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2020 (9) TMI 231 - AT - Income TaxDisallowance of interest expenditure - Difference of unsecured loan on which interest is paid is not commensurate in with interest received on loans and advances - advances given to the sister concern or associated concerns at interest are sourced from interest-bearing loans obtained - assessee has incurred interest cost of ₹ 376,982,874/– on unsecured loans amounting to ₹ 512 crores and assessee has earned interest of ₹ 376,951,117/– on loans and advances of ₹ 344 crores - HELD THAT:- Assessee has submitted a chart of interest charged which also supports the view that advances given to the sister concern or associated concerns at interest are sourced from interest-bearing loans obtained by the assessee. It is also undisputed fact that the total interest received by the assessee of ₹ 376,982,874/– is taxed under the head income from other sources by revenue. As assessee has utilised interest-bearing funds for the purpose of making investment/giving advances to the sister concern on interest, which is charged to taxed Under the head income from other sources, assessee is entitled to deduction u/s 57 (iii) of the act of any expenditure which is not in the nature of capital expenditure, if it is laid out and expended wholly and exclusively for the purpose of making or earning such income. Undisputedly there is no claim by the revenue that above expenditure is in the nature of capital expenditure. The interest income earned by the assessee is from loans and advances given to sister concern which is shown by the assessee to have been financed by obtaining loan on interest from other parties. Therefore, such interest paid on unsecured loan is laid out and expended wholly and exclusively for the purpose of making an earning such interest income. Relevant judicial pronouncements placed before us by both the parties also canvass a view that any expenditure incurred by the assessee which is not in the nature of capital expenditure, if laid out and expended wholly and exclusively for the purpose of making or earning any income which is chargeable to tax under head income from other sources is allowable as deduction to the assessee u/s 57 (iii) of the act. Allow appeal of the assessee and direct the lower authorities to delete the disallowance of interest expenditure .
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