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2017 (12) TMI 531 - AT - Income TaxAddition on account of interest expense claimed against the interest income - assessee has earned interest income which was offered to tax under the head “income from other source” - whether the assessee is entitled for claiming the interest expense against the interest income ? - Held that:- It is undisputed fact that the loan was provided to the parties on interest and accordingly interest income was earned. Now the question arises whether the fund used by the assessee in providing loan was interest bearing or not. On perusal of the balance-sheet we find that assessee has been paying interest on the capital contributed by the partners to the firm as well as money borrowed by the firm from the outside. As the interest bearing fund has been advanced by the assessee to the parties to earn interest then in our considered view the interest paid qua to the interest income was very much eligible for deduction u/s 57(iii) of the Act. From the above precedent, we hold that assessee is very much entitled to claim the expense incurred in the form of interest against the impugned interest income. Computation of interest expense qua to the interest income - Held that:- We find that the assessee has adopted the manner for making the disallowance of interest expense as provided under Rule 8D of I.T. Rules, 1962. Though prima facie we disagreed to the basis adopted by the assessee for claiming the interest expense qua the interest income. However, Ld DR before us has not brought any defect in the manner in which interest expense was worked out against the interest income as adopted by assessee. Therefore, we are not inclined to adjudicate the same. In view of the above, we hold that is entitled to claim the interest expense against the interest income. We respectfully following the consistent view of the Tribunal decline to interfere with the order passed by the Ld. CIT(A) on this account and accordingly the ground taken by the Revenue is regretted.
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