TMI Blog2019 (11) TMI 802X X X X Extracts X X X X X X X X Extracts X X X X ..... rification, therefore, the matter in all fairness is restored to the file of the A.O - A.O shall in the course of the set aside proceedings afford a reasonable opportunity of being heard to the assessee who shall remain at a liberty to substantiate its claim as regards its eligibility towards claim deduction under Sec. 57(iii) of the Act Entitlement of the assessee towards claim of deduction of interest paid on the loan raised from its associate concern - HELD THAT:- A.R has filed before us a Chart , wherein it is claimed that the interest bearing loan received from M/s Skylark Buildcom Private Limited was advanced by way of interest bearing loans to its associate concerns during the year under consideration. As the claim of the assessee requires to be verified in the backdrop of the facts projected in the Chart filed by the assessee before us, therefore, in all fairness we restore the matter to the file of the A.O. The A.O is directed to verify the veracity of the claim of the assessee that the amount received by it as interest bearing loans from M/s Skylark Buildcom Private Limited was utilised for providing interest bearing advances to its associate concerns. In case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of the Assessing Officer for treating the whole interest income of ₹ 26,37,87,842/ - as income of your appellant and without giving any deduction of the expenses incurred by your appellant for earning said interest . 3. That the Commissioner of Income Tax (Appeals) has erred in law as well as under the circumstances of the case in confirming the order of the Assessing Officer in capitalizing the whole expenditure as part of work-in-progress in spite of the fact that your appellant has no project in its hand and no expenditure which is required to be incurred for carrying out construction activities have been incurred till the date of filing of this appeal . 4. That the Commissioner of Income Tax (Appeals) has erred in law as well as under the circumstances of the case in confirming the order of the Assessing Officer in treating the entire interest income as income from other sources instead of income from business. 5. That the Commissioner of Income Tax (Appeals) has erred in law as well as under the circumstances of the case in confirming the order of the Assessing Officer in not allowing any expenditure as business expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11.02.2011) from M/s Dewan Housing Finance Limited (for short DHFL ). As is prima facie discernible from the records, the aforesaid loan was raised by the assessee for a redevelopment project viz. project at Vile Parle, Premnagar CHS (Prop) located at Irla Tank Plot, S.V. Road, Vile Parle (West), Mumbai 400 058. The loan was raised from DHFL against hypothecation of the aforesaid project property, which as stated by the assessee is owned by M/s Sigtia Construction Pvt. Ltd. Out of the loan of ₹ 184 crores raised by the assessee from DHFL, an amount aggregating to ₹ 183,81,00,000/- was advanced to two of its associate concerns viz. (i) M/s Sahana Construction Pvt. Ltd : ₹ 179,81,00,000/- ; and (ii) M/s Sigtia Construction Pvt. Ltd. : ₹ 4,00,00,000/-. As per the balance sheet for the year ended 31.03.2011 the amount receivable by the assessee from the aforementioned two associate concerns was reflected in its books of accounts , as under:- S.No. Loans and Advances to Related parties Amount 1. M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te approvals within the agreed time frame, the assessee as per the terms of the MOU was entitled to charge interest @16.25% from the date the money was advanced to M/s Sigtia Construction Pvt. Ltd. (iv) During the immediately preceding year i.e. A.Y. 2011-12 the assessee had earned interest aggregating to ₹ 4,35,52,093/- on the money advanced to the aforesaid two concerns viz. (i). M/s Sahana Construction Pvt. Ltd. : ₹ 4,26,34,175/-; and (ii). M/s Sigtia Construction Pvt. Ltd. : ₹ 9,17,918/- The assessee after setting off the interest of ₹ 4,14,20,434/- that was paid to DHFL against the interest income of ₹ 4,35,52,093/- had filed its return of income for A.Y. 2011-12, declaring its total income at ₹ 64,355/- under the head Income from business . Return of income filed by the assessee was summarily accepted, vide intimation under Sec. 143(1), dated 07.01.2012. 4(i) Further, the assessee during the year under consideration i.e A.Y. 2012-13 had on 13.10.2011 also entered into a MOU with its another associate concern i.e. M/s Sahana Builders and Developers Pvt. Ltd. for jointly commencing construction of the la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 75,00,00,000/- 4. M/s Shree Vrunda Enterprise ₹ 7,00,00,000/- 5. M/s Pawansut Realtors Pvt. Ltd. ₹ 400/- Total Rs, 85,35,75,400/- (iii) The assessee had during the year i.e. F.Y. 2011-12 also raised an interest bearing loan of ₹ 17,29,26,728/- from its associate concern i.e. M/s Skylark Buildcon Pvt. Ltd. (iv) That during the year under consideration i.e. F.Y. 2011-12 the assessee had paid interest aggregating to ₹ 30,47,50,567/- on the interest bearing loans raised by it from viz. (i). DHFL :₹ 29,90,00,000/-; and (ii). M/s Skylark Buildcon Pvt. Ltd. : ₹ 57,50,567/-. Out of the aforesaid amount of interest expenditure, a sum of ₹ 4,34,10,584/- which was attributable to the amount given by the assessee by way of earnest money deposits towards its capital asset commitment to M/s Sahana Builders and Dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... V Road, Vile Parle (West), Mumbai-400 058 was furnished as the primary security for availing of the aforesaid loan by the assessee from DHFL. On being confronted with the aforesaid facts as were discernible from a perusal of the loan application form, it was submitted by the assessee that the interest expenditure pertaining to the amounts which were utilized for the respective projects was capitalized and not claimed as an expense in the return of income for the year under consideration. Apart there from, it was brought to the notice of the A.O that the loan was raised for the project of M/s Sigtia Construction Pvt. Ltd. and the said project property i.e land was given as a security for facilitating availing of the said loan. It was further clarified by the assessee that there were no projects in its hands till date. 6. The A.O after deliberating on the contentions advanced by the assessee in the backdrop of the material available on record ,was of the view, that as the loan was sanctioned by DHFL for its business purposes i.e. for the purpose of project construction, therefore, the deduction for the interest paid on such loan would be allowable under the head Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d business loan advanced to the assessee by DHFL could only have been allowed as a deduction under Sec. 36(1)(iii) while computing the income of the assessee under the head Profit and Gains from business/profession ;(iii) that, as the revenue earning from the project had yet not commenced, therefore, the expenses incurred by the assessee on the project were to be capitalized as pre-operative expenses for which deduction would be allowed as per the I.T. Act, as and when income referred to in Sec. 28 was available for computation under the head Profit and Gains from business/profession , and till such time, the balance interest expenses of ₹ 26,13,39,983/- and other expenses were to be capitalized; (iv) that, as the assessee which was engaged in the business of construction was not into the business of money lending or financing business, therefore, the interest income of ₹ 26,37,87,842/- earned on the amount given as loan and advance by the assessee to its associate concerns was taxable under the residuary head i.e. income from other sources ; (v) that, the advancing of the business loan raised by the assessee to its associate concerns was akin to parking the surplus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions advanced by the assessee did not find favour with the same. It was observed by the CIT(A), that the loan of ₹ 184 crores raised by the assessee from DHFL was mainly advanced by it to its associate concern viz. M/s Sahana Construction Pvt. Ltd. in the immediately preceding year i.e. A.Y. 2011-12. Accordingly, it was observed by the CIT(A), that the loan received by the assessee from DHFL for undertaking the construction activity of its project was not utilized for its business purpose and was rather diverted by way of loans and advances to its associate concern viz. M/s Sahana Construction Pvt. Ltd. It was further observed by the CIT(A), that as the assessee was not engaged in the business of money lending or financing, therefore, its claim that the interest received on the loans/advances given to its associate concerns was in the normal course of its business could not be accepted. As such, the CIT(A) concurred with the view taken by the A.O that the interest income was liable to be assessed in the hands of the assessee under the head income from other sources . Insofar the claim of the assessee for allowing of deduction of the interest expenditure of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly those expenditures which were laid out or expended wholly and exclusively for the purpose of making or earning such income were to be allowed as a deduction. Accordingly, it was observed by him, that the scope for allowability of expenses as a deduction under Sec. 57(iii) was very narrow in comparison to the deductions eligible under Sec. 37(1). It was observed by the CIT(A) that as the assessee after raising the loan of ₹ 184 crores from DHFL for undertaking the construction activities of its business as a builder and developer, had however, utilized the said borrowed funds for providing interest bearing loans and advances to its associate concerns, therefore, the interest paid on the loan raised from DHFL could not be held to have been laid out or expended for earning the interest income. Accordingly, it was observed by the CIT(A) that as there was no direct nexus between the amounts borrowed by the assessee from DHFL and the sum advanced to the associate concerns, therefore, the interest paid to DHFL was not eligible for deduction under Sec. 57(iii) for earning of interest income on the loans and advances that were given by the assessee to its associate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 13.10.2011 with M/s Sigtia Construction Pvt. Ltd. and M/s Sahana Builders and Developers Pvt. Ltd., respectively, wherein it had expressed its interest to become a joint venture partner in the respective redevelopment projects of the said associate concerns. It was submitted by the Ld. A.R that as the requisite approvals from the appropriate authorities could not be obtained by the aforementioned associate concerns, therefore, the said respective MOU s were thereafter cancelled at the instance of the assessee, vide its respective letters dated 03.05.2012 and 05.07.2012, and the refund of the amounts advanced to the said respective concerns was sought by it. The Ld. A.R taking us through Page 10 of the assesses paper book (for short APB ) submitted, that the associate concern of the assessee viz. M/s Sigitia Construction Pvt. Ltd. was the developer of the redevelopment project at Vile Parle, Prem Nagar CHS (prop). It was submitted by the Ld. A.R, that the assessee had during the year under consideration given an amount aggregating to ₹ 94,12,62,248/- towards its capital assets commitment to the aforementioned parties viz.(i) M/s Sigtia Construction Pvt. Ltd. : ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... objects could enter into any arrangement for sharing profits, union of interest, co-operation, joint venture or reciprocal concession with any person, firm or company carrying on or engaged in any business or transaction which the company is authorized to carry on. Further, the Ld. A.R took us through Clause 21 and Clause 22 of the MOA , as per which the assessee as per the said objects could negotiate loans and lend and advance money or give credit to such persons, firms, companies and other entities and on such terms, with or without security and/or interest, as may be thought fit, and particularly to customers or other persons or corporation having dealing with the company. In the backdrop of the aforesaid objects of the assessee company, it was submitted by the Ld. A.R that the assessee in the course of its business was vested with a right to enter into a joint venture and also advance interest bearing funds to third parties. Apart there from, it was submitted by the Ld. A.R, that on the basis of the fact that more than 90 percent of the assets of the assessee company were advanced as loans and advances and 100 percent of its income was from the interest received on the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was submitted by the Ld. A.R that though the assessee company had raised the loan of ₹ 184 crores from DHFL for construction of the redevelopment project of M/s Sigtia Construction Pvt. Ltd. at Vile Parle, Prem Nagar CHS (prop), however, the said purpose of loan was irrelevant for deciding the allowability of deduction of the interest paid on the said loan which was utilized for advancing interest bearing loans and advances to the associate concerns. The Ld. A.R also in support of his contention that the purpose for which loan was raised is irrelevant, and all that the assessee has to show is that the borrowed funds were used for its business purpose in the relevant year, therein relied on the judgment of the Hon ble High Court of Bombay in the case of CIT Vs. Srishti Securities Pvt. Ltd. (2010) 321 ITR 498 (Bom). Also, reliance was placed by the Ld. A.R on the order of the ITAT, Mumbai C Bench in the case of Chhaganlal Khimji Co. Pvt. Ltd. Vs. ACIT (ITA No. 7629/Mum/2013, dated 23.09.2015). Further, the Ld. A.R relied on the judgment of the Hon ble High Court of Bombay in the case of CIT Vs. Lok Holdings (2009) 308 ITR 356 (Bom). The Ld. A.R taking us t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d stock broker, the Hon ble High Court in the aforesaid case had observed, that it could safely be concluded that the substantial part of the companies business consisted of money lending business. It was submitted by the ld. A.R, that on the aforesaid basis the Hon ble High Court had concluded that as the assessee before them was carrying on money lending business, therefore, the loan advanced by the company to its shareholder could not be taxed as deemed dividend under Sec. 2(22)(e). Also, reliance was placed by the Ld. A.R on the judgment of the Hon ble High Court of Bombay in the case of CIT Vs. Parle Plastics Ltd. Anr. (2011) 332 ITR 63 (Bom). The Ld. A.R taking us through the facts involved in the case before the Hon ble High Court submitted, that as 42 percent of the total assets of the company as on 31.03.1996 and 39 percent of its total assets on 31.03.1997 were deployed in loans and advances, and the assessee company except for interest income had suffered losses, therefore, in the backdrop of the said facts it was concluded by the Hon ble High Court that the company was substantially involved in money lending business. 10. Per contra, the Learned Depar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its associate concerns towards its capital asset commitment i.e for the period for which the said amount was advanced during the year, therefore, the CIT() was in error in observing that the quantification of such interest expenditure was not properly done by the assessee @16.25% p.a i.e the rate of interest at which funds were borrowed from DHFL. Also, it was submitted by the ld. A.R that the aforesaid observations as regards infirmity in interest attributable to the funds given to the associate concerns towards capital asset commitment were drawn by the CIT(A) without affording any opportunity of being heard to the assessee. 12. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements relied upon by them. Our indulgence in the present appeal has been sought by the assessee for adjudicating three issues viz. (i) that, as to whether the interest income received by the assessee on the amounts advanced to its associate concerns is to be assessed as its business income or as its income under the head other sources ; (ii) that, as to whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment of its main object and cannot exist on a standalone basis. In other words, incidental objects cannot be divorced from the main object of the company and considered in isolation. As in the case before us, the assessee company had not yet commenced its business of a builder, developer and trading in residential, commercial and industrial properties as provided in its main object, therefore, we are not inclined to accept the claim of the ld. A.R that the business of the assessee was to be taken as having been commenced. Accordingly, we reject the claim of the ld. A.R that the business of the assessee had commenced during the year under consideration. 14. We shall now advert to the reliance placed by the ld. A.R on the judgments of the Hon ble High Court of Bombay in the case of CIT vs. Jayanth H. Modi (2015) 232 Taxman 337 (Bom) and CIT vs. Parle Plastics Ltd. Anr. (2011) 332 ITR 63 (Bom) . Ld. A.R by drawing support from the aforesaid judicial pronouncements had tried to impress upon us that as the total income of the assessee during the year comprised of the interest income received from its associate concerns and 90% of its total funds had been utili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. (1999) 236 ITR 315 (SC) . We have given a thoughtful consideration to the aforesaid claim of the ld. A.R and find the same to be absolutely misconceived and misplaced. In the case before the Hon ble Apex Court in Bokaro Steel Ltd. (supra), it was observed, that as the amounts received by the assessee company prior to its commencement of business from viz. letting out quarters to employees of contractors who were engaged in construction of assesse s plant, hire charges for letting out plant and machinery to contractors, interest on amounts advanced to them and royalty received from them for allowing excavation of stones etc. were all intrinsically connected with the construction activity, therefore, the same were in the nature of capital receipts which had gone to reduce the cost of construction of the project and were to be adjusted against the charges payable to the contractors that were capitalized as pre-operative expenses. Now, in the case of the assessee before us, as the interest income received by the assesse from its associate concerns is in no way linked with any project of the assesse, therefore, the said judgment would not assist its case. Accordingly, the aforesa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accordingly, in the backdrop of the observation that the assessee company had raised a loan from DHFL for its project, that the lower authorities had thereafter concluded that the interest paid on the said loan was to be treated as a pre-operative expense which was to be capitalized and was to be allowed as a deduction under Sec. 36(1)(iii) after there was inflow of revenue from the said project. As observed by us herein above, it was the claim of the assessee before the lower authorities that the loan was raised for the redevelopment project at Vile Parle, Prem Nagar CHS (proposed) which belonged to its associate concern i.e. M/s Sigitia Construction Pvt. Ltd. In other words, it has been the claim of the assessee that M/s Sigitia Construction Pvt. Ltd. was the developer of the aforesaid redevelopment project at Vile Parle, Prem Nagar CHS (prop), and the assessee company had neither carried out any project since its incorporation nor was having any project in hand till date. In the course of hearing of the appeal, the ld. A.R had drawn our attention to the fact that it was specifically claimed by the assessee before the lower authorities viz. (i). that, the loan was taken by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt project at Vile Parle, Prem Nagar CHS (proposed) (against the hypothecation of the land of the said project). (Page 10 of APB ). Apart there from, the letter dated 25.01.2017 of the Deputy Chief Engineer, Slum Rehabilitation Authority, Mumbai (Page 10-23 of APB), which is addressed to the developer of redevelopment project at Vile Parle,Prem Nagar CHS (prop.) viz. M/s Sigitia Construction Pvt. Ltd. also inspires some confidence as regards the claim of the assessee that the redevelopment project at Vile Parle, Prem Nagar CHS (prop) belonged to M/s Sigitia Construction Pvt. Ltd. 17. As observed by us hereinabove, in case if the redevelopment project at Vile Parle, Prem Nagar CHS (prop) belongs to M/s Sigtia Construction Pvt. Ltd., then, in our considered view, the observations of the lower authorities that the interest paid by the assessee on the loan raised for the aforesaid project viz. redevelopment project at Vile Parle, Prem Nagar CHS (prop) was to be treated as pre-operative expense which was to be capitalized and thereafter to be allowed as a deduction under Sec. 36(1)(iii) after there was inflow of revenue from the said project in the hands of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the conclusion drawn by the lower authorities that the interest expenditure was to be capitalized as a preoperative expense which would thereafter be allowed as a deduction u/s 36(1)(iii) to the assessee after there was inflow of revenue from the said project, would be beyond comprehension if it is established that the project for which loan was raised by the assessee viz. redevelopment of Vile Parle Premnagar CHS Ltd.(proposed) at Irla Tank Plot, S.V Road, Vile Parle (west), Mumbai, belonged to M/s Sigtia Construction Pvt. Ltd. i.e an associate concern of the assessee and not to the assessee. We are afraid that as the view arrived at by the lower authorities is apparently nothing short of being based on incomplete and distorted facts, therefore, we are unable to persuade ourselves to subscribe to the same. 18. It is in the backdrop of the aforesaid facts, that we shall now deliberate on the reliance placed by the lower authorities on the judgment of the Hon ble Supreme Court in the case of Tuticorin Alkali Chemicals Fertilizers Ltd. Vs. CIT (1997) 227 ITR 172(SC) . We may herein observe, that the way the lower authorities had projected the facts of the case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... machineries even before the commencement of the business of the assessee. Accordingly, it was in the backdrop of the aforesaid facts, wherein the assessee who had raised term loans from bank for setting up its factories, and had thereafter earned interest on the surplus amount (out of the borrowed funds) that were not immediately required by it and had been deposited with the banks, that the Hon ble Apex Court had concluded that the Interest received was to be assessed under the head other sources and the interest paid on the borrowed funds was to be capitalised as preoperative expense. Now, in the case of the assessee before us, in case the project viz. redevelopment project at Vile Parle, Prem Nagar CHS (prop) for which loan was raised from DHFL belongs to the assessee, then it would stand squarely covered by the aforesaid judgment of the Hon ble Apex Court in the case of Tuticorin Alkali Chemicals Fertilizers Ltd. (supra). But as observed by us hereinabove, it is the claim of the assessee that the aforesaid project belongs to its associate concern viz. M/s Sigitia Construction Pvt. Ltd. If that be so, then we are afraid, that the facts of the case woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nse should have been incurred for the purpose of making or earning such income; (iii). that, as the assessee had raised the loan from DHFL for undertaking the construction activities of its business as builders and developers, therefore, the interest paid on such loan funds which had been utilised by the assessee for advancing interest bearing loans to its associate concerns cannot be set off against the interest income received therefrom; and (iv). that, the assessee had failed to prove a direct nexus between the borrowings and the amounts advanced to the associate concerns. Also, the CIT(A) after deliberating on the facts of the case, was of the view, that as there was only a rotation of funds from one associate company to another which includes the interest bearing loans given and non-interest bearing loans/advances/capital advances, therefore, the interest paid on loan to DHFL cannot be held as having a nexus with the loans/advances on which interest income had been earned by the assessee company. Accordingly, the CIT(A) was of the view that as the assessee had failed to establish a nexus between the interest bearing borrowed funds with the interest bearing loans and advances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is fortified by the judgment of the Hon ble Supreme Court in the case of Tuticorin Alkali Chemicals Fertilizers Ltd. Vs. CIT (1997) 227 ITR 172(SC). (B). SITUATION 2 : If pursuant to the verifications carried out by the A.O in the course of the set aside proceedings, it emerges, that the claim of the assessee is found to be in order and the aforesaid project viz. redevelopment project at Vile Parle, Prem Nagar CHS (prop) belongs to M/s Sigitia Construction Pvt. Ltd., then in the absence of any such project in the hands of the assessee, the Interest paid by the assessee on the loan raised from DHFL cannot be capitalised as a pre-operative expense for being allowed as a deduction u/s 36(1)(iii) to the assessee after there is inflow of revenue from the said project. It is in context of this situation, that we shall now deliberate on the allowability of the assesses alternative claim for deduction u/s 57(iii) of the Interest paid to DHFL as against the Interest received from the associate concerns on the amounts advanced to them. 21. We shall now proceed with our observations, which as stated by us hereinabove would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taking the construction activities of its business as builders and developers cannot be sustained. 22. We may herein observe that for allowability of an assesses claim for deduction of an expenditure u/s 57(iii) what would be relevant is not the purpose of which the loan was raised, but in fact, if the incurring of the expenditure can be related to the purpose of making or earning of such income then the expenditure so incurred would be allowable as a deduction while computing the income of the assessee under the head Other sources . An analogy can be drawn from the judgment of the Hon ble Supreme Court in the case of India Cement Ltd. Vs. CIT (1966) 60 ITR 52 (SC) for supporting our aforesaid view, that the purpose for which a loan is raised would not be relevant but it is the purpose for which the loan has actually been utilised that would be relevant. Now, this takes us to the second aspect i.e as to whether is there a nexus existing between the interest bearing borrowed funds raised by the assessee from DHFL and the interest bearing amounts advanced to the associate concerns. We may herein observe that a perusal of the balance sheet of the assessee compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the associate concerns to whom interest bearing loans were given cannot be safely gathered from the records before us, and would require verification, therefore, the matter in all fairness is restored to the file of the A.O. As observed by us hereinabove, if in the course of the set aside proceedings, it emerges, that the aforesaid project viz. redevelopment project at Vile Parle, Prem Nagar CHS (prop) for which loan was raised by the assessee from DHFL belongs to M/s Sigitia Construction Pvt. Ltd. and not to the assessee, then the A.O shall verify as to whether the requisite conditions envisaged in Sec. 57(iii), therein making the assessee eligible to claim deduction of the Interest paid on the loans raised from to DHFL against the Interest income received from the associate concerns are satisfied or not. Needless to say, the A.O shall in the course of the set aside proceedings afford a reasonable opportunity of being heard to the assessee who shall remain at a liberty to substantiate its claim as regards its eligibility towards claim deduction under Sec. 57(iii) of the Act. Also, we may herein observe, that as the view taken by the CIT(A) that the assessee had suppressed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee for earning of Interest income , therefore, the same would not fall within the realm of the deductions envisaged in Sec. 57(iii) of the Act. Accordingly, finding no infirmity in the order of the CIT(A), we uphold the disallowance of the aforesaid expenses. 25. Resultantly, in terms of our aforesaid observations the matter is restored to the file of the A.O. As observed by us hereinabove, the A.O shall in the course of the set aside proceedings, after making necessary verifications, as he may deem fit, therein adjudicate upon four issues viz. (i). that, as to whether the aforesaid project viz. redevelopment project at Vile Parle, Prem Nagar CHS (prop) belongs to M/s Sigitia Construction Pvt. Ltd. or to the assessee; (ii). that, if in the course of the set aside proceedings, it emerges, that the aforesaid project viz. redevelopment project at Vile Parle, Prem Nagar CHS (prop) for which loan was raised by the assessee from DHFL belongs to M/s Sigitia Construction Pvt. Ltd. and not to the assessee, then the A.O shall verify as to whether the conditions envisaged in Sec. 57(iii) making the assessee eligible to claim deduction of the Interest paid on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t your appellant has no project in its hand and no expenditure which is required to be incurred for carrying out construction activities have been incurred till the date of filing of this appeal. 4. That the Commissioner of Income Tax (Appeals) has erred in law as well as under the circumstances of the case in confirming the order of the Assessing Officer in treating the entire interest income as income from other sources instead of income from business. 5. That the Commissioner of Income Tax (Appeals) has erred in law as well as under the circumstances of the case in confirming the order of the Assessing Officer in not allowing any expenditure as business expenditure including claim of payment of interest u/s. 36(1)(iii) or u/s. 37(1) of the Income Tax Act. 6. Without prejudice of above, the Commissioner of Income Tax (Appeals) has erred in law as well as under the circumstances of the case in confirming the order of the Assessing Officer in not allowing deduction u/s. 57(iii) of the Income Tax Act, 1961 in respect of expenditure incurred in earning the interest income. 7. That the Commissioner of Income Tax (Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the interest income of ₹ 29,92,92,585/- received by the assessee. Accordingly, the A.O assessed the income of the assessee at ₹ 29,92,92,585/- as against its returned income of ₹ 78,010/-. 29. Aggrieved, the assessee carried the matter in appeal before the CIT(A). However, the CIT(A) observing that the facts and the issue involved in the appeal remained the same as were there before him in the case of the assessee for the immediately preceding year i.e. A.Y. 2012-13, upheld the order of the A.O and dismissed the appeal. 30. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. We find that as the facts and the issue involved in the present appeal remains the same as were there before us in the appeal of the assessee for the immediately preceding year i.e. A.Y. 2012-13 in ITA No. 317/Mum/2019, therefore, our order therein passed shall apply mutatis mutandis for disposal of the present appeal of the assessee for A.Y. 2013- 14 in ITA No. 318/Mum/2019. 31. The appeal of the assessee is partly allowed for statistical purposes in terms of our aforesaid observations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under the circumstances of the case in not considering the evidences filed by way of affidavit along with necessary documentary proofs while deciding the above matter. 8. That the Commissioner of Income Tax (Appeals) has erred in law as well as under the circumstances of the case in not considering the decision of the Hon ble Supreme Court in the case of India Cement Ltd. 60 ITR 52 (SC) referred to by your appellant which held that interest on borrowed money be allowed on the basis of its usages and not on the basis of object for which the money is borrowed. The assessee company had filed its return of income for A.Y. 2014-15 on 30.09.2014, declaring a loss of ₹ 1,51,050/-. Assessee during the year under consideration had earned interest income aggregating to ₹ 26,84,76,642/- on the interest bearing loans which were advanced by it to its various associate concerns. Further, during the year under consideration, the assessee had paid interest amounting to ₹ 26,87,26,798/- on the interest bearing loans which were raised by it from DHFL and its associate concern i.e. M/s Skylark Buildcon (P.) Ltd. Accordingly, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances of the case in confirming the version of the Assessing Officer that your appellant is having project in hand. 2. That the Commissioner of Income Tax (Appeals) has erred in law as well as under the circumstances of the case in confirming the order of the Assessing Officer for treating the whole interest income of ₹ 29,92,92,585/- as income of your appellant and without giving any deduction of the expenses incurred by your appellant for earning said interest. 3. That the Commissioner of Income Tax (Appeals) has erred in law as well as under the circumstances of the case in confirming the order of the Assessing Officer in capitalizing the whole expendi ture as part of work-in-progress in spite of the fact that your appellant has no project in its hand and no expenditure which is required to be incurred for carrying out construction activities have been incurred till the date of filing of this appeal. 4. That the Commissioner of Income Tax (Appeals) has erred in law as well as under the circumstances of the case in confirming the order of the Assessing Officer in treating the entire interest income as income from othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee formed part of the cost of its project which had yet not commenced, therefore, he capitalized the same as a part of the project cost. As such, the A.O assessed the interest received by the assessee amounting to ₹ 28,54,71,491/- as its income from Other sources , and declined its claim of deduction of the interest paid on loans amounting to ₹ 29,85,08,798/- and other expenses of ₹ 31,70,760/- against the aforesaid interest income of ₹ 28,54,71,491/-. Accordingly, the A.O assessed the income of the assessee at ₹ 28,54,71,491/- as against its returned loss of ₹ 1,35,11,379/- 39. Aggrieved, the assessee carried the matter in appeal before the CIT(A). However, the CIT(A) observing that the facts and the issue involved in the present appeal remained the same, as were there before him in the case of the assessee for A.Y. 2012-13, upheld the order of the A.O and dismissed the appeal. 40. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. We find that as the facts and the issue involved in the present appeal remains the same, as were there before us in t ..... 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