TMI Blog2015 (8) TMI 1445X X X X Extracts X X X X X X X X Extracts X X X X ..... M.: This is an appeal filed by the Revenue against the order of CIT(A) dated 20th April, 2010 for the assessment year 2007-08, on the following grounds of appeal: i. On the facts and circumstances of the case, the Ld. CIT(A) has erred both fact and law in deleting an addition of ₹ 39,76,476/- on account of interest payment on borrowed funds and also deleting an addition of ₹ 10,03,861/- on account of various expenses incurred to earned under the head income from other sources as these expenses are not allowable expenditure under sub-section (iii) of Section 57 of the IT Act. ii. The ld. CIT(A) has ignored the decision of Gujarat High Court in the case of Smt. Padmavati Vs. Addl. CIT, Gujarat 166 ITR 176, where in the Hon b;e Court has held that where assessee declare income from other source interest on amount borrowed to pay annuity deposit is not allowable as deduction under sub-section (iii) of section 57 of the Income Tax Act, 1961. iii. The appellant craves leave for reserving the right to amend, modify alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal. 2. The brief facts of the case are that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 248 ITR 439 (SC) in which it has been held the interest, that the assessee received from the bank was income in his hands. It could stand diminished only if there was a provision in law which permits such diminution. There is none, and, therefore, the amount paid by the assessee as interest on the loan that he took from the bank did not reduce his income by way of interest on the fixed deposit placed by him in the bank .... In the case of Saluja Farms vs. CIT (2002) 254 ITR 172 (DEL), the Hon'ble Delhi High Court has held that Interest paid on money borrowed for personal purpose cannot be deducted from the interest earn by the assessee from fixed deposit in the bank on the grounds that for the borrowing the assessee would have liquidated the fixed deposits (carrying interest). The connection with the borrowing and fixed deposits is too remote. In the case of CIT vs Devraj (S) (1969) 73 ITR 1 (MADRAS) the Hon'ble Madras High Court has held that Section 57(iii) is though similar to section 37(i) but the scope of section 57(iii) is narrower than that of section 37(i) because unless the expenditure has been incurred wholly exclusively for the purpose of making or earni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he liquor business of the assesse in the Firms and AOPs. The claim of the expenses under other heads is also not acceptable in view of the facts that the assesse is having income from the share profit of Firms and AOPs which is exempt in the hands of the assesse, and income under the head business and profession and the income from short term capital also. Therefore, the claim of the assesse is disallowed, treating that these expenses have not been incurred to earn the income under the head income from other sources. Therefore, it is treated the same have been incurred either to earn the exempt income in the shape of share profit form Firms and AOPs or in connection with the transactions of income from short term capital gain. Therefore, the same is disallowed and added back to the income of the assesse. Penalty proceedings u/s 271(1)(c) read with explanation-1are also initiated separately. 4. Being aggrieved by the assessment order, an appeal was preferred before the CIT(A) who vide order dated 20th April, 2010 deleted the additions by placing reliance on the decisions of Hon ble Supreme Court in the case of SA Builders Ltd. Vs. CIT, 288 ITR 1 (SC); Seth R. Dalmia Vs. CIT, 110 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure of ₹ 10,03,860/-, the learned CIT(A) deleted the addition vide para 8, which is reproduced as under: After considering the observations made by the Ld. Assessing Officer as well as the factual submissions made by the Authorised Representative of the assessee and I have reached the following facts- (i) That the Assessing Officer has neither pointed out any defect in the books of the assessee nor has doubted the authenticity of the expenses either debited to the profit loss account of the assessee so much so it was pertaining to claiming deduction from the business receipts. (ii) That the assessing officer has not doubted the authenticity of various expenses claimed by the assessee as deduction u/s 57(iii) of the Act. The only objection of the assessing officer is that these expenses were not incurred wholly and exclusively for the purpose of earning income under the head income from other sources. (iii) That the assessing officer has not brought any cogent material on record, which could suggest that the expenses claimed by the assessee as deduction u/s 57(iii) of the Act were not incurred wholly and exclusively for the purposes of earning income und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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