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2017 (3) TMI 1713 - AT - Income TaxDisallowance of interest expenses in relation to funds borrowed for various purposes including loan/advances given incidentally from which the appellant is earning interest income - Held that:- CIT (A) has given a very categorical finding that this interest expenditure has no co-relation with the earning of ₹ 48 lakhs of interest income from ICD, because the funds advanced for ICD was out of the interest free fund of ₹ 11.25 crores received from the associate company. Only contention as raised by that, this interest expenditure should be capitalized, because it pertains to the ongoing project. It is purely a new plea/ground, which has been taken for the first time at this stage, but at the same time it goes to the root of the issue involved because, whence, this interest expenditure is not attributable to ‘income from other sources’, then it indicates that the same may have been for the purpose of construction business/ongoing project. Being a core issue which goes to the determination of correct tax liability of the assessee, we therefore deem fit to admit the additional ground. Since this aspect has neither been contented by the assessee before the AO nor has been examined by the AO, therefore, in the interest of justice, we remit back the matter to the file of the AO, who shall examine the utilization of the borrowed fund for the purpose of business and the nexus of interest expenditure which has been incurred on such borrowed funds. - Appeal of the assessee is partly allowed for statistical purposes.
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