TMI Blog2023 (12) TMI 331X X X X Extracts X X X X X X X X Extracts X X X X ..... d a conclusive and reasoned order. Accordingly, we do not find any infirmity in the order of the CIT(A) on the disputed issues and uphold the same and dismiss the grounds of appeal of the revenue. - Shri Br Baskaran, Accountant Member And Shri Pavan Kumar Gadale, Judicial Member For the Appellant : Smt. Mahita Nair. Sr.DR For the Respondent : Shri. Madhur Agrawal. AR ORDER PER PAVAN KUMAR GADALE JM: The revenue has filed the appeal against the order of the National Faceless Appeal Centre (NFAC), Delhi /CIT (A) passed u/sec 250 of the Act. The revenue has raised the following grounds of appeal: 1 Whether on the facts and circumstances of the case, the Ld. CIT(A) erred in allowing the deduction claimed u/s. 57(iii) of Rs. Rs. 5,92,19,931/- ignoring the fact that the assessee has failed to establish nexus between the interest income earned and interest expenditure which is wholly and exclusively for the purpose of making or earning such interest income.? 2 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in allowing deduction on interest u/s 57(iii) of the Act on proportionate basis without the assessee pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uly considered but not found satisfactory. Therefore, vide order sheet nothings dated 09.12.2016, the authorized representative of the assessee was asked to justify interest expenses u/s. 57 by establishing the nexus between interest given and taken. In response to the same, the authorized representative of the assessee has filed the explanation vide letter dated 09.12.2016, the relevant portion of the same is reproduced as under: with regards to the interest claim w/s. 57(iii), we would like to state that as explained in the previous paragraph, the assessee company grants loan to various parties as and when any surplus/unutilized borrowed funds are available with them thereby earning interest income on the same. However, as it was virtually not feasible to work out the part of borrowed funds that was utilized for granting such loans exclusively, (due to the modus operandi of the business as such) the assessee company taking the base of the aforementioned formula for deduction u/s24(b)similarly determined the amount of deduction to be claimed u/s. 57(iii) of the Act as under: Total Interest Cost X Total Balance of Loan given as at 31.03.2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 016). It may also be appreciated that the assessee company has disallowed all the expenditure which is not attributable to the earning of income from house property and under other sources Thus, in nutshell only that portion of expenditure which is attributable to the earning of the incomes as referred above are claimed and no loss is claimed under the head of Income from business and profession Assessee's reply dated 21.12.2016: The assessee company has made investment in the Vi jay Wadhwa Associates during the F.Y.2012-13. As regards to source of investment, the assessee company had received the interest free loan from Raghuleela Leasing and Real Estates Pvt. Ltd of Rs. 48,39,35,954/on 18.09.2012 and from Tulsi Bhimjyani (L A other) of Rs. 32,00,00,000/- on 07.01.2013. The funds so received back was invested in Vijay Wadhwa Associates aggregating to Rs. 68,29,35,954/- on the same date on which the said funds were received. Copy of the fund flow statement is attached herewith for your ready reference evidencing the same(Annexure 1) Thus, it can very well be inferred that all the investments and advancing has been made out of the borrowed interest free and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the assessee has allocated funds for different projects and has claimed proportionate deduction of interest based on the percentage of barrowed funds with the total availability of funds. Further the allocation is based on the methodology considering the total assets and total liabilities and total interest cost. Whereas the assessee has claimed deduction of interest component from income from house property U/sec 24(b) of the Act and income from other sources U/sec 57(iii) of the Act in the ratio worked out relying on the Audited financial statements. The Ld. AR emphasized that the assessee has made substantial investments in the projects by obtaining barrowed funds and own surplus available funds. We found that the CIT(A) has dealt on the factual aspects, provisions and methodology consistently adopted by the assessee and at this juncture, we consider it appropriate to refer to the findings of the CIT(A) in granting relief to the assessee dealt at Page 9 Para 4.3 to 4.4.3 of the order as under: 4.3 I have considered the submissions of the appellant. Sec. 57(iii) of the Act states the nature of expenditure which is allowable to the appellant. It reads as under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the AO's observation that the current investments in M/s Vijay Associates (Partnership firm) in F.Y 2012-13 on which no interest expenses was claimed was repaid during the year. It has also been stated that this amount has been invested by way of loans of Rs. 69.50 crs. and so interest expenditure cannot be claimed. In this regard, I find the appellant's contention that it had not claimed any interest deduction in the preceding year owing to the fact that it had not received any interest from the partnership firm, to be a reasonable explanation. Once the funds. have subsequently been deployed in interest bearing advances, the appellant's claim that it stands entitled to deduction u/s. 57(iii) has a logical basis. In any case, as pointed out in the preceding para, the appellant has demonstrated that part of the borrowed funds had indeed been deployed in interest bearing loans/advances and that using a consistent methodology, it had also not claimed interest expenses of Rs. 2,97,90,455/- during the year under reference . 4.3.3 In view of the reasons above, I agree with the appellant that it is entitled to deduction u/s. 57(iii). The disallowance made by the AO of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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