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TMI Blog2024 (12) TMI 1085X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessment, the AO found that the assessee had claimed deduction of interest expenses of Rs. 1,33,67,138/- under Section 57 of the Income Tax Act, 1961 (in short 'the Act') against the interest income of Rs. 1,33,68,138/-. The claim of the assessee was examined by the AO in the course of assessment proceeding. It was found that the assessee had taken home loans, loan for financing of agricultural activities etc. and the total interest incurred on such loans was to the extent of Rs. 1,45,42,728/-.Out of this total interest expenditure, the assessee had claimed deduction of Rs. 1,33,68,138/- u/s. 57 of the Act, which was to the extent of interest income earned by the assessee. The AO held that the amount of loans on which the interest expenditure was incurred by the assessee, was not laid out wholly and exclusively for the purpose of earning of interest income. Therefore, he disallowed the entire claim of Rs. 1,33,68,138/- in respect of interest expenditure claimed u/s. 57 of the Act. The assessment was completed u/s. 143(3) of the Act on 21.11.2019 at total income of Rs. 2,39,87,284/-. 4. Aggrieved with the order of the AO, the assessee had filed an appeal before the First Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance. He submitted that the Ld. CIT(A) had allowed interest paid to HDFC in respect of amount ultimately advanced to Tripoli Management; the set off of which should be allowed from the opening balance amount as outstanding. 7. Per contra, Shri Aashish Rajesh Revar, Ld. Sr.DR supported the order of the Ld. CIT(A). He submitted that the Ld. CIT(A) had carefully examined the facts of the case and allowed relief to the assessee, wherever due. He submitted that interest payment of Rs. 52,36,850/- was confirmed by the Ld. CIT(A) for the reason that the assessee was unable to establish the nexus between the loans taken and the loans advanced by it. 8. We have carefully considered the rival submissions. It is found that the assessee had earned interest income of Rs. 1,33,68,138/- from Tripoli Management Pvt. Ltd. On the other hand, it had incurred interest expenditure of Rs. 1,45,42,728/- but the claim of deduction u/s. 57 of the Act was restricted to the extent of interest income earned i.e. Rs. 1,33,68,138/-. In order to claim deduction u/s. 57 of the Act, the assessee has to establish that the interest expenditure was laid out or expanded wholly and exclusively for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the share of the profit which is exempt in the hands of the appellant. Accordingly, the interest paid has no direct nexus with earning any taxable income and therefore I uphold the action of the AO to add back the interest paid of Rs. 34,56,149/- and Rs. 12,25,191/- to SBH and PNB respectively. 6.4 In view of the above discussion, I find that interest paid of Rs. 76,98,249/- + Rs. 4,33,039/-= Rs. 81,31,288/- to SBI and HDFC Banks are allowable. Further, interest paid of Rs. 17,30,100/- + Rs. 34,56,149/- + Rs. 12,25,191/-are disallowable. However, as the appellant has already restricted the interest paid of Rs. 1,45,42,728/- to an amount of Rs. 1,33,68,138/- the balance amount that is confirmed being disallowance of interest comes to Rs. 52,36,850/-. In a nutshell the AO is directed to delete the addition of Rs. 81,31,288/. Addition of Rs. 52,36,850/- made by him is confirmed. Ground of appeal 1 is partly allowed." 9. So far as the interest of Rs. 76,98,249/- paid on SBI loan is concerned, there is no dispute. The Ld. CIT(A) has given a finding that out of loan of Rs. 9.90 Crore taken from SBI on 31.05.2016, an amount of Rs. 9.79 Crore was transferred to Tripoli Management ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 and the amount of Rs. 5 crore was in turn advanced to Tripoli Management on the same day. Thus, the nexus of the loan amounts from SBH and PNB, which was initially advanced to Nandan Corporation and subsequently transferred from Nandan Corporation to Tripoli Management, is established to the extent of Rs. 5 crore advanced on 20/06/2016.Since the assessee had offered the interest derived from Tripoli Management to tax, it is entitled to claim deduction in respect of interest payment on loan amount of Rs. 5 crores for the period from 20/06/2016 to 31/03/2017. The assessee has submitted the working of interest on this loan of Rs. 5 crores for the period from 20/06/2016 to 31/03/2017 which works out to Rs. 36,58,096/-. We deem it proper to set aside the matter to the file of Jurisdictional AO with a direction to verify the working of interest on loan ofRs. 5 crores for the period from 20/06/2016 to 31/03/2017 and thereafter allow the deduction to the assessee. In case of any variation in the amount of interest, than the amount as worked out by the assessee, the AO should allow an opportunity of being heard to the assessee. 12. The finding of the Ld. CIT(A) in respect of LIC policy l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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