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TMI Blog2010 (5) TMI 712X X X X Extracts X X X X X X X X Extracts X X X X ..... istance of the learned Departmental representative we have gone through the record carefully. The assessee has filed her return of income on July 31, 2006 declaring an income of Rs. 13,35,054. On scrutiny of the return the learned Assessing Officer found that the assessee has declared income as under: (Rs.) Long-term capital gain 25,69,359 claimed exempt Short-term capital gain 5,20,417 Interest income from FDRs 23,06,662 Other interest 1,00,632 The assessee has claimed deduction of Rs. 14,92,657 on account of an interest paid to Canara Bank on overdraft limit taken by her for dealing in sale and purchase of shares. The Assessing Officer issued a show-cause notice to the assessee inviting her explanation as to why interest paid on overdraft limit and claimed against the interest income on fixed deposit receipt may not be disallowed in view of the Supreme Court's decision in the case of CIT v. Dr. V. P. Gopinathan [2001] 248 ITR 449 (SC). The assessee has filed a detailed reply which has been reproduced by the Assessing Officer. The learned Assessing Officer however disallowed the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the hon'ble Supreme Court in the case of CIT v. Dr. V. P. Gopinathan [2001] 248 ITR 449 (SC) wherein it has been held by the hon'ble Supreme Court that gross interest income is to be assessed and no deduction on account of interest paid on overdraft limit is to be allowed out of interest income earned from fixed deposit receipts. The interest paid can only be allowed deduction out of the business income earned from dealings in shares. After considering the reply filed by the assessee, the Assessing Officer disagreed with the same and by following the decision of Dr. V. P. Gopinathan [2001] 248 ITR 449 (SC) held that no deduction is allowable against the interest income earned by the assessee, while computing income earned from interest. The Assessing Officer further held that interest paid on overdraft limit against short-term/long-term capital gain also cannot be allowed as the assessee has not declared any business income from dealings in sale and purchase of shares. 5. Aggrieved by the above order, the assessee filed an appeal but without any positive results, so he is in further appeal before us. 6. It was contended by the learned authorised representative that the k ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rests'. This fact is mentioned on the relevant fixed deposit receipt. This fixed deposit was for Rs. 2,00,46,007.23 and its maturity value was Rs. 2,83,60,654.23, thus any credit entry in the corresponding overdraft account could be made only at the time of maturity of this fixed deposit and on maturity, the maturity value was credited by the bank to the corresponding overdraft account only. The assessee is ready to produce proof of credit of the maturity value of this fixed deposit to the corresponding overdraft account by the bank if so directed by the Bench. In respect of the FD No. FD/0233/2003, the assessee had opted for 'simple interest', that is why deposit and the maturity value both were at Rs.1,35,00,000. Thus, the bank has treated the relevant fixed deposits and their corresponding overdraft accounts as one account though they might have been written on different sheets of paper. In case of a loan for construction of house, the loan account and the fixed deposits account are altogether different accounts, this is common knowledge. 7. He also cited the decision of the hon'ble Gujarat High Court in the case of Smt. Jashvidyaben C. Mehta v. CIT reported at [1988] 172 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rce of investment has been given by the assessee. As per the learned Departmental representative, dividend and longterm capital gain are claimed exempt and therefore, the expenditure in relation to such investment is not allowable as per section 14A also. 10. We have considered the rival contentions, carefully gone through the orders of the authorities below and also deliberated upon the case law cited by the learned authorised representative and the learned Departmental representative and also referred to by lower authorities in their respective orders, in the context of factual matrix of the instant case. From the record, we found that the assessee was having interest income out of fixed deposit receipts. Against these fixed deposit receipts, the assessee has also taken overdraft limit which he has utilised for shares and securities. The interest paid on the overdraft limit has been claimed by the assessee out of the interest income earned on the fixed deposit receipts. There is no dispute to the well settled legal proposition that expenditure on account of interest can be allowed only against the source of income or earning of which the borrowed funds have been utilised. Merel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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