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2022 (9) TMI 772 - Income Tax
Disallowing interest expenditure - interest paid resulting in loss under the head “income from other sources‟ - Addition u/s section 57(iii) or under section 36(1)(iii) - Assessee accepted the disallowance - assessee was asked to submit the details of party-wise interest paid and was also asked to prove its nexus with the interest income earned - HELD THAT:- In the present case, the assessee has earned income from business, which comprises of remuneration and interest from the firm in which the assessee is a partner. Further, the assessee has also earned interest which is taxable under the head “income from other sources‟.
Since the interest paid by the assessee during the year was more than the interest earned under this head, income from other sources was declared at loss - We find that during the course of assessment proceedings, the Authorised Representative for the assessee admitted that the net excess interest paid resulting in loss under the head income from other sources does not fit into the conditions of section 57(iii) or section 36(1)(iii) and agreed for disallowance while computing income from other sources. It is the plea of the assessee that the assessee has not accepted the aforesaid disallowance and the same was challenged before the learned CIT(A). From the perusal of the impugned order we find that the learned CIT(A) has noted that the assessee has filed different balance sheets at different times, which are contradictory in nature.
Assessee has claimed that no interest was received on certain loans given by it, and at the same time assessee has also not paid interest on borrowings from certain parties. The assessee has claimed that its own funds and interest free loans are more than loans on which interest has been paid. However, no details were furnished either before the lower authorities or before us, during the course of hearing, in support of the aforesaid claim. Further, even though the assessee has claimed that it has not accepted the disallowance however, nothing has been brought on record to prove that said net excess interest paid fit into the conditions of section 57(iii) or section 36(1)(iii) of the Act. - Decided against assessee.