Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2014 (3) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (3) TMI 1009 - AT - Income TaxIncome on capital gain - assessee has made investment in IPOs from his saving bank account and not by using the OD a/c - Held that:- The assessee utilized OD Limit mainly for making advances to others and to earn short term capital gain which is more than the expenditure and it also fulfill the condition of Section 57(iii) of the Act. According to this section, expenditure must be made wholly and exclusively for earning income and that such income must have been earned. It is not the case of the A.O. that the loan funds were utilized for the purpose of earning tax free income. Both the A.O. and the ld CIT(A) have not given their fact finding clearly on this issue as discussed above, otherwise also, as per the settled position of law where interest is received on fixed deposit and interest is paid on loan obtained on the security of that fixed deposit, only the net interest is chargeable to tax on the principle of mutuality. On these facts and circumstances of the case, the Hon'ble Rajasthan High Court in the case of Hamendra Singh vs CIT,[1987 (7) TMI 73 - RAJASTHAN High Court ] held that immediate purpose of taking loans was to construct a house and in that view of the matter, even if the loan was taken on security of his FDRs in order to maintain his interest income therefrom was irrelevant. It has been held that interest paid on the loans could not be said to be the expenditure incurred wholly and exclusively for earning income from other sources. On the first reading it seems that because higher rate of interest was paid on the loans in that case and also in the case under reference, the ratio of that decision applied. However, in that case the loan was taken for construction of house and not for the purpose of earning income. In the given case, the facts are entirely different. The assessee had his own funds which he utilized in such a manner that he has earned net income from interest and by not making any fresh investment in IPOs but has earned income on capital gain as discussed above. Accordingly, we are left with no option but to hold that this addition deserves to be deleted. We order to delete this addition and allow the appeal of the assessee on merits
|