Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2019 (10) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (10) TMI 636 - AT - Income TaxDisallowance of interest expenditure u/s 36(1)(iii) - interest expenditure allowable as a deduction u/s 57(iii) - HELD THAT:- Since the assessee intended to purchase a business premise from the funds borrowed, it can be very well concluded that the purpose for which these loans were obtained were business purpose only. It is noted that assessee could not find any suitable office, he invested these idle funds into FDRs to reduce the burden of interest cost to be borne on the borrowed funds and the funds are readily available to the assessee as when a suitable office is found for investment. It is a well settled law that revenue cannot sit in the armchair of a businessman to decide the reasonableness of a decision taken by a businessman. Here, in this case also, the AO has alleged that the borrowed funds were not for a business purpose while the assessee has clearly established the nexus between the purpose of business and the expenditure incurred. AO has wrongly disallowed the expenditure claimed by the assessee u/s 36(1)(iii) of the Act, by alleging that the interest expenditure were not directly related to the business of the assessee. Even otherwise, if the said expenditure is not allowable as a business expenditure, then the interest expenditure is allowable as a deduction u/s 57(iii) . During the year under consideration, the assessee had earned interest on FDR amounting to ₹ 13,41,303/- and a total expenditure on interest on loan and bank interest amounting to ₹ 14,90,125/- As per the language of section 57(iii) the expenditure which is wholly and exclusively incurred for the purpose of earning income chargeable under the head income from other sources, is allowed as deduction from the said income of the assessee. Thus, it can be concluded that there is a direct nexus between the income earned and the expenditure incurred which should allowable as a deduction u/s 57(iii) - Appeal of the assessee is allowed.
|