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2014 (7) TMI 547 - AT - Income TaxInterest claimed on partners' capital contribution made to chit funds and interest claimed on payment to retired partners' outstanding balance - claim of deduction from income from other sources - nexus with lease rent received on lodge building – Held that:- Income of the assessee from lease rent of lodge is assessed as income from other sources - While computing the income from other sources any interest paid on money borrowed for the purpose of investment so as to earn income from such asset, then such interest on borrowal is to be considered wholly and exclusively for the purpose of earning income as per the provisions of s. 57(iii) of Income-tax Act, 1961 - The dominant purpose was to be for the purpose of acquisition of assets. If the funds are not borrowed to invest them for the purpose of earning income, the provisions of s. 57(iii) cannot be applied - although the borrowing may have a remote connection with the assessee's earning of income, the dominant purpose was not to earn lease rent - it cannot be said that money was borrowed wholly and exclusively for the purpose of earning lease rent from the lodge - the assessee failed to establish the link between the investments made in chit funds by the Managing Director and role of these investments in earning lease rent - the disallowances of interest on chit funds as well as interest to retired partners is confirmed – Decided against assessee. Validity of proceedings u/s 147 r.w.s. 150(1) of the Act – Held that:- Re-assessment proceedings u/s. 147 of the Act were initiated after expiry of six years from the end of relevant assessment year and the same is time barred in terms of s. 149(1) of the Act, since the issue of notice u/s. 148 r.w.s. 149(1) can be said to have been barred by limitation and also provisions of s. 150(1) cannot be pressed into service – thus, the order of the CIT(A) is upheld – Decided against Revenue.
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