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TMI Blog2015 (6) TMI 568X X X X Extracts X X X X X X X X Extracts X X X X ..... hearing, is what had led to what we may term as an ‘imbalance’ as per the assessee’s plans. But for this limit, the entire interest on borrowed capital (Rs.15,69,007/-) would stand to be allowed against income under Chapter IV-B, i.e., income from house property, resulting in the two arrangements, i.e., either withdrawing money lent and saving interest to bank, or, alternatively, assuming borrowing for investment in house property, being at par, both financially (perhaps, that is – the interest rates on borrowing and monies lent being not known), as well as under the tax regime. Assuming a tax equivalence, while none existed, then, thus, represents the fundamental fallacy in the assessee’s argument and case, i.e., the underlying assumption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RDER Per Sanjay Arora, A. M.: This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals)-11, Mumbai ( CIT(A) for short) dated 28.02.2013, dismissing the Assessee s appeal contesting its assessment u/s.143(3) of the Income Tax Act, 1961 ( the Act hereinafter) for the assessment year (A.Y.) 2010-11 vide order dated 11.01.2013. 2. The only issue arising in the instant appeal, agitated per its two grounds, as under, is the maintainability or otherwise in law of the assessee s claim of interest paid on borrowed capital (from bank) invested in a house property, against interest income assessable u/s. 56, i.e., in computing the income chargeable under the head of income income from other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not able to retrieve the loan money back from the person to whom he had lent, in time, necessitating a temporary arrangement by way of bank borrowing. However, the two arrangements are at par, so that interest suffered, i.e., in excess of ₹ 1,50,000/- (Rs.14.19 lacs), ought to be adjusted in computing his actual income . Reliance is placed on the decision in the case of Raj Kumari Aggarwal v. Dy. CIT (ITA No. 176/Agra/2013 dated 18/7/2014), wherein the Tribunal, in a similar situation, allowed the assessee s claim for interest on borrowings against the interest arising on bank FDRs, on the security of which the borrowing was raised. 4. We have heard the parties, and perused the material on record. 4.1 Viewed from any angle, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during hearing, is what had led to what we may term as an imbalance as per the assessee s plans. But for this limit, the entire interest on borrowed capital (Rs.15,69,007/-) would stand to be allowed against income under Chapter IV-B, i.e., income from house property, resulting in the two arrangements, i.e., either withdrawing money lent and saving interest to bank, or, alternatively, assuming borrowing for investment in house property, being at par, both financially (perhaps, that is the interest rates on borrowing and monies lent being not known), as well as under the tax regime. Assuming a tax equivalence, while none existed, then, thus, represents the fundamental fallacy in the assessee s argument and case, i.e., the underlying ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it, paying interest to the bank at ₹ 90,410/-, claiming that he be taxed only on the differential amount of ₹ 27,034/-. The same being allowed by the tribunal and the hon ble high court, the Revenue carried the matter in appeal by special leave. The claim was negatived on the ground that it had no basis in law, i.e., s. 57(iii), inasmuch as there was no nexus, as in the present case, between the interest earned and paid. Would it matter, the court wondered, if the assessee had instead taken a loan from a different bank or against any other security? The interest paid did not reduce the income by way of interest on fixed deposit placed by him with the bank in any manner. 4.3 Coming, next, to the decision in the case of Raj Kum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income, for the interest (to the bank) to be exigible to deduction against the interest on the FDRs. The claim was allowed not on the basis of any financial equivalence, as contended by the assessee before us, but of a direct nexus, meeting, thus, the stipulation of s. 57(iii). This is as it found that the borrowing would directly impact the bank interest inasmuch as it (the borrowing) only saved interest. The decision in fact has support of the decisions by the apex court, as in Challapalli Sugars Ltd. v. CIT [1975] 98 ITR 167 (SC) and Tuticorin Alkali Chemicals Fertilizers Ltd. vs. CIT [1997] 227 ITR 172 (SC). In the present case, on the other hand, the bank borrowing has been invested toward another source of income, i.e., income fr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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