TMI Blog2019 (2) TMI 2034X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ramesh P. Bhatia as income from other sources, deduction has to be allowed in respect of interest payment on loan to M/s. Godrej Properties Ltd. to equal extent. In our opinion decision cited by learned CIT(A) in the case of Dr. V.P. Gopinathan [ 2001 (2) TMI 10 - SUPREME COURT ] is clearly distinguishable on fact and not applicable in the present case. In our view, the assessee has proved direct nexus between borrowings and lending. Therefore we are not in agreement with the conclusion of learned CIT(A). Accordingly we set aside the order of learned CIT(A) and direct the Assessing Officer to allow deduction in respect of interest paid u/s 57(iii) of the Act while assessing interest income as income from other sources. Assessee appeal all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ources , which was replied by the assessee vide written submissions dated 5.11.2015, wherein the assessee submitted that the assessee has given loans to two partners out of borrowings/loans from another partner i.e. M/s. Godrej Properties Limited. It was also submitted that cost of interest on such loan has been set off to the extent of Rs. 49,84,677/-from the interest received from the partners and hence the total finance cost of Rs. 1,69,92,681/- was reduced by the corresponding amount and thus capitalised net finance cost of Rs. 1,20,08,004/- instead of Rs. 1,69,92,681/-. However, reply of the assessee did not find favour of the Assessing Officer. He treated Rs. 49,94,677/- as income from other sources while the same amount was also c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers out of borrowings from another partner M/s. Godrej Properties Limited. Whatever interest income was received from the partners was set off against total interest expenditure and therefore net amount was capitalized in the work in progress account. Authorities below, came to the conclusion that such netting of interest is not permissible and accordingly assessed interest earned of Rs. 49,84,677/- as interest from other source and also correspondingly adding the said amount to the work-in-progress account. Learned AR contended before the Bench that since there is direct nexus between the borrowings and lending, said expenditure has to be allowed u/s. 57(iii) of the Act, which envisaged that where any expenses are wholly and exclusively in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said case money was borrowed and put into FDRs and money advances was out of borrowings made against security of FDRs by pledging FDRs so made. Learned AR therefore prayed that the order of learned CIT(A) may be set aside and the Assessing Officer may be directed to allow deduction u/s. 57(iii) of the Act while assessing interest income as income from other sources . 6. Learned DR heavily relied on the orders of authorities below and submitted that there is no nexus and therefore the order of learned CIT(A) needs to be affirmed. 7. After hearing both the parties and perusing the materials on records as placed before us including various documents filed by learned AR during the course of hearing, we observe that in this case there exi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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