TMI Blog2013 (12) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... f business. The interest paid on such borrowing cannot be allowed as a deduction under Section 36(1)(iii) - The assessee may have interest income on its capital or on its non-interest bearing funds received from somebody else but the said interest cannot be set off against the interest payment on the basis of some hypothesis or presumption - Decided in favour of Revenue. Office and administrative expenses - Held that:- The were the expenses of general nature - Even when the assessee has not carried on the business, the certain expenses which were required to be incurred for maintaining the corporate status of the assessee is allowable deduction - In fact the assessee carried on the business during the accounting year relevant to the assessment year under consideration, whatever small scale may be of the business - Decided against Revenue. - ITA No. No. 3358/Del/2012, Cross Objection No.378/Del/2012 - - - Dated:- 22-11-2013 - Shri G. D. Agrawal And Shri Chandra Mohan Garg,JJ. For the Petitioner : Shri Sameer Sharma, Sr. DR. For the Respondent : Shri Kapil Goel, Advocate. ORDER Per G. D. Agrawal, VP : The appeal by the Revenue is directed against the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he interest received by the assessee amounting to Rs. 1,13,50,138/- from City Guide Yellow Pages Pvt.Ltd. against the interest paid to UFPL and sustained the disallowance. From the facts of the assessee's case, it is evident that the money borrowed from UFPL was not for the purpose of business and, therefore, the entire disallowance of interest was to be sustained. There is no provision under the Income-tax Act for setting off the interest received against the interest paid on the money which was not borrowed for the purpose of business. He, therefore, requested that the order of learned CIT(A) should be reversed and that of the Assessing Officer may be restored. With regard to disallowance of interest amounting to Rs. 61,191/-, he relied upon the order of the Assessing Officer. 5. The learned counsel for the assessee, on the other hand, so far as Revenue's appeal is concerned, relied upon the order of learned CIT(A) and he stated that the money borrowed from UFPL and the interest received from City Guide Yellow Pages Pvt.Ltd. are inextricably connected. In support of this argument, he filed a note on the entire transactions and we reproduce the same below for ready reference:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2/03/09 - 5 Cr. Rtgs Syndicate Bank b. 16/03/09 - 5 Cr Rtgs Syndicate Bank c. 17/03/09 - 3 Cr. Rtgs Syndicate Bank" 6. The learned counsel further submitted that the disallowance sustained by the learned CIT(A) out of interest paid is not justified. The same should be allowed in view of the cross-objection furnished by the assessee. 7. We have carefully considered the submissions of both the sides and perused the material placed before us. Section 36(1)(iii) of the Income-tax Act, 1961 reads as under:- "36. (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28-- (i) .............. (ii) .............. (iii) the amount of the interest paid in respect of capital borrowed for the purposes of the business or profession : [Provided that any amount of the interest paid, in respect of capital borrowed for acquisition of an asset for extension of existing business or profession (whether capitalised in the books of account or not); for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... handa but received the interest of Rs. 1,13,50,138/- from City Guide Yellow Pages Pvt.Ltd. However, on the above facts, in our opinion, there is no case for set off of the interest paid to UFPL with the interest received from City Guide Yellow Pages Pvt.Ltd. The CIT(A) has allowed the set off with the following finding:- "The other contention of the AR is that the interest receipt should be reduced from the interest expenditure incurred for disallowance if any on the ground that, had the funds not given to M/s City Guide Yellow Pages Pvt.Ltd., the same would have been available for making the investment and also there would be lesser borrowal of funds for making investment with lesser interest burden. The contentions of the AR are tenable. The AO is hereby directed to allow set off of interest received against the interest paid and disallowed." 11. The CIT(A) allowed the set off on the ground that had the funds not been given to City Guide Yellow Pages Pvt.Ltd., the same should have been available for making the investment for the purchase of shares and there would be lesser borrowing of funds with lesser interest burden. Thus, the CIT(A) allowed the relief on the basis of cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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