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TMI Blog2015 (1) TMI 1246X X X X Extracts X X X X X X X X Extracts X X X X ..... interest paid constitute the input cost of the fund and therefore has to be reduced while determining the income from other sources which is the spirit of the provision of section 57 (iii) of the Act . In view of these facts, we reverse the order of CIT(A) by allowing the appeal of the assessee. - Decided in favour of assessee - ITA NO 327/Mum/2014 - - - Dated:- 6-1-2015 - SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER For The Assessed : Shri Biren Gabhawala For The Revenue : Shri Naveen Gupta ORDER Per Rajesh Kumar, AM This appeal by the assessee is directed against the order dated 18.11.2013 of CIT (A) for A.Y. 2009-10. The assessee has raised following grounds of appeal:- 1. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prove the nexus between the expenditure incurred and the income earned. He ought to have followed this decision and allowed the appeal. 1.4 On the facts and circumstances of the case an in law the learned Commissioner Of Income Tax (Appeals) erred in ignoring the explanation of your appellant that the interest on the opening balance of ₹ 25,00,000/- as well as additional loan of ₹ 23.50 Lakhs taken during the year from M/s. Amco Land Marine Service and m/s. Mayur Gems were legitimate expenses for earning the income from Other Sources as these borrowings were exclusively used for advancing the loans to the companies from where the appellant earned interest income. 2. Your appellant prays that the disallowance of int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention of the assessee that interest paid on money raised was admissible u/s 57(iii) of the Income Tax Act by relying upon the various decisions as incorporated in para 6 of the CIT(A) order. 6. The ld AR for the assessee submitted that interest of ₹ 3,97,244/- paid by the assessee on the funds borrowed to return the existing loans and to advance to loans to other companies at higher rate and therefore the interest paid of ₹ 3,97,244/- was an admissible expense u/s 57(iii) of the Act. The ld AR also submitted that the money was borrowed at the rate of 9% and the same was utilized to return the existing loans and for advancing loans which were @ rate of 12%. The assessee filed detailed statement showing the nexus of loans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chargeable under the head Income from other sources shall be computed after making following deductions, namely:- (i) (ii) .. (iii) any other expenditure(not being in the nature of capital expenditure) liad out or expended wholly and exclusively for the purpose of making or earning such income; We find that the assessee had raised money during the year which was utilized either to lend or to repay the loans of the assessee as per details at page no. 1 of the paper book. The bank statement of the assessee which was filed at page no. 2 to 4 of the paper book also shows the nexus between the borrowings and lending s/repayments. We also note that the money raised was paid interest @ 9% whereas the money lent/repaid was @ 12% rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, the Honble Court has held that that the purpose of incurring the expenses should be to earn income and connection between the income and the expenses need not be direct. It may be indirect but there must be a nexus or connection between the income and the expenditure. In the case of the assessee, we are of the opinion that there is a direct nexus between the money raised and utilized and the expenses by way of interest is also not of capital nature. During the instant year the assessee earned interest income of ₹ 15,99,664/- and claimed deduction of interest paid on borrowings to the tune of ₹ 3,97,244/- u/s 57(iii) of the Act. We in agreement with the submissions of the ld AR of the assessee that the interest paid constitu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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