDS ARE LEGAL AND THE FACTS RE LATING TO THESE GROUNDS ARE AVAILABLE ON RECORD BEFORE THE AUTHORITIES BELO W. WE, THEREFORE, IN VIEW OF THE HON'BLE SUPREME COURT IN THE CASE OF NTPC 22 9 ITR 383 ADMIT THESE ADDITIONAL GROUNDS. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED ITS INCOME TAX RETURN ON 30.11.1998 CLAIMING DEDUCTION U/S. 33AC. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE SUBMITTED COMP UTATION OF INCOME AND PROFIT AND LOSS ACCOUNT IN WHICH THE INCOME OF ` 46,87,343/- HAS BEEN BIFURCATED AS UNDER: SHIPPING DIVISION BARGE DIVISION OTHER BUSINESS, MAINLY INTEREST INCOME INCOME FROM INVESTMENTS MADE OUT OF OWN SOURCES OF FUNDS. ITA 3061, 3062, 3691&3602/MUM/2017 M/S. DISH TV INDIA LTD. 5 THE ASSESSING OFFICER COMPLETED THE ASSESSMENT VIDE HIS ORDER, DATED 23.03.2011, AT ` 5,51,50,290/-. AGGRIEVED THE ASSESSEE FILED APPEA L BEFORE THE FIRST APPELLATE AUTHORITY. THE CIT(A) PARTLY A LLOWED THE APPEAL OF THE ASSESSEE. 6. AS AGREED BY BOTH THE PARTIES, WE DECIDED TO DIS POSE OF THE ADDITIONAL GROUNDS FIRST, WHICH WAS TAKEN BY THE ASSESSEE VIDE LETTER DATED 28.12.2015. AFTER HEARING THE RIVAL SUBMISSIONS AND GOING THROU GH THE ORDERS OF THE TAX AUTHORITIES BELOW, WE NOTED THAT THE ASSESSING OFFI CER WHILE MAKING THE ASSESSMENT ADDED THE SUM OF ` 20,11,502/- AS INTEREST EARNED BY THE ASSESSEE ON INCOME TAX REFUND RELATING TO A.YS 1994 -95, 1995-96 AND 1996- 97. THE LEARNED AR CONTENDED THAT THE SAID REFUND WAS SUBSEQUENTLY WITHDRAWN ON ACCOUNT OF THE ASSESSMENT COMPLETED U/ S. 143(3) ON REASSESSMENT FRAMED U/S. 143(3) R.W.S. 147. THE LE ARNED DR, ON THE OTHER HAND, RELIED ON THE ORDER OF THE ASSESSING OFFICER. 7. WE NOTED THAT OUT OF THE INTEREST ON REFUND, A S UM OF ` 12,55,571/- THAT WAS RECEIVED BY THE ASSESSEE ON PROCESSING THE RETURN U/S. 143(1) WAS SUBSEQUENTLY WITHDRAWN AS IS APPARENT FROM PAGES 15 8 TO 161 OF THE PAPER- BOOK. WE THEREFORE, REDUCE THE ADDITION TO ` 7,55,9 31/-. THUS, THIS GROUND IS PARTLY ALLOWED. 8. NOW COMING TO THE ADDITIONAL GROUNDS TAKEN UP BY THE ASSESSEE VIDE LETTER DATED 01.08.2017. VIDE ITS FIRST GROUND OF APPEAL, THE ASSESSEE HAS ITA 3061, 3062, 3691&3602/MUM/2017 M/S. DISH TV INDIA LTD. 6 CHALLENGED THE INTEREST INCOME RECEIVED BY IT AS I NCOME FROM OTHER SOURCES AS DETAILED BELOW: A) INTEREST FROM SUBSIDIARY COMPANIES: (I) TOLANI BULK CARRIERS LTD. RS. 1,08,39,116/- (II) TOLANI SHIPPING CO. LTD. RS. 65.97,575/- RS. 1,74,36,691/- B) OTHER INTEREST INCOME (A) INTER CORPORATE DEPOSITS RS. 1,38,38,314/- (B) STAFF LOAN RS. 2,918/- (C) INCOME-TAX REFUNDS RS. 20,11,502/- RS. 1,58,52,734/- RS.3,32,89,4257- C) DISCOUNTING CHARGES ON TRADE BILLS RS. 28,34,996 /- D) INTEREST ON SECURITIES RS. 1,24,761/- E) MISCELLANEOUS EARNINGS RS. 2,29,911/- F) RENT RECEIVED RS. 13,500/- TOTAL INCOME CONSIDERED AS INCOME FROM OTHER SOURCES RS.3,64,92,593/- WE HAVE HEARD THE RIVAL SUBMISSION AND CAREFULLY CO NSIDERED THE SAME ALONG WITH THE ORDERS OF THE AUTHORITIES BELOW. WE NOTED THAT IN THE COMPUTATION STATEMENT THE ASSESSEE HAS CONSIDERED A SUM OF ` 3,62,62,682/- EXCLUDING THE SUM OF ` 2,29,911/- CONSIDERING IT AS BUSINESS INCOME OTHER THAN INCOME FROM SHIPPING BUSINESS. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF OWNING AND OPERATION OF SHIPS FOR TRANSPORTATION OF DRY BU LK CARGO IN INTERNATIONAL WATERS. THE ASSESSEE IS HAVING TWO SUBSIDIARY COMP ANIES VIZ. TOLANI BULK CARRIERS LTD. AND TOLANI SHIPPING LTD., WHICH ARE E XCLUSIVELY ENGAGED IN THE SIMILAR BUSINESS OF OPERATION OF SHIPS. IN THE BOA RD MEETING OF THE COMPANY ITA 3061, 3062, 3691&3602/MUM/2017 M/S. DISH TV INDIA LTD. 7 HELD ON 11.04.1994, THE COMPANY CONSIDERED THE MATT ER OF OBTAINING LOAN OF ` 10 CRORES FROM SCICI LTD. BY PASSING FOLLOWING RES OLUTION : 'THE CHAIRMAN STATED THAT THE COMPANY HAD APPROACH ED SCICI LTD. FOR A FLOATING RATE RUPEE LOAN OF RS. 10 CRORE S TOWARDS FINANCING THE COMPANY'S AND GROUP'S EXPANDING ACTIV ITIES. SCICI LTD. FAVOURABLY CONSIDERED THE COMPANY'S REQUEST AN D HAS SANCTIONED THE REQUESTED LOAN ON THE TERMS AND COND ITIONS OF WHICH ARE CONTAINED IN THEIR LETTER OF INTENT OF MA Y 18, 1994 UNDER REFERENCE 908. ACCORDINGLY, THE ASSESSEE RECEIVED LOAN OF ` 10 CRORES FROM SCICI LTD. IN THE LETTER OF INTENT SCICI LTD MENTIONED THE PURPOS E OF GRANTING THE LOAN AS UNDER: 'PLEASE REFER TO THE CORRESPONDENCE RESTING WITH YOUR LETTER NO. TL/SEC/COM/24F AND TL/COMR/24F DATED MARCH 31, AND APRIL 6, 1994 AND THE SUBSEQUENT DISCUSSIONS YOUR REPRESENTA TIVES HAD WITH US REGARDING YOUR APPLICATION FOR FINANCIAL AS SISTANCE FOR MEETING PART OF THE COST OF SHIP ACQUISITIONS AS WE LL AS CHARTERING IN OF VESSELS AND MEETING ATTENDANT WORKING CAPITAL REQUIREMENTS BESIDES STRENGTHENING THE CAPITAL STRUCTURE OF THE COMPANY. SCICI LTD. (SCICI) IS AGREEABLE, IN PRINCIPLE, TO PROVIDE FOR THE AFORESAID SCHEME, A CORPORATE LOAN OF RS.10 CRORES. 9. THE ASSESSEE COULD NOT UTILIZE THE LOAN IMMEDIAT ELY FOR THE PURCHASE OF THE SHIP AND IT WAS GETTING DELAYED. THE ASSESS EE, THEREFORE, OUT OF THE LOAN BORROWED, TEMPORARILY INVESTED IN GIVING ADVAN CE AGAINST BILL DISCOUNTING AND INTER-CORPORATE DEPOSITS TO EARN IN TEREST AND SAVE THE BURDEN OF INTEREST PAYABLE ON THE LOAN TAKEN FROM S CICI LTD. THE ASSESSEE HAD ACCORDINGLY GIVEN LOAN OF ` 5 CRORES TO M/S. TOLANI BULK CARRIER LTD., A SUBSIDIARY COMPANY OF THE ASSESSEE, FOR PURCHASE OF SHIP, M.V PRABHUMIHIKAA FROM M/S. CEREZA WORLD LINE INC. FOR A SUM OF ` ITA 3061, 3062, 3691&3602/MUM/2017 M/S. DISH TV INDIA LTD. 8 82,35,32,699/-. THE FINANCING OF THE SHIP ACQUISIT ION INCLUDED LOAN TAKEN FROM THE ASSESSEE AS UNDER: (I) LOAN TAKEN BY TOLANI BULK CARRIERS LTD. FROM SCICI LTD. ON 6.1.1996 RS.61,02,11,000/- (II) LOAN FROM APPELLANT COMPANY ON 24.1.1996 RS. 5,00,00,000/- (III) LOAN FROM M/S. TOLANI SHIPPING CO. LTD. (SUBSIDIARY OF APPELLANT COMPANY) ON 24.1.1996 RS . 10,00,00,000/- (IV) BALANCE FROM INTERNAL SOURCES OF TOLANI BULK CARRIERS LTD. RS. 6.33,21.6997- TOTAL RS.82,35,32,6997- THE ASSESSEE HAS GIVEN A TOTAL LOAN OF ` 17,50,00,000/- TO TOLANI BULK CARRIERS LTD. AS UNDER: I) OUT OF LOAN FROM SCICI LTD. (24.1.1996) RS. 5,00 ,00,000/- (II) OUT OF FUNDS WITHDRAWN FROM CORPORATE DEPOSITS AND BILL DISCOUNTING (23.9.96 TO 31.3.97) RS. 9,50,00,000/- (III)OUT OF FUNDS WITHDRAWN FROM CORPORATE DEPOSITS AND BILL DISCOUNTING (1.4.97 TO 31.3.98) RS.3.00 ,00,000/ - TOTAL RS. 17,50,00,000/ - THE ASSESSEE RECEIVED INTEREST TO THE EXTENT OF ` 1,74,36,691/- FROM THE SUBSIDIARY COMPANY AS WELL AS INTEREST ON INTER-COR PORATE DEPOSIT TO THE EXTENT OF ` 1,38,38,314/-. THE ASSESSEE IN THE COMPUTATION OF INCOME HAS SHOWN THE SUM OF ` 3,64,92,593/- AS INCOME FROM BUSINESS, TAKEN BY THE AO AS INCOME FROM OTHER SOURCES. WE HAVE NOTED THAT OUT OF THIS AMOUNT ITA 3061, 3062, 3691&3602/MUM/2017 M/S. DISH TV INDIA LTD. 9 ONLY A SUM O ` 1,74,36,691/- ` 1,38,38,314/- AND ` 28,34,996/- (ON ACCOUNT OF DISCOUNTING CHARGES ON TRADE BILLS) CAN BE TREAT ED AS BUSINESS INCOME BECAUSE IT IS A CASE WHERE THE ASSESSEE HAS TEMPORA RILY UTILISED THE SURPLUS FUNDS WHICH IT HAS BORROWED FOR ACQUIRING OF SHIPS AND ALSO FOR CARRYING OUT THE DISCOUNTING INTER CORPORATE DEPOSITS. THIS, IN FACT, IN OUR OPINION, IS INTEREST EARNED ON UNUTILISED AMOUNT BORROWED FOR B USINESS PURPOSE. OUR VIEW IS DULY COVERED BY THE DECISION OF THE JURISDI CTIONAL HIGH COURT IN THE CASE OF CIT VS. VARUN SHIPPING CO. LTD. 334 ITR 263 . IT IS NOT DENIED BY THE LEARNED DR, EVEN THOUGH HE HAS VEHEMENTLY RELIED ON THE ORDER OF THE AUTHORITIES BELOW THAT MAIN BUSINESS OF THE ASSESSE E IS SHIPPING BUSINESS AND THE ASSESSEE HAS ALSO TAKEN LOAN FROM SCICI LTD . FOR THE PURCHASE OF SHIP AND CHARTING IN VESSELS. THE ASSESSEE SINCE C OULD NOT IMMEDIATELY ACQUIRE THE SHIP, HAS ADVANCED THE MONEY FROM ITS O WN SOURCES AS WELL AS FROM THE MONEY BORROWED TO ITS SUBSIDIARY COMPANY, WHICH WERE ALSO ENGAGED IN THE SIMILAR BUSINESS. SINCE THESE COMPA NIES TO WHOM THE ASSESSEE HAS GIVEN TEMPORARY LOAN FOR ACQUIRING SHI P IS ALSO THE SUBSIDIARY COMPANY OF THE ASSESSEE THEREFORE EVEN ON THE BASIS OF COMMERCIAL EXPEDIENCY, THE ASSESSEE IS BOUND TO ASSIST THOSE C OMPANIES. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) ON THI S ISSUE AND DIRECT THE AO TO TREAT THE SUM OF ` 3,41,10,001/- OUT OF THE SUM OF ` 3,64,92,593/- AS INCOME FROM BUSINESS. THE REST OF THE INCOME I.E. INTEREST ON STAFF LOAN, INTEREST ON SECURITIES, MISCELLANEOUS EARNING, RENT RECEIVED AS WELL AS INCOME ITA 3061, 3062, 3691&3602/MUM/2017 M/S. DISH TV INDIA LTD. 10 TAX REFUND TO THE EXTENT SUSTAINED BY US, CANNOT BE REGARDED AS INCOME FROM BUSINESS. WE, THEREFORE, DO NOT FIND ANY ILLE GALITY OR INFIRMITY IN THE ORDER OF THE CIT(A) TO THE EXTENT THAT THESE INCOME AS ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. 10. COMING TO THE ADDITIONAL GROUND NO.2, RELATES TO THE DISALLOWANCE OF ` 12073623 IN RESPECT OF INTEREST AND OTHER EXPENSES ATTRIBUTABLE TO THE TAX FREE INCOME. AFTER HEARING THE RIVAL SUBMISSIONS AN D GOING THROUGH THE ORDERS OF THE AUTHORITIES BELOW, WE NOTED THAT DURI NG THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE EARNED DIVIDEND AND I NTEREST FROM TAX FREE BONDS AMOUNTING TO ` 4,69,92,994/- WHICH HAS BEEN CLAIMED BY THE ASSESSEE TO BE INCOME EXEMPT FROM TAX. THE AO DID NOT DISPUTE THE INCOME TO THAT EXTENT TO BE A TAX FREE INCOME BUT ALLOCATE D A SUM OF ` 1,20,73,623/- OUT OF THE EXPENSES CLAIMED BY THE ASSESSEE UNDER T HE HEAD INCOME FROM BUSINESS TOWARDS EARNING OF THIS EXEMPT INCOME IN THE FOLLOWING MANNER:- 1. INVESTMENT IN SHARES AND SECURITIES RS. 160,131,377/- (AS PER BALANCE SHEET) 2. TOTAL INVESTMENT OF THE ASSESSEE INCLUDING RS.537,535,849/- INVESTMENT IN CURRENT ASSETS (ASSETS SIDE OF BALANCE SHEET) 3. TOTAL INTEREST CHARGED TO PROFIT AND LOSS A CCOUNT. RS.247,54,448/- 4. INTEREST ATTRIBUTABLE TO TAX FREE RECEIPTS ( X 3 ) RS. 73,74,324/- 5. OTHER EXPENSES ATTRIBUTABLE TO TAX FREE RECEI PT - TAKE ON ESTIMATE BASIS @ 10% OF DIVIDEND RECEIPT RS. 4,699,299/- 6. TOTAL INTEREST AND EXPENSES ATTRIBUTABLE TO TAX FREE RECEIPT (4 + 5) RS. 12,073,623/- ITA 3061, 3062, 3691&3602/MUM/2017 M/S. DISH TV INDIA LTD. 11 IT IS NOT A CASE WHERE THE AO HAS APPLIED THE PROVI SIONS OF SECTION 14A BUT JUST ALLOCATED THE VARIOUS EXPENSES BETWEEN THE EXE MPT INCOME AS WELL AS TAXABLE INCOME. IT IS NOT DENIED THAT THE ASSESSEE IS HAVING OWN FUNDS TO THE EXTENT OF ` 39,74,69,549/- WHILE INVESTMENT ON TAX FREE SECURI TIES WAS TO THE EXTENT OF ` 16,01,31,377/- AS IS APPARENT FROM PAGE 87 OF THE PAPER- BOOK (BALANCE SHEET). WE NOTED THAT THE DISALLOWAN CE HAS SIMPLY BEING MADE BY THE AO ON ESTIMATE BASIS. IN VIEW OF THE D ECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF HDFC BANK LTD. 366 ITR 505, WE ARE OF THE VIEW THAT NO SUCH DISALLOWANCE CAN BE MADE A S THE NATURAL INFERENCE WILL BE THAT THE ASSESSEE MADE INVESTMENT IN TAX FR EE SECURITIES OUT OF ITS OWN FUNDS. WE, THEREFORE, DELETE THE SAID DISALLOW ANCE. THUS, ADDITIONAL GROUND NO.2 STANDS ALLOWED. 11. NOW COMING TO THE SUMMARIZED GROUND TAKEN BY TH E ASSESSEE. GROUND NO.1 & 2 RELATES TO THE CLAIM OF DEDUCTION T OWARDS THE EXPENSES AS WELL AS TREATING THE INTEREST RECEIVED FROM SUBSIDI ARY COMPANY AND INTER CORPORATE LOANS, BILL DISCOUNTING TO BE PART OF PRO FIT OF SHIPPING BUSINESS. SINCE WHILE DISPOSING OF ADDITIONAL GROUND NO.1, WE HAVE DIRECTED THE AO TO TREAT THE INTEREST RECEIVED FROM SUBSIDIARY AS WELL AS INTEREST AND DISCOUNTING CHARGES ON TRADE BILLS AS INCOME FROM BUSINESS OF THE ASSESSEE AS PART OF SHIPPING BUSINESS, THE NATURAL INFERENCE WILL BE TH AT THE INTEREST PAID AS WELL AS OTHER EXPENSES WHICH HAS BEEN DISALLOWED TO THE EXTENT OF ITA 3061, 3062, 3691&3602/MUM/2017 M/S. DISH TV INDIA LTD. 12 ` 2,23,17,217/- WILL AUTOMATICALLY BE ALLOWED AS DED UCTION OUT OF THE INCOME COMPUTED FROM BUSINESS. THUS, TO THAT EXTENT GROUN D 1 AND 2 ARE ALLOWED. 12. GROUND NO.3 IN THE SUMMARIZED GROUND RELATES TO THE LOANS OF BARGE DIVISION. THE LEARNED AR WAS FAIR ENOUGH TO CONCE DE THAT THIS ISSUE IS DULY COVERED AGAINST THE ASSESSEE BY THE DECISION OF THI S TRIBUNAL IN THE CASE OF DCIT VS. ORION AGENCIES LTD. 128 TTJ 524. WE ACCOR DINGLY, DISMISS THIS GROUND. 13. GROUND NO.4 IS AN ALTERNATE GROUND AND RELATES TO THE CLAIM OF DEDUCTION IN RESPECT OF INTEREST PAID ON LOAN U/S. 57(III) IN CASE INTEREST RECEIVED IS TREATED AS INCOME FROM OTHER SOURCES. THIS GROUND BECOMES INFRUCTUOUS AS WE HAVE ALREADY DIRECTED THE AO WHIL E DISPOSING OF ADDITIONAL GROUND NO.1 THAT INCOME FROM INTEREST BE TAKEN AS INCOME FROM BUSINESS. THUS, THIS GROUND STANDS DISMISSED AS SUCH. 14. GROUND NO. 5 REQUIRES THE AO TO GIVEN THE EFFEC T OF THE APPEAL ORDER OF THE LEARNED CIT(A) DATED 8.3.2013. WE DIRECT TH E ASSESSING OFFICER TO GIVE THE APPEAL EFFECT TO THE ORDER OF THE CIT(A). THUS, THIS GROUND STANDS STATISTICALLY ALLOWED. 15. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH JANUARY, 2018 SD/- SD/- (PAWAN SINGH) (P.K. BANSAL) JUDICIAL MEMBER VICE PRESIDENT MUMBAI, DATED: 4 TH JANUARY, 2018 ITA 3061, 3062, 3691&3602/MUM/2017 M/S. DISH TV INDIA LTD. 13 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) , MUMBAI 4. THE CIT , MUMBAI 5. THE DR, E BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI SA