TMI Blog2015 (3) TMI 793X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year to hold that interest bearing advances are more than the interest bearing loans. On the other hand, the contention of the assessee is that investment in such bonds were made in earlier years and that too out of interest bearing funds. The ld. CIT(A) has simply held that since deductions under Chapter VI-A are to be done on net basis, the assessee deserves relief. He failed to note that the question under consideration was not about the calculation of the amount of deduction under Chapter VI-A, but the computation of income under the head `Income from other sources’, for which there is a separate scheme set out in Chapter IV-F of the Act. Under such circumstances, we cannot sustain the view canvassed by the ld. CIT(A). Accordingly, the impugned order is set aside and the matter is sent back to the AO for deciding this issue afresh to find out the source of the amount invested in such funds, at the time when such investments were made. - Decided in favour of revenue for statistical purposes. - ITA Nos.5490/Del/2013, 477/Del/2010 & 4868/Del/2010 - - - Dated:- 12-3-2015 - Shri R.S. Syal And Shri A.T. Varkey JJ. For the Appellant : Shri V.K. Nischal, Advocate F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48,89,252 (ii) Recovery of unrealized interest 70,35,453 (iii) Reversal of provisions for doubtful debts advances 2,07,74,884 (iv) Income from Other Sources 10,41,98,731 (a) Interest on investments Less: Expenses @ 68.95% (Computation enclosed) 7,18,45,025 3,23,53,706 (iv) Short Term Capital Gains 2,46,059 6,52,99,354 3 Gross Business Income 59,68,03,660 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were certain sums amounting to ₹ 1883.35 crore appearing on the Liability side and loans to the tune of ₹ 1906.49 crore appearing on the Asset side of the assessee s balance sheet. By making a comparison of these two loan figures, the AO opined that no part of loans amounting to ₹ 1883.35 crore could be said to have been attributed to the investments made by the assessee in UP State Bonds and others. In view of the fact that the amount of Reserves and surplus was more than the Investments made by the assessee company in these UP Government Bonds, it was held that such investments were made out of interest free funds available at the disposal of the assessee and resultantly, the deduction of interest and other charges amounting to ₹ 145.66 crore from Interest on investment , being Income from other sources , was not permissible. 4. The AO re-prepared Chart-C and Chart-B as under:- Chart-B 1 Business income after making adjustments 66,21,03,014 2 Less: (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ------------------ 3. Ratio of Expenses (Rs.8,69,51,563) to Gross Receipts(Rs.227,11,97,296) 3.82% 5. On the basis of the above re-calculated charts, the AO re-prepared Chart-A for calculating the amount of deduction u/s 36(1)(viii), as under:- Computation of Rebate Allowable u/s 36(1)(viii) of the Income Tax Act, 1961. 20% of Profit from Long term Housing loan ..transferred to special reserve whichever is less 1. Business income before deduction u/s 36(1)(viii) of the Income Tax Act 52,89,39,027 Ratio of interest on Long Term Housing Loans to Total Receipts of the Business. 140,69,40,560 : 2167244624 64.92 : 100 2. Profit from Long Term Housing Loans Therefore, 64.92% of business income is eligible for rebate u/s 36(1)(viii) (A) 34,33,87,216 3. 20% of (A) above allowable as deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the finance charges and interest paid on loans obtained by the assessee for making investment in shares is deductible u/s 57(iii) in computing `Income from other sources . In view of the above legal position, it is apparent that the amount of interest expenditure can be allowed as deduction u/s 57 of the Act provided the investments are made from interest bearing loans. 9. Coming back to the factual matrix of the case, we note that there is no discussion in the assessment or the impugned order as to the nexus of investment in such bonds with the interest bearing or interest free bonds. The AO has gone with the figures of the current year to hold that interest bearing advances are more than the interest bearing loans. On the other hand, the contention of the assessee is that investment in such bonds were made in earlier years and that too out of interest bearing funds. The ld. CIT(A) has simply held that since deductions under Chapter VI-A are to be done on net basis, the assessee deserves relief. He failed to note that the question under consideration was not about the calculation of the amount of deduction under Chapter VI-A, but the computation of income under the head `Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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