9911796707
TMI Blog2009 (11) TMI 562X X X X Extracts X X X X X X X X Extracts X X X X ..... ous year relevant to the assessment year 2001-02, the assessee received an amount of Rs. 69,87,702 towards interest on various term deposits. However, the assessee did not offer the entire income for the purpose of levy of tax under the head "Income from other sources". The assessee claimed deduction of Rs. 31,80,176 under section 57(iii) of the Income-tax Act towards interest paid to the bank as borrowals. The Assessing Officer held that the entire interest paid by the assessee to the bank was Rs. 1,00,60,390 which was on funds borrowed for business purpose and it was not justified on the part of the assessee to bifurcate part of the funds as borrowed for deposit with the same bank for earning interest and to apportion the total interest l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount is borrowed from the bank for making deposit, the claim of deduction of interest paid on borrowed funds in the computation of income from other sources under section 57(iii) of the Income-tax Act is not tenable. In fact, if the assessee's claim is genuine, then the net result should be a negative figure because the borrowed funds attract higher rate of interest than the rate of interest received on deposit. 5. The next aspect to be considered is whether the assessee will be entitled to deduction of interest under section 57(iii) of the Act against interest income received on term deposit merely because deposits are made by transferring funds from cash credit account/packing credit account. From the bank's letter, what is clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is 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. Therefore in our view, there is no justification for the first appellate authority or the Tribunal to allow any deduction of estimated interest under section 57(iii) in the computation of interest income under the head "Income from other sources". In our view, the Assessing Officer has rightly allowed the entire interest charged by the bank against income from business because cash credit/packing credit account maintained is for business purpose and the entire interest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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