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TMI Blog2010 (6) TMI 604X X X X Extracts X X X X X X X X Extracts X X X X ..... hri Amrish Bedi for the Appellant. Shri A.K. Bansal for the Respondent. Shamim Yahya, Accountant Member - The Revenue is in appeal before us against the order of the learned Commissioner of Income-tax (Appeals) dated January 4, 2010 pertaining to the assessment year 2006-07. 2. The issue raised is that the learned Commissioner of Income-tax (Appeals) has erred in directing to allow interest expenditure of Rs.6,14,992 from the interest earned. 3. In this case the Assessing Officer noted that during the year the assessee-company has shown income from interest only. Since the business has not commenced the Assessing Officer asked as to why the interest income should be allowed to be set off against the expenses during the const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany cannot claim any relief under either of these two sections, since its business had not started and there could not be any computation of business income or loss incurred by the assessee in the relevant accounting year. In such a situation, the expenditure incurred by the assessee for the purpose of setting up its business cannot be allowed as deduction, nor can it be adjusted against any other income under any other head. On the basis of the above remarks, as indicated above, the income from interest is to be taxed as income from other sources. Since, in the current year the business is yet to be commenced the income of the assessee is assessed at Rs. 6,92,000 as income from other sources." 6. Upon the assessee's appeal the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne it should be taken as an income which should be deducted from the interest receipts.' 5.6 Under the facts of the case, and ratios decided vide Supreme Court in the matter of Tuticorin Alkali Chemicals and Fertilizers Ltd. [1997] 227 ITR 172, read with approved judgment of Madras High Court in the case of CIT v. Seshasayee Paper and Boards Ltd. [1985] 156 ITR 542, I am of the considered view that Assessing Officer has rightly added interest income of Rs. 6,92,000 as 'income from other sources' under section 56 but the appellant is also entitled for deduction of relatable interest expenditure under section 57(iii). Accordingly, the Assessing Officer is directed to allow relatable interest expenditure of Rs. 6,14,992 from the assessed inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow the interest paid by the assessee to M/s. Narain Infrastructure (P.) Ltd. to the proportion of the amount advanced comes to Rs.6,14,992. Hence, admittedly in earning the income of Rs. 6,92,000 the assessee has spent Rs. 6,14,992 as interest on amount borrowed. Since the interest earned on amount advanced is directly correlated to the interest spent on amount borrowed, in our considered opinion there is no infirmity in the directions of the learned Commissioner of Income-tax (Appeals) that against the interest income of Rs. 6,92,000, Rs. 6,14,992 should be allowed as expenditure and hence the net taxable income under other sources will be Rs. 77,008 only. Hence holding that there is direct nexus between the amount advanced and amount borr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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