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2017 (12) TMI 531

Addition on account of interest expense claimed against the interest income - assessee has earned interest income which was offered to tax under the head “income from other source” - whether the assessee is entitled for claiming the interest expense against the interest income ? - Held that:- It is undisputed fact that the loan was provided to the parties on interest and accordingly interest income was earned. Now the question arises whether the fund used by the assessee in providing loan was in .....

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defect in the manner in which interest expense was worked out against the interest income as adopted by assessee. Therefore, we are not inclined to adjudicate the same. In view of the above, we hold that is entitled to claim the interest expense against the interest income. We respectfully following the consistent view of the Tribunal decline to interfere with the order passed by the Ld. CIT(A) on this account and accordingly the ground taken by the Revenue is regretted. - ITA No. 1964-1965/Kol/ .....

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round raise by the Revenue reads as under:- 1. In the facts and circumstances of the assessee and in law, the CIT(A) has erred in restricting the interest expenditure to ₹ 36,39,402/- in view of the submissions of the assessee that since the source of expenditure for business as well as income from other source was out of common fund accordingly the calculation of expenditure on account of interest attributable to lending activities should be ass per manner provided in Rule 8D in spite of .....

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ss total income of ₹ 15,58,218/- only which is reflecting the income from interest. The assessee in its profit and loss account has claimed the interest expenses as detailed under : 1. Interest on Partners Capital ₹ 68,57,703.00 2. Bank interest ₹ 2577.00 3. Interest on the loan (others) ₹ 2,43,231.00 Total 71,00,934.00 The interest income was calculated by the assessee in the following manner. Gross interest income ₹ 51,97,621.00 Less Interest Expenses ₹ 36,3 .....

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herefore the expenses incurred in connection such interest income wholly and exclusively will be allowed as deduction under section 57(iii) of the Act. 3. The loan has been advanced only out of surplus fund which evidences no direct nexus between the interest income & expenses. 4. The basis adopted for the bifurcation/ computation of interest expenses as per rule 8D is not correct as it relates to dividend income. 5. The assessee did not borrow any money from its partners to lend it to other .....

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advance to the parties. Thus, it cannot be concluded that no cost was incurred by it on its interest income; d) As per the provision of Section 57(iii) of the Act the assessee is very much entitled to claim the deduction of the expenses incurred in relation to such interest income. The assessee further submitted that in similar facts and circumstances the Co-ordinate Bench of this Tribunal in the case of Burnie Braes Tea Co.(sister concern of assessee) vs. ITO in ITA No.1866-1867/Kol/2010 for A .....

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diture to ₹ 36,39,402/- attributable to the income from other sources. Accordingly, the appeal is allowed. The Revenue, being aggrieved, is in appeal before us. 8. Before us Ld. DR vehemently relied on the order of AO whereas Ld. AR before us filed paper book which is running from pages 1 to 34 and he reiterated the submissions which were made before Ld. CIT(A) and he relied on the order of Ld. CIT(A). 9. We have heard the rival contentions and perused the material available on record. In .....

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hat the loan was provided to the parties on interest and accordingly interest income was earned. Now the question arises whether the fund used by the assessee in providing loan was interest bearing or not. On perusal of the balance-sheet we find that assessee has been paying interest on the capital contributed by the partners to the firm as well as money borrowed by the firm from the outside. As the interest bearing fund has been advanced by the assessee to the parties to earn interest then in o .....

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ed in the form of interest against the impugned interest income. 9.2 Next question before us arises that how to compute interest expense qua to the interest income. In this regard, we find that the assessee has adopted the manner for making the disallowance of interest expense as provided under Rule 8D of I.T. Rules, 1962. Though prima facie we disagreed to the basis adopted by the assessee for claiming the interest expense qua the interest income. However, Ld DR before us has not brought any de .....

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