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Income Tax Officer Versus M/s Borojalingh Tea Co.

2017 (12) TMI 531 - ITAT KOLKATA

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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ch entitled to claim the expense incurred in the form of interest against the impugned interest income. - Computation of interest expense qua to the interest income - Held that:- 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 .....

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2014 - Dated:- 6-12-2017 - Shri Waseem Ahmed, Accountant Member And Shri S. S. Viswanethra Ravi, Judicial Member By Assessee : Shri Raj Kumar Patadi, FCA By Revenue : Shri Arindam Bhttacherjee, Addl. CIT-DR ORDER Per Waseem Ahmed, Accountant Member These two appeals by the Revenue are directed against the different order of Commissioner of Income Tax (Appeals)-XX, Kolkata of even date 01.07.2014. Assessment was framed by ITO Ward-34(1), Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter .....

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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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partnership firm and engaged in the business of growing and manufacturing tea under the trade name Borojalingah Tea Company. Besides the income from tea business, the assessee is also deriving interest income from money lending activity. The interest income was classified under the head income from other sources. 6. The assessee declared its income from tea business for ₹ 49,69,948/- for which deduction of the same amount was claimed under section 80IE of the Act. The assessee declared gro .....

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9,403.00 ₹ 15,58,218.00 The assessee computed the amount of interest expenses in the manner as provided in Rule 8D of Income Tax Rule. 1962. In this regard, the assessee submitted that the surplus fund available to the assessee firm was advanced to various parties with a view to earn interest income on the surplus fund. In-fact, the surplus fund is representing the capital of the firm which belongs to the partners of the firm. The partners of the firm are being paid interest on the amount .....

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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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the interest income. 7. Aggrieved, assessee preferred an appeal to Ld CIT(A).The assessee before LD. CIT(A) submitted as under:- a) The assessee is engaged in tea business as well as for providing loan to the parties; b) The assessee has been providing loan to the parties on interest on regular basis. Therefore, the lending activity was not in the nature of investment of any temporary surplus fund; c) The fund available with the assessee was interest bearing funds which were used to provide the .....

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ssessment Years 2005-06 & 2006-07 dated 31.10.2011, has decided the identical issue in favour of assessee. Ld. CIT(A) after considering the submissions of assessee and the order of Co-ordinate Bench has deleted the addition made by the AO by observing as under:- …. .. After going through the facts and circumstances of the case and also the submission of the appellant, I find merit in their argument, therefore, after considering the argument (supra) and also the case law relied upon, t .....

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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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med interest expense against the interest income. 9.1 However, AO was of the view that surplus fund has been utilized for the purpose of earning interest income and therefore there is no question of claiming any expenditure against such interest income. However, Ld. CIT(A) reversed the order of AO. Now, the question before us arises so as to whether the assessee is entitled for claiming the interest expense against the interest income in the given facts and circumstances. It is undisputed fact t .....

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ur considered view the interest paid qua to the interest income was very much eligible for deduction u/s 57(iii) of the Act. In holding so, we also find support and guidance from the order of this Co-ordinate Bench, in the case of Burnie Braess Tea Co. (supra) where the Tribunal has held:- … … In view of these facts we cannot accept the plea of assessee that this interest income is business income s declared by assessee, but this is interest income and lower authorities have rightl .....

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