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2020 (3) TMI 1252 - AT - Income TaxInterest expenditure claimed u/s 57 - Addition of interest earned by the assessee out of the deposits made as per the instruction of Special Court - plea of the assessee is that there is oral contract between the parties to pay 12% per annum and whatever the interest income earned by the assessee are out of the surplus of the liquidation of certain investment - HELD THAT:- Assessee has earned interest income from the deposits in bank. These deposits are out of the balance of liquidating certain investments. From the facts on record, prima facie, it appears that there is a nexus between the borrowed funds on which assessee has paid interest and the investment on which it has earned interest income. Therefore, the assessee should get deduction of interest expenditure to the extent of interest income earned of ₹ 3,52,622/-. It is relevant to observe, in assessee’s own case in AY 2017-18, the AO himself has allowed claim of deduction of interest expenditure to the extent of interest income earned during that year. In view of the aforesaid, the ground is allowed as indicated above. Disallowance of interest u/s 14A - HELD THAT:- We find that the identical ground raised in the present appeal has already been decided by the Coordinate Bench of ITAT in for AY 2009-10 in Shri Sudhir S. Mehta case [2017 (12) TMI 1668 - ITAT MUMBAI] wherein the Hon’ble ITAT has allowed the ground on merit in favour of assessee. Additional ground raised with respect to capitalization of interest - HELD THAT:- We are of the view that to the extent the interest relate to the investment, i.e. being disallowable under Section 57 will become part of cost of acquisition of shares and therefore the AO is directed to take it as part of the cost of shares for determining profit on sale of the shares. Thus, the additional ground stands allowed to that extent.
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