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2023 (9) TMI 319 - ITAT MUMBAIDisallowance of interest expenses u/s 57 - nexus between the interest income from FDs and the interest paid by the assessee - AO has contended that the assessee failed to establish the nexus of the FD balance as of 31/03/2017 and the details of the loan amount borrowed from related parties as provided by the assessee - It is the claim of the assessee that the FDs are placed using the funds borrowed in earlier years from the related parties and therefore the revenue cannot make the disallowance in the years under consideration for the reason that the assessee failed to establish the nexus HELD THAT:- During the course of hearing our attention was drawn to Balance Sheet of the assessee as at 31/03/2017 and 31/03/2018 to submit that there cannot be a one to one match between the loan amount used for investing in FD and used for business. We tend to agree with this contention for the reason that one of the partners' capital account is having a considerable credit balance (own funds) and there is also sizeable balance shown under the head "Span Margin" in the asset side which substantiates the claim that there is no one to one match between the source and the investments. The claim of the assessee that the amount borrowed from related parties has been used for investment in FD as well as business purpose has merits. Be that as may be for the purpose of claiming deduction under section 57, it is important to establish that the expenditure (not being in the nature of capital expenditure) is laid out or expended wholly and exclusively for the purpose of making or earning such income. In assessee's case the assessing officer has not considered the movement in the loan account details submitted by the assessee and also has not considered the fresh FDs and renewal of FDs before concluding that the entire claim is not allowable u/s 57. Alternate plea of the assessee that the interest expenditure if disallowed u/s 57 should be allowed as business expenditure for the reason that the FDs are kept for business purpose has also not been considered by the lower authorities - In view of these discussions we deem it fit to remit the issue back to the assessing officer for a de novo consideration. AO is directed to consider the movement in the FD account and the loan account to understand the nexus and also to consider the alternate claim of interest as business expenditure based on the facts and evidences that may be submitted by the assessee. Appeal allowed for statistical purposes.
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