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2022 (3) TMI 432 - AT - Income TaxDisallowance of interest expenses - income from investment shown as Nil - as observed by AO that assessee-company had advanced interest free loan as advanced out of secured loan availed from the Bank of Baroda - interest bearing secured loan was diverted to advance interest free loan - HELD THAT:- The assessee has proved complete nexus between the amount borrowed and amount invested. We note that assessing officer has not pointed out that the fund borrowed was not diverted for the purpose of making investment with Affem Rolling Pvt Ltd. We note that before lower authorities, the assessee claimed both alternatives that interest expenses is allowable u/s 36(1)(iii) or u/s 57(iii) of the Act. However, we note that assessee has not derived any business income. Therefore, assessee’s claim u/s 36(1)(iii) of the Act should not be allowed, and interest expense should be allowed under section 57(iii) of the Act.We note that assessing officer has erred in holding that assessee claimed such expenses u/s 24 of the Act. It is to be noted that assessee claimed only the standard deduction @30% u/s 24(a) of the Act however the assessee did not claim any interest expenses u/s 24(b) of the Act. Based on the above facts, we note that interest expense is allowable u/s 57(iii) of the Act. Assessee has not claimed the interest expenses against the interest on refund received from the income tax department. Interest on refund has been shown in the computation of total income only for disclosure purposes and not for the purpose of set off. This is because the assessee has not lent the money to the income tax department. The assessee in fact claimed the interest expenses against the Nil return on investment made in Affem Rolling Pvt. Ltd. We note that such interest expense is allowable under section 57(iii) as relying on RAJENDRA PRASAD MOODY [1978 (10) TMI 133 - SUPREME COURT] - Thus we allow the interest expenses - Decided in favour of assessee. Disallowance of expenses - assessee had claimed expenses of ₹ 9,02,504/- on account of fees of Accountant, audit fees, and general expenses etc. - HELD THAT:- So far disallowance of these other expenses are concerned, we note that assessee is claiming the deduction u/s 57(iii) of the Act. The ld Counsel submits that these expenses are not relating to the property on which the assessee is deriving the rent income, but these expenses are related to the investment made in Affem Rolling Pvt. Ltd. We note that to maintain the investment portfolio the assessee has incurred expenses therefore, we are of the view that it is quite reasonable to allow 50% of these expenses - Accordingly, we allow 50% of these expenses for both the assessment years.
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