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2024 (3) TMI 469 - AT - Income TaxClaim of Loss - Deduction u/s. 57 - Taxability of real income / net interest income - Capitalization of the impugned interest income, or of setting it off against preoperative expenditure - claim was for being allowed proportionate interest expenditure against interest income inasmuch as the entire investment in PDI is sourced from secured debt - HELD THAT:- The assessee, a company setting-up business during the relevant year, though claiming loss (qua preoperative expenditure, on setting it off interest income), rightly disallowed, restricts it’s claim before us to expenditure incurred by way of interest on secured debt deployed in debt instrument earning interest income, assessed u/s. 56 and, again, rightly so, i.e., in computing the said income. The facts are admitted. It is only real income, unless constrained by law, that is liable to tax. Though the nomenclature ‘perpetual debt’ is inconsistent with the stated position of parking of business funds, surplus for the time being, the same shall have no immediate bearing in the instant case, limited to deductibility of interest on borrowed capital placed in a debt security for interest. Revenue’s insistence on taxing the gross receipt, de hors expenditure there-against, is without any factual or legal basis. In the facts of Tuticorin Alkali Chemicals [1997 (7) TMI 4 - SUPREME COURT] there was no claim of expenditure u/s. 57. It is a clear case of misapplication of a decision, applicable in principle, though distinguishable on facts. The disallowance of the balance expenditure, not agitated before us, gets confirmed by default. Assessee’s appeal is allowed.
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