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TMI Blog2016 (11) TMI 743X X X X Extracts X X X X X X X X Extracts X X X X ..... ,585/- were not pressed and accordingly dismissed as not pressed. The second part of ground no 2 qua confirmation of depreciation disallowance by CIT(A) has been dealt with in para 13 of this order. 4. Ground No.3 is in respect of not allowing deduction on account of interest incurred/payable to the banks from the interest income earned of Rs. 2,60,42,297/- and assessed to tax under the head "income from other sources". 5. Brief facts of the case are that the assessee filed e-return on 30.9.2008 declaring total income at Rs. NIL, which was processed u/s 143(1) of the Act. Thereafter, scrutiny proceedings were initiated against the assessee and statutory notices under section 143(2) and 142(1) were issued and served upon the assessee. During the year under consideration the assessee was not doing any business activity but in earlier years was engaged in the business of trading in shares and securities as member of the NSC and were SEBI registered merchant bankers before the assessee was debarred by the interim order of the SEBI dated 4.4.2001 from undertaking any business as stock broker or as merchant banker till further order. The SEBI passed another order dated 21.6.2001 contin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the order of SEBI which was finally upheld by the Hon'ble Apex Court, then the interest income assessed under the head "income from other sources" should be calculated after allowing interest incurred/payable which was incurred by the assessee in relation to earning of such income and have direct nexus. The plea taken by the ld.AR was that since the assessee was doing business of broking as stock brokers at NSC , it was required to give securities and guarantees to the National Stock Exchange. The said securities/guarantees were given in the form of FDRs under lien purchased out of borrowed funds from banks and also bank guarantees issued by the banks. These guarantees were invoked by the National Stock Exchange upon commission of default by the assessee and the proceeds of FDRs were transferred to the National Stock Exchange by the respective banks on invocation thereof. The assessee tried to co-relate various bank deposits and their sources in order to justify the co-relation nexus with interest received from the NSE on the money lying with it. The assessee submitted that interest incurred to the banks has direct nexus with the income earned by way of interest from National S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sits which were lying with the National Stock Exchange following the invoking of the guarantees and encashing FDRs when lien was exercised by the Stock Exchange details whereof were also before us during the course of hearing. The ld. AR finally submitted that since the money which accumulated with the National Stock Exchange has came from various FDRs which were made out of overdraft account or the various bank guarantees which were invoked by National Stock Exchange by which already overdue accounts were increased to that extent and therefore whatever interest was incurred by the assessee on the overdraft or the bank guarantees should be allowed to be reduced under the provisions of section 57(iii) of the Act from the interest income received from the National Stock Exchange. The ld. AR submitted that the assessee have incurred Rs. 2,74,88,000/- on various overdrafts out of which the FDR were made by the assessee and received interest of Rs. 2,60,42,297/- from the National Stock Exchange. Finally the ld. AR submitted that the said interest incurred by the assessee was covered by the provisions of section 57(iii) of the Act as the interest incurred to banks has direct nexus and co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be computed after making the following deductions, namely :- (i) ...... (ia) ............ (ii) .......... (iia) .......... (iii) any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning such income; (iv) ..... The interest is not in doubt or disputed that the interest received from the National Stock Exchange on the total amount of deposit with it is assessable as income from other sources". So far as the question of deduction qua interest to various banks is concnerned, we are of the opinion that if there is nexus between the interest received and interest to banks on borrowings , the same is to be allowed as deduction u/s 57(iii) of the Act. A plain reading of provisions of section 57(iii) of the Act reveals that any expenses which is not of capital in nature and is wholly and exclusively incurred or expended for the purpose of making or earning of such income has to be allowed against the income which is earned and assessable under the provisions of section 56 of the Act. We also find that the National Stock Exchange exercised lien on FDRs of Rs. 5 crores on 23.07.2002 (p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . This ground was taken before the ld.CIT(A) who dismissed the ground by holding that the assessee was free to move an application u/s 154 of the Act before the AO and accordingly, claim the credit of TDS and thus dismissed the appeal of the assessee. The ld. AR submitted before us that the AO has not allowed the credit of TDS deducted on behalf of the assessee amounting to Rs. 38,79,584/-. At the time of hearing, the ld.AR submitted that the ld. CIT(A) also erred in directing the assessee to move an application u/s 154 of the Act instead of issuing direction to the AO to allow credit of TDS which was a legitimate claim to which the assessee was legally entitled. 10. On the contrary, the ld. DR relied heavily on the order of ld. CIT(A). 11. We have carefully considered the submissions of the parties, perused the material placed before us including the orders of authorities below. We find that the assessee has not been allowed credit of Rs. 38,79,584/- being TDS at source on behalf of the assessee by NSE/Banks and the ld. CIT(A) has just dismissed the ground by directing the assessee to file rectification application u/s 154 of the Act which is not correct in our view and hence we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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