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TMI Blog2009 (11) TMI 562X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction in the computation of income from other sources which in this case is interest earned on deposit. From the facts stated above, there can be no doubt that funds transferred from cash credit/packing credit are nothing but the assessee's amount credited in such account and not borrowed funds converted to deposit account by the assessee. - Decided in favor of revenue. - - - - - Dated:- 16-11-2009 - RAMACHANDRAN NAIR C. N., MOHANAN V. K. JJ JUDGMENT C. N. Ramachandran Nair J.- The question raised is whether the Tribunal was justified in granting deduction of estimated amount of expenditure against interest income received by the assessee during the previous year on term deposits. 2. We have heard the senior standin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the cash credit account, upon request by the assessee. Since cash credit account again is loan amount, the assessee's case is that deposits are made from out of borrowed funds and, so much so, interest paid on borrowals should be allowed to be set off against interest earned on deposits. In other words, the strange and unusual claim is that the assessee borrows funds at a higher rate of interest for making deposit with the same bank at much lower rate of interest. However, the certificate issued by the bank in para 5 states as follows : "We have extended the credit facility as export packing credit to procure raw materials to execute export orders. We have not granted any advances to the customer for the specific purpose of making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the packing credit account. It is immaterial whether at the time of transfer, there is credit balance or debit balance because it is up to the assessee to reckon pending bills and to request the bank to transfer from out of cash credit account/packing credit account to deposit account. However, this transaction should not be taken as a loan availed of by the assessee from the bank to make the deposit. Section 57(iii) provides for deduction of expenditure in the computation of income as follows : "(iii) any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning such income." 6. It is obvious from the above provision that unless funds are bor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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