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2022 (7) TMI 376 - ITAT BANGALORERectification of mistake - Deduction u/s. 57(iii) - set off of interest paid with interest income - interest income earned on mutual funds that was offered to tax under the head 'Other Sources' - as submitted that the Petitioner had earned interest income from deposits made in the Capital Gains Account Scheme [CGDA] against which deduction was claimed for interest paid on loans availed from HSBC Invest Direct Financial Services [I] ltd and the same is also clearly brought out in the impugned order passed u/s. 263 - petitioner prayed that the Tribunal may be pleased to amend the order by holding that there was a direct nexus between the borrowed funds and the income earned from deposits made in the CGDA scheme and accordingly, the Petitioner is entitled to deduction u/s. 57[iii] of the Act, for the advancement of substantial cause of Justice - HELD THAT:- We find that there are certain errors in the orders of the Tribunal which is required to be corrected. Accordingly, para 34 of the order as modified - Unless funds are borrowed for making deposits to earn interest income, such interest paid on borrowings cannot be allowed as deduction in the computation of income from other sources, which in this case, is interest earned from CGDA Scheme. In the facts stated above, there is no doubt that the funds borrowed from HSBC Bank was used for investment to earn interest income in the CGDA Scheme. The assessee wants to set off the interest paid to HSBC Bank with interest earned from CGDA Scheme. As per section 54F of the Act, the whole consideration of capital asset to be used for deposit in CGDA Scheme. In the present case, the assessee diverted the sale consideration of capital asset in investment in mutual funds. However, the assessee borrowed money from HSBC Bank to make investment in CGDA Scheme. The funds which ought to have been used for investment in CGDA Scheme is the amount received on sale consideration of capital asset. Because the assessee has mis-used the sale consideration to invest in mutual fund, the self-made mistake cannot be a reason to set off the interest paid to HSBC Bank out of interest earned from CGDA Scheme. Therefore, in our opinion, there is no merit in the arguments of the assessee that interest paid to HSBC Bank is to be allowed as a deduction u/s. 57(iii) of the Act out of interest earned from CGDA Scheme. Accordingly, these ground of the assessee in both the appeals are dismissed.
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