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2022 (7) TMI 1262 - AT - Income TaxDisallowance of deduction u/s 57(iii) - claim of deduction / set off of interest expenditure against the interest income - AO observed that, assessee had failed to establish that the unsecured loans were raised for earning of interest income - HELD THAT:- Dynasty Tradelink Pvt. Ltd. - We are of the considered view that as the assessee had raised interest bearing loans from M/s. Dynasty Tradelink Pvt. Ltd. wholly and exclusively for the purpose of earning interest income on the loans/deposits given to GDR Educational Society, therefore, his claim for deduction of the corresponding interest expenditure is well in order and had wrongly been disallowed by the lower authorities. We, thus, in terms of our aforesaid observations set-aside the order of the CIT(Appeals) and direct him to allow the assessee’s claim for deduction under Sec. 57(iii) of the interest expenditure corresponding to the interest bearing that was raised from M/s Dynasty Tradelink Pvt. Ltd. Hill Queen Investment Pvt. Ltd., Sonal Kumar Rungta & Tanishq Export Pvt. Ltd. - We find that neither the complete facts which would prove to the hilt the existence of an inextricable nexus between the aforesaid interest bearing loans and the interest generating advances is discernible from the records, nor any such claim of deduction of interest is found to have been raised by the assessee in its return of income for the immediately preceding year i.e AY 2012-13. Be that as it may, as the issue as regards the allowability of the assessee’s claim for deduction under Sec. 57(iii) of the interest paid on the loans raised from the aforementioned three parties cannot be adjudicated in the absence of complete set of facts before us, therefore, in all fairness we restore the matter to the file of the A.O with a direction to re-adjudicate the same in the backdrop of our aforesaid observations. In case the assessee in the course of the set-aside proceedings is able to substantiate that the interest bearing loans raised by him from the aforementioned three parties, viz. (i) Hill Queen Investment Pvt. Ltd.; (ii) Sonal Kumar Rungta; and (iii) Tanishq Export Pvt. Ltd. were advanced for the purpose of earning of interest income in question, then, the A.O shall allow his claim for deduction qua the same under Sec. 57(iii). Assessee had paid interest on the old interest bearing loans that were raised in the earlier years from the aforementioned four parties, viz. (i) Mary Mithai; (ii) V.K Satija HUF; (iii) Jaya Solanki ; and (iv) Yashwant Rao Kavre for advancing of interest bearing amounts - We find substance in the claim of the ld. AR as regards the allowability of his claim for deduction of the interest expenditure on the old loans which were utilized for earning of interest income by advancing the same as interest bearing loans/deposits. Our aforesaid conviction is supported by the fact that the assessee’s claim for deduction of interest paid on the loans raised from the aforesaid four parties in his return of income for the immediately preceding year, i.e, AY 2012-13 had been accepted by the department and had not been dislodged, Page 11 of APB. Nothing to the contrary has been brought to our notice by the DR to rebut the aforesaid factual position as had been canvassed by the ld. AR before us. We are of the considered view, that as the fact situation during the year under consideration remains the same except for that the outstanding loans of the aforesaid four parties were squared up by the assessee by raising a bank loan i.e, a temporary OD from OBC bank, therefore, going by the principle of consistency we find no reason to take a different view and thus allow the assessee’s claim for deduction of interest on aforesaid loans.
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