TMI Blog2013 (10) TMI 1572X X X X Extracts X X X X X X X X Extracts X X X X ..... had advanced money to M/s. Tips Industries Ltd. on which it had earned interest income of Rs. 3,95,268/- during the year. The assessee had also borrowed a sum of Rs. 1.75 crore from M/s. Prachar Communications Ltd., on which it had paid interest of Rs. 17,50,000/- during the year. The entire money borrowed from M/s. Prachar Communication Ltd., has been utilized for the purpose of making payments for acquiring preferential allotment of shares of M/s. Tips Industries Ltd. The dividend income receivable if any from the shares of M/s. Tips Industries Ltd., is not chargeable to tax. However during the year the assessee had not received any dividend income. The assessee set off the interest paid on borrowings from M/s. Prachar Communication Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particular item of income from other source. It was argued that the borrowings had been used for acquisition of shares income from which was assessable as income from other source and, therefore, interest expenditure incurred had to be allowed against the interest income on advances given to M/s. Tips Industries Ltd. It was also submitted that though no dividend income had been received, earning of income was not necessary for allowability of expenditure as held by Hon'ble Supreme Court in case of CIT Vs. Rajendra Prasad Moody (115 ITR 519). Hon'ble Supreme Court in the said case held that in case the expenditure had been incurred wholly and exclusively for the purpose of earning income, the deduction has to be allowed even if no in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to correlate each item of expenditure to income earned. Therefore, if the expenditure had been incurred for earning income from other source and there is no actual earning of income, such expenditure can be allowed against any other item of income from other source. In our view, the arguments advanced are not relevant to the factual matrix of the present case. In this case, borrowings had been utilised for acquisition of shares, income from which is exempt from tax. Though no income from dividend had been actually earned during the year, the dividend income even if earned is not taxable. Therefore, in view of the provisions of section 14A interest expenditure which relates to tax free income is not allowable as deduction against any other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic head under section 14. Therefore, it is clear that if a particular income is to be excluded from total income, this has not to be considered as income under the head income from other sources . The income from shares which is in the form of dividend has to be excluded from total income whether earned or not and, therefore, such income cannot be considered as income from other sources. Therefore, the expenditure incurred on borrowings invested in shares cannot be considered while computing the income from other sources. 4.3 The judgment of Hon'ble Supreme Court in case of Rajendra Prasad Moody (Supra) relied upon by the learned AR is distinguishable and not applicable to the facts of the present case. In the said case it was held ..... X X X X Extracts X X X X X X X X Extracts X X X X
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