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TMI Blog2010 (11) TMI 767X X X X Extracts X X X X X X X X Extracts X X X X ..... considering the personal use of telephone and mobile phone by the partners disallowed one fifth of the expenditure - The learned CIT(A) confirmed the addition - Held that:- On consideration of the above facts and the nature of business of the assessee, held that disallowance is excessive in nature - The same is restricted to Rs.4,000/- in all as against addition of Rs.8,595/ - Thus, appeal of the assessee is partly allowed. - ITA No. 2578/Ahd/2010 - - - Dated:- 25-11-2010 - Bhavnesh Saini, J. P.M. Mehta, AR for the Appellant Shailja Rai, DR, for the Respondent ORDER Bhavnesh Saini: This appeal by the assessee is directed against order of the CIT(A)- XVI, Ahmedabad dated 18-06-2010 for assessment year 2005- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion under that provision". 4. Briefly, the facts of the case are that the AO observed that the assessee has claimed deduction u/s 80-IB of the IT Act in respect of other income of Rs.2,38,967/-. He asked the assessed as to why this amount should not be excluded for the purpose of deduction u/s 80-IB of the IT Act. The contention of the assessee was that interest income of Rs.2,38,967/- has been earned out of the funds borrowed from overdraft bank account. The assessee has incurred expenses and interest to partners' capital account was paid. There was direct nexus between the interest expenditure and interest income. It was, therefore, requested that the same is required to be netted off against each other. The AO did not accept the cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, once interest income is assessed u/s 56 the expenditures admissible u/s 57(iii) being expenditure incurred wholly and exclusively for the purpose of earning interest income except capital expenditure can be allowed as deduction. The ld. CIT(A) has in this regard observed as under: "(i) The claim of assessee against exclusion of interest income for the purpose of computing deduction u/s 80IA is rejected. (ii) However, as claimed by the appellant, the net interest income, if any, should be taken to the head income from other sources i.e. after allowing interest expenditure. The AO shall verify the interest expenditure linked with the earning of interest income and allow set off of such interest expenditure. The balance, if any s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned DR also suggested that the matter may be restored to the file of the AO for deciding the issue afresh in accordance with law. 7. On consideration of the rival submissions, I am of the view that the matter requires reconsideration at the level of the AO on limited point with regard to allowability of the expenditure u/s 57(iii) of the IT Act. However, it is clarified that once the income is treated as income from other sources, the same cannot be allowed as deduction u/s 80- IB of the IT Act. I accordingly set aside the orders of the authorities below on this point and restore this issue to the file of the AO with direction to redecide the issue in accordance with law by following the order of the Tribunal in the case of Gujarat Pag ..... X X X X Extracts X X X X X X X X Extracts X X X X
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