TMI Blog1984 (3) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... he fund so received was deposited in short-term deposits with the banks on which the assessee earned interest of Rs. 2,64,279. The assessee claimed that the said interest receipts should be set off against the interest payments made by the assessee and, therefore, no interest income was assessable in the hands of the assessee-company. The ITO, however, rejected this contention holding that the interest of Rs. 2,64,279 earned by the assessee was assessable under the head 'Income from other sources' and only the expenditure laid out or expended wholly or exclusively for the purposes of making or earning such interest income was allowable as deduction against the interest income. He then analysed the sources of bank deposits and observed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruction period and when no loans from financial institutions had been obtained and interest was earned on the shares subscription money. 4. The department is in appeal before us. The learned departmental representative relied on the Tribunal's order in the assessee's case for the assessment year 1977-78 as also on Addl. CIT v. Madras Fertilisers Ltd. [1980] 122 ITR 139 (Mad.), CIT v. United Wire Ropes Ltd. [1980] 121 ITR 762 (Bom.) and New Central Jute Mills Co. Ltd.'s case. 5. The learned counsel for the assessee relied on the decisions of the Tribunals, Special Bench namely, Arasan Aluminium Industries (P.) Ltd. v. First ITO [1982] 1 ITD 10 (Mad.) (SB), Nagarjuna Steel Ltd. v. ITO [1983] 3 ITD 796 (Hyd.) and Addl. CIT v. Indian Drugs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose of loan raised was not to utilise the amount for earning interest from bank and, therefore, interest payment was not for earning interest from bank and could not be allowed as revenue expenditure. 7. The Bombay High Court in Smt. Zubedabai v. CIT 1983 Tax LR 1518 held that for claiming deduction under section 57(iii) of the Income-tax Act, 1961 ('the Act') nexus between the expenditure and income has to exist. 8. The Madhya Pradesh High Court inM.P.StateIndustries Corpn. Ltd. v. CIT [1968] 69 ITR 824 held that the interest earned on deposit of share money with the bank was assessable under the head 'Income from other sources'. 9. The Delhi High Court in Indian Drugs Pharmaceuticals Ltd.'s case held that the receipts from the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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