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2020 (9) TMI 1046 - AT - Income TaxInterest expenses claim against the interest income received from various parties u/s 57(iii) - HELD THAT:- It is not necessary that you can earn in every transaction and in this case, instead of making interest income, assessee has incurred a loss. We do not agree with the tax authorities that only income is chargeable to tax under the head income from other sources and the loss is not chargeable under the head income from other sources. The intention of the legislature to allow the expenditure incurred by the assessee to earn the income from other sources, which is directly linked to the earning of such income. In the given case, the assessee has not incurred the expenditure directly linking the interest income but incurred the loss by arranging the funds for earning the interest income. You cannot segregate the income alone without considering the object of the transaction or nature of the business of earning the interest income and the expenses includes loss vice versa. No doubt that assessee is into arranging funds and earns interest income by refinancing to the other parties and the difference in the rates in refinancing is the income of the assessee. It is the nature of the business and all the expenditure incurred in earning the income is allowable expenditure. It is only characterization whether it is relating to expenses incurred to earn income or loss incurred in the process of making the income. Therefore,interest expenditure incurred by the assessee will fall under the category of loss. Therefore, it is allowed as an expenditure. Accordingly, ground No. 1 raised by the assessee is allowed. Disallowance u/s 14A r.w.r. 8D - HELD THAT:- AO should have considered only those investments which has earned exempt income and eliminate those investment which has not earned exempt income. In our considered view, AO should calculate the disallowance under rule 8D (2) (iii) by eliminating the investments which has not earned the exempt income. By calculating the disallowance as per above direction and AO should compare the disallowances as above by simultaneously calculating 31% of the administration expenditure and the revised disallowance under rule 8D (2) (iii). In case the revised disallowance under rule 8D(2) is less than 31% of the adminstration expenditure then AO should disallow as per rule 8D(2). Accordingly, we are remitting this issue back to the file of AO to determine the proper disallowance under section 14A. Therefore, ground No. 2 raised by the assessee is allowed for statistical purpose. Unaccounted cash consideration paid over and above the consideration paid by cheque which is reflected in the books of accounts - certain loose papers pertaining to M/s Growmore Investments were found and seized being copies of undated 6 numbers of hundies - HELD THAT:- Even if accept the findings of revenue authorities that assessee has received on money over and above sale consideration in cash and why should the company, where assessee is a director to pay back in cash to the purchaser. What is that assessee has achieved. As such there is no clear finding that the cash was actually received by assessee except that Mr Vipul who is the finance manager has confirmed in writing on the back side of the hundies. Other than that there is no other proof linking the assessee to have received the cash from Bliss GVS, moreover in this case, it was found that employee of the Bliss GVS has received the cash. From the hundi transaction and the contents of the hundi, clearly indicate that this transaction was between Growmore Investment and Bliss GVS. Any proceedings has to be taken with these companies and just because there is property transaction by the assessee, the revenue cannot presume itself linking assessee as the beneficiary of the transaction. As there is no benefit to Bliss GVS in the above transactions and neither to Growmore Investment. Whatever Bliss GVS has paid in cash presumably to assessee, was received back. AO has linked hundi transaction between Growmore Investment and Bliss GVS with assessee. There is no proof coming out of the documents found during search linking the assessee as the beneficiary except presumption and assumptions of the tax authorities. Since there is no cogent material in the possession of the revenue to indicate that the assessee has actually received cash from Bliss GVS, we are inclined to delete the addition made by AO - Decided in favour of assessee.
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