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TMI Blog2015 (11) TMI 1532X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court in assessee's own case directed the AO to allow deduction u/s.80IB (10) of the I.T. Act in respect of profit on 15 residential buildings on the basis of profits earned from these exclusively residential buildings on stand-alone basis. 4. So far as treatment of interest income as "income from other sources" is concerned the Tribunal observed that there is no immediate and direct relation between the housing project and earning of interest. Therefore, there is no reason to interfere with the first appellate order in this regard. For the above proposition, the Tribunal relied on various decisions of the Hon'ble Supreme Court and the decision of the Hon'ble jurisdictional High Court in the case of K.K. Doshi and Company. Accordingly, it was held that the said interest income has to be taxed as income from other sources. However, the Tribunal at Para 21 of the order observed as under : ". . . .considering the above submissions we find that there is no dispute that interest receipt must have an intricate relation with the interest expenditure, then only the balance can be considered for tax purpose. One has to examine that the expenditure incurred has a connection or there mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income from other sources in absence of any direct nexus between the borrowed funds, loan given, interest expenditure incurred and interest earned proved by the assessee. The relevant observation of the AO at para 5 and 6 of the order read as under : "5. The assessee in its submission dated 21/05/2012, has provided the ledger account of M/s. Brahma Finance Corporation for the financial year relevant to A.Y. 2002-03. As per the ledger account, the interest accrued to the assessee from M/s. Brahma Finance Corporation is Rs. 38,19,238/- during the financial year. Further, from the examination of the bank statement and ledger accounts of M/s. Brahma Finance Corporation it is found that the assessee has partly used the borrowed loans from Rupee Co-operative Bank Ltd. in order to give interest bearing loans to M/s. Brahma Finance Corporation. On examination of the interest expenditure incurred during the year, it is clear that the interest expenditure includes interest on loans borrowed from Rupee Cooperative Bank Ltd. and certain miscellaneous expenses which have been booked as interest's expenditure by journal entries. Even, the ledger account of interest received also shows that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at village Kondhwa Khurd, Tal: Haveli, Pune. The six parties of the AOP decided to share the profit being Bramha Builders @ 60% and other five individuals @ 8% each. During the year under consideration, the appellant stated that the AOP was in receipt of interest income of Rs. 1,09,94,741/-, which was set off against interest paid to the extent of Rs. 1,10,01,275/- however, the Assessing Officer taxed the aforesaid interest income received of Rs. 1,09,94,741/- as income from other sources. The appellant has brought to notice the directions of the ITAT in appellant's own case directing the Assessing Officer to examine that the expenditure incurred had connection or there must exist nexus between the receipts and payments as the same remained to be examined by the Assessing Officer, the matter was set aside to the Assessing Officer to decide the issue after affording opportunity to the assessee to establish nexus between receipt and payments. The appellant during the assessment proceedings submitted that there was a direct nexus between the amounts taken from bank and the amounts advanced to M/s. Brahma Corporation and hence only net interest be taxed. The appellant also submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure thus claimed and the interest income received till 31-03-2003 are as follows : INTEREST PAID : a) Upto 32-03-2002 Rs. 61,71,506/- b) For F.Y. 2002-03 Rs. 48,29,769/- ---------------------- Rs.1,10,01,275/- INTEREST RECEIVED : a. From Brahma Finance Corporation (upto F.Y. 31-03-2002) Rs. 59,20,843/- b. From Brahma Finance Corporation ( F.Y. 2002-03) Rs. 38,19,238/- c. From Brahma Builders (For F.Y. 2002-03) Rs. 12,54,660/- --------------------- Rs.1,09,94,741/- --------------------- The appellant has submitted that the Assessing Officer during the assessment proceedings has considered the receipt of interest from Brahma Finance Corporation for F.Y. 2002-03 only at Rs. 38,19,238/- whereas taken into consideration the interest expenditure of Rs. 1,09,94,741/-, which also included the interest expenditure till 31-03- 2002. The appellant has thus contended that the Assessing Officer ought to have considered and given set off for the interest earned from Brahma Finance Corporation upto 31-3-2002 of Rs. 59,20,843/- and also of M/s. Brahma Builders received during F.Y. 2002-03 of Rs. 12,54,660/-. The appellant has thus contended that as there is a direct nexus between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion raised by the appellant is found to be correct and hence the total receipts of interest of Rs. 1,09,94,741/- qualifies as against Rs. 38,19,238/- considered by the Assessing Officer to be set off against the interest paid of Rs. 1,10,01,275/-. 3.6 In view of the above fact the disallowance made by the Assessing Officer of Rs. 71,75,503/- is liable to be deleted and the grounds of appeal No.1 & 2 raised by the appellant are liable to be allowed." 8. Aggrieved with such order of the CIT(A) the Revenue is in appeal before us with the following grounds : "1. The learned Commissioner of Income-tax (Appeals) erred in holding that the total receipts of interest of Rs. 1,09,94,741/- qualifies to be set off against the interest paid of Rs. 1,10,01,275/- when nexus between interest earned and interest paid could be established only to the extent of Rs. 38,19,238/-. 2. The learned Commissioner of Income-tax (Appeals) was not justified in deleting addition made on account of interest receipt amounting to Rs. 71,83,503/- even though expenditure on account of interest paid to the Rupee Coop. Bank is not an expenditure incurred for earning interest income from Bramha Finance Corp. and B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which has been allowed by the Ld.CIT(A). 10. The Ld. Counsel for the assessee on the other hand heavily relied on the order of the CIT(A). Referring to page 156 of the paper book he submitted that an amount of Rs. 70,89,344/- being interest has been reversed on 23-03-2002 which relates to A.Y. 2002-03. Referring to page 146 of the paper book he submitted that the interest amounting to Rs. 55,31,996/- has been reversed on 29-03-2003 relating to A.Y. 2003-04. He submitted that as against payment of interest of Rs. 1.10 lakhs the assessee has received interest of Rs. 1.09 lakhs. Referring to the copy of the assessment order the Ld. Counsel for the assessee drew the attention of the Bench to the finding given by the AO where he has accepted the amount of Rs. 38,19,238/- being interest received from Brahma Finance Corporation. Therefore, there is no justification how the AO can deny for the earlier period when he accepts the interest income for 9 months. Referring to the bank accounts he submitted that the loan obtained and given are back to back transactions. As regards the allegation of the Ld. Departmental Representative that there were certain cash withdrawals he submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X
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