TMI Blog2019 (11) TMI 1076X X X X Extracts X X X X X X X X Extracts X X X X ..... ering the decision of Tuticorin Alkai Chemicals and Fertilizers Ltd. [ 2015 (10) TMI 22 - DELHI HIGH COURT] has held that where assessee having availed of loan from HSBC, advanced said amount to its holding company, i.e. SCL and since there was a direct nexus between earning of interest on loan advanced by assessee to SCL and payment of interest to HSBC on loan drawn in terms of sanction letter, assessee s claim for netting off of interest in terms of section 57 (iii) was to be allowed. The various other decisions relied by the ld. Counsel for the assessee also support his case that such interest expenditure has to be allowed as deduction from such interest income if such interest income is treated as income from other sources. We, therefore, hold that the assessee is entitled to netting of off interest expenditure and interest income. Even if the proposition laid down by the CIT(A) that principle of rejudicata is not applicable to the income tax proceedings is accepted, however, the rule of consistency has to be followed. Since the revenue in the preceding as well as subsequent years has accepted such netting off of interest expenses from such interest income, therefore, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eted the addition of ₹ 11,97,900/- on account of allocation of 10% employees cost to the Industrial park. He, however, noted that the assessee had claimed interest expenditure of ₹ 20,30,27,153/- against the interest income of ₹ 28,15,88,633/- which according to him was not in accordance with the provisions of law. He, therefore, issued an enhancement notice to the assessee asking him to explain as to why the income of the assessee should not be enhanced to this extent as the interest income has to be taxed under income from other sources since the interest expenditure on term loan taken from the bank is not an allowable expenditure against the interest income which is on account of loans given to related parties. 5. The assessee objected to the proposed enhancement notice on the ground that the same is beyond the jurisdiction of the CIT(A) since he cannot introduce a new source of income. It was argued that the interest income in the case of the assessee was taxable under the head business income. It was further argued that even if the interest income is taxable under the head income from other sources , the interest expenditure amounting to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s. 57 (iii) is concerned he also rejected the same by relying on the decision of Hon ble Supreme Court in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd. reported in 227 ITR 172 and various other decisions. He accordingly enhanced the income and directed the AO to compute the income of ₹ 28,15,89,000/- as against the returned income of ₹ 7,85,61,550/-. 9. Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds :- 1.1 That CIT(A) has erred on facts and in law in re-computing deduction u/s 80IA of the Act at ₹ 4,25,72,564 as against ₹ 24,56,00,048 claimed by the appellant in the return and allowed by the Assessing Officer at ₹ 24,44,02,148 in the assessment order dated 13.03.2015 U/s 143(3) of the Act. 1.2 That the Ld. CIT(A) has erred in reducing ₹ 20,30,27,153/- being interest from the income of industrial park eligible for deduction under section 80IA and, at the same time, computing taxable income from other sources (interest) at ₹ 28,15,89,000/- without allowing benefit of netting of interest. 1.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are dismissed. 12. So far as the ground No. 1.1 to 1.6 are concerned, the Ld. Counsel for the assessee referring to the paper book page no. 21 to 30 drew the attention of the bench to the form No. 10 CCB duly certified by the auditors and submitted that there is no claim of deduction u/s.80IA on such interest income and expenditure. Referring to page No.18 of the order of Ld. CIT(A) he submitted that in the earlier and subsequent years the interest income has been taxed as business income. Further the assessee itself has excluded both the interest income and interest expenditure. Therefore, it is not proper on the part of the CIT(A) to introduce a new source of income and issue the notice of enhancement. 13. Referring to the decision of the coordinate bench of the Tribunal in the case of LG Electronics India Private Limited Vs. ACIT vide ITA No.3612 3613/Del/2017 order dated 18.07.2018 for A.Y. 2005-06 and 2006-07, he submitted that the Tribunal relying on the decision of Hon ble Delhi High Court in the case of CIT Vs. Sardari Lal and Co. reported in 251 ITR 864 and the decision of the Pune Bench of the Tribunal in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- to the total income of the assessee. We find the Ld. CIT(A) deleted the above addition made by the AO but issued an enhancement notice to the assessee on the ground that assessee has claimed interest expenditure of ₹ 2030.27 lacs from the interest income of ₹ 2819 lacs is not in accordance with law. According to the CIT(A) the interest income ₹ 2815.89 lacs is required to be taxed under the head income from other sources and the assessee is not entitled to deduction u/s. 57 of the interest expenditure. While doing so he relied on the decision of the Hon ble Supreme Court in the case of Tuticorin Alkai Chemicals and Fertilizers (supra) and distinguished the decision of Hon ble Supreme Court in the case of Bokaro Steels Limited reported in 102 taxman.com 94. He also rejected the argument of the assessee that such interest was always treated as business income by the AO in the preceding and subsequent years on the ground that principle of re-judicata is not applicable to income tax proceedings and if the previous decision is plainly erroneous, it is the duty of the court to rectify it and not perpetuate the mistake. 16.1 It is the argument of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wings 20,30,27,153 Net Interest Income 7,85,61,480 From the above it is clear that there is a direct nexus between the interest income of ₹ 23.96 lakhs and interest expenditure of ₹ 20.30 lakhs. 19. We find the Hon ble Delhi High Court in the case of Vodafone South limited Vs. CIT (supra), after considering the decision of Hon ble Supreme Court in the case of Tuticorin Alkai Chemicals and Fertilizers Ltd. (supra) has held that where assessee having availed of loan from HSBC, advanced said amount to its holding company, i.e. SCL and since there was a direct nexus between earning of interest on loan advanced by assessee to SCL and payment of interest to HSBC on loan drawn in terms of sanction letter, assessee s claim for netting off of interest in terms of section 57 (iii) was to be allowed. 20. Similarly the Hon ble Delhi High Court in the case of PCIT Vs. Jubilant Energy Nelp V P Ltd. (supra) has held that where assessee paid interest to sister concern on money borrowed and subsequently it earned interest income on Inter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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