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2015 (8) TMI 1492 - AT - Income TaxDisallowance of interest expenses - FAA assumed that assessee must have incurred 95% of this income as expenditure on interest and, therefore, only to that extent, interest expenditure is to be allowed - HELD THAT:- Assumption by FAA is not the requirement in law, the requirement is that expenditure must be laid down by the assessee wholly and exclusively for earning of income. The expression wholly refers to quantum of expenditure and exclusively refers to the object and purpose of expenditure. Though these expressions are not used in section 57 but the overall meaning of section 57 is also to the same effect that, the expenditure ought to be incurred for earning income which is assessable under the head “income from other sources”. If the logic of CIT (Appeals) is accepted, then, in each and every case, expenditure would be allowed only, when there is resultant income. In other words, there cannot be any loss in any activity which results “income from other sources”. All the details were before CIT(Appeals) but instead of pin pointing any concrete diversion of interest bearing funds CIT (Appeals) only assumed that some funds might have been used by the assessee for some other purposes. The department has been consistently accepting the claim in earlier years and in subsequent years. It appears that in the beginning, assessee has more income under the head “income from other sources” as than the interest expenditure, but in Assessment Year 2006-07, 2007-08 and 2009-10, the interest expenditure was more than income, in spite of that loss under the head “income from other source” was allowed by the ld. Assessing Officer in scrutiny assessment. Thus considering the past history and stand of the revenue itself, we are of the view that AO has erred in making the disallowance. CIT (Appeals) also failed to appreciate that total expenditure is to be allowed which is incurred wholly and exclusively for earning income. It cannot be restricted in proportion of income. We allow the ground of appeal raised by assessee and consequently reject the ground raised by the revenue. The assessee is entitled to expenditure of ₹ 1,09,29,139/- claimed by him. Addition of cost of improvement on account of long term capital gain - HELD THAT:- Assessee while offering capital gain on sale of a plot of land had claimed cost of improvement for ₹ 10,84, 275/-. The Assessing Officer rejected the additional cost to the extent of ₹ 6 lacs. On appeal, ld. Commissioner of Income Tax (Appeals) allowed the claim of assessee on the ground that payment was made through account payee cheque for the construction made. The detail of material and other evidence were produced on the record. Contrary to this finding of fact recorded by the Commissioner of Income Tax (Appeals), nothing was pointed out to us during the course of hearing, therefore, we do not find any merit in this ground of appeal. It is rejected.
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