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2020 (8) TMI 356 - AT - Income TaxDisallowance of deduction claimed under the head income from other sources - Whether the assessee is eligible to claim the expenditure incurred in earning of the interest income as per the provisions of Section 57? - Whether the assessee is eligible to claim deduction u/s 37 in case such interest income is to be treated under the head “income from the profits and gains of business or profession”? - HELD THAT:- For the amount received on interest, the assessee would not be in a position to lend the amount on interest to earn interest income. Hence, netting of the interest income on the interest expenditure is a prerequisite for correct determination of taxable income. Keeping in view, decision of the CIT (A) that there is no nexus between the interest earned and the interest paid cannot be upheld. As a result, the assessee is allowed to claim the interest expenses. Regarding the alternate decision of the ld. CIT (A) that the interest income constitutes the business income, even in those circumstances, the interest paid to earn such interest income is to be allowed as deduction u/s 37 of the Act. Since, we hold in principle that the expenditure is allowable either way u/s 57, if the income is treated under the head “income from other sources” as per the provisions of Section 56 or u/s 37, if the income is treated under the head “profits and gains of business or profession” as per the provisions of Section 28, at this juncture, we refrain from determining issue of the claim of preclusion or collateral estoppel under “which head” the income earned by the assessee is taxable. - Appeal of the assessee is allowed.
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