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TMI Blog2017 (8) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... eceipt was got made. Taking into consideration the fact, the interest income is to be reckoned as income from other sources. The netting of the interest paid and the interest received is not permissible. Section 57(iii) of the Income-tax Act also does not help the assessee, in peculiar facts of the case, the assessee cannot be heard to say that it has spent ₹ 5,33,23,380 for earning interest of ₹ 59,31,141 on the fixed deposit receipt . Hence, the view taken by the Tribunal is just and proper - Decided against assessee. - D. B. Income Tax Appeal No. 104 of 2004 - - - Dated:- 10-1-2017 - K. S. Jhaveri And Vinit Kumar Mathur, JJ. For the Appellant : Gaurav Sharma For the Respondent : K. D. Mathur for R. B. Mathur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the company's assets, having charge of State Bank of India was ₹ 5,76,93,728. 4. Since, there were two claims of unsecured creditor's, out of the sale proceeds, a sum of ₹ 5,75,80,000 was deposited in the fixed deposit with the bank. On March 29, 1994, the company court ordered to withdraw 50 per cent. of the fixed deposit amount for disbursement. However, the company has earned interest of ₹ 59,31,141 on the fixed deposit and interest has also accrued on the loan of the secured creditor's of the State Bank of India to the tune of ₹ 5,33,23,380 on the unpaid admitted loan amount. On February 23, 1996 pursuant to the return for the assessment year 1993-94, an order came to be passed by the Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) provides that deduction is to be made in respect of expenditure laid out or expended wholly and exclusively for the purpose of making or earning such income. The question for consideration, therefore, is whether the expenses of the type incurred by the liquidator in this case can be said to have been incurred solely for the purpose of earning the interest income. It is true that the connection between the expenditure and the earning of income need not be direct and it may be indirect. But, since the expenditure must have been incurred for the purpose of earning that income, there should be some nexus between the expenditure and the earning of the income. There is not even some sort of evidence to show that the expenses incurred by the li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT reported in [1992] 195 ITR 565 (SC) in para. No. 15, holding as under (page 573) : On a careful consideration of the facts and circumstances of this case, we are of the view that the fixed deposit receipts had, in fact, been made over to the shareholders and the resolution for the distribution of the proceeds of the said fixed deposit receipts were duly passed and that intimation was also furnished to the bank concerned about the transfer. On a construction of the letters written by the liquidator to the Manager, United Bank of India, and the certificates given by him to which reference has already been made, it is evident that the fixed deposit receipts were transferred in favour of the shareholders who alone are entitled to rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditors against the claim of the workers under section 529 of the Companies Act, 1956, will not take precedence, the fixed deposit receipt was got made. Taking into consideration the fact, the interest income is to be reckoned as income from other sources. 11. Mr. Mathur has relied on the judgment of the Kerala High Court in CIT v. Vaikundam Rubber Co. Ltd. reported in [2002] 253 ITR 417 (Ker) wherein it has been held as under (page 418) : The relevant assessment year is 1981-82. The assessee had a fixed deposit of ₹ 22.85 lakhs with a bank. Subsequently, the assessee borrowed a sum of ₹ 7.50 lakhs from that bank against the fixed deposit. The assessee had the liability to pay interest thereon, which was 2 per cent. hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e question referred to above was referred for the opinion of this court under section 256(2) of the Income-tax Act . . . We also find that the earlier view adopted by this court in CIT v. Dr. V. P. Gopinathan [1998] 229 ITR 801 (Ker) was reversed by the Supreme Court in CIT v. Dr. V. P. Gopinathan [2001] 248 ITR 449 (SC), wherein the Supreme Court held that the interest that the assessee received from the bank on the fixed deposit was income in his hands and it could stand diminished only if there was a provision in law permitting such diminution. There was no such provision of law and the interest on the loan taken from the bank did not reduce his income by way of interest on the fixed deposit. We find that the ratio of the decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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