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2019 (6) TMI 1695 - AT - Income TaxDisallowance of interest u/s. 57(iii) - unsecured loan obtained for investment in the partnership firm - assessee explained that borrowed money was invested as capital in the partnership firm and firm had made capital investment in the purchase of new shops by which future potentiality of earning income by way of profit and remuneration from the partnership firm has been increased because of contribution to the capital account in the partnership firm - HELD THAT:- Assessee has withdrawn more money from the partnership firm than actually invested in the partnership firm. Apart from the above, earning of interest income/share in the profit/remuneration from the partnership firm is assessed under the head profit and gains from business or profession and the assessee could not substantiate that how the income for making investment in the partnership firm would be assessable under the head income from other sources. As further noticed that judicial pronouncement referred in the case of CIT vs. Rajendra prasad Moody [1978 (10) TMI 133 - SUPREME COURT] is distinguishable from the case of the assessee as in the referred judgment, the issue was pertained to receiving of dividend income on account of investment made in the companies which was assessable as income from other sources u/s. 56 of the act whereas the issue in the case of assessee is contribution made by the assessee in his capital account in the partnership firm and income from the partnership firm would be assessable under the head profit and gains of business. Thus we observe that as per specific provision of section 28(v) of IT Act any interest, salary etc. earned by a partner from a partnership firm is taxable under the head profit and gains of business or profession and there is no question of categorizing it under the head income from other sources. Therefore, we do not find any merit in the claim of the assessee for deduction u/s 57(iii) since there was no scope for treating such income earned from partnership firm as falling under the head income from other sources. We consider that eligibility for deduction u/s. 57(iii) arises only if expenditure is lead out wholly and exclusively for purpose of earning income which is chargeable under the head income other sources, therefore, we do not find infirmity in the decision of ld. CIT(A). Accordingly, the appeal of the assessee is dismissed.
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