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TMI Blog2017 (12) TMI 531X X X X Extracts X X X X X X X X Extracts X X X X ..... as well as money borrowed by the firm from the outside. As the interest bearing fund has been advanced by the assessee to the parties to earn interest then in our considered view the interest paid qua to the interest income was very much eligible for deduction u/s 57(iii) of the Act. From the above precedent, we hold that assessee is very much entitled to claim the expense incurred in the form of interest against the impugned interest income. Computation of interest expense qua to the interest income - Held that:- We find that the assessee has adopted the manner for making the disallowance of interest expense as provided under Rule 8D of I.T. Rules, 1962. Though prima facie we disagreed to the basis adopted by the assessee for claiming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his consolidated order for the sake of convenience. First we take up ITA No.1964/Kol/2014 for A.Y. 2011-12. 3. The ground raise by the Revenue reads as under:- 1. In the facts and circumstances of the assessee and in law, the CIT(A) has erred in restricting the interest expenditure to ₹ 36,39,402/- in view of the submissions of the assessee that since the source of expenditure for business as well as income from other source was out of common fund accordingly the calculation of expenditure on account of interest attributable to lending activities should be ass per manner provided in Rule 8D in spite of failure on the part of the assessee to explain the nexus between the expenditure and interest income earned. 2. The appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng manner. Gross interest income ₹ 51,97,621.00 Less Interest Expenses ₹ 36,39,403.00 ₹ 15,58,218.00 The assessee computed the amount of interest expenses in the manner as provided in Rule 8D of Income Tax Rule. 1962. In this regard, the assessee submitted that the surplus fund available to the assessee firm was advanced to various parties with a view to earn interest income on the surplus fund. In-fact, the surplus fund is representing the capital of the firm which belongs to the partners of the firm. The partners of the firm are being paid interest on the amount of capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the interest income. 7. Aggrieved, assessee preferred an appeal to Ld CIT(A).The assessee before LD. CIT(A) submitted as under:- a) The assessee is engaged in tea business as well as for providing loan to the parties; b) The assessee has been providing loan to the parties on interest on regular basis. Therefore, the lending activity was not in the nature of investment of any temporary surplus fund; c) The fund available with the assessee was interest bearing funds which were used to provide the advance to the parties. Thus, it cannot be concluded that no cost was incurred by it on its interest income; d) As per the provision of Section 57(iii) of the Act the assessee is very much entitled to claim the deduction of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whereas Ld. AR before us filed paper book which is running from pages 1 to 34 and he reiterated the submissions which were made before Ld. CIT(A) and he relied on the order of Ld. CIT(A). 9. We have heard the rival contentions and perused the material available on record. In the instant case, assessee has earned interest income which was offered to tax under the head income from other source . The main business of assessee was growing manufacturing of tea. The assessee against interest income claimed to have incurred cost in the form of interest expenses on the capital contributed by the partners. As per the assessee the surplus fund available with it was advanced for loan to the parties for the purpose of earning interest income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities have rightly treated the same as income from other sources while assessing the income of assessee. However, the assessee is entitled for deduction u/s. 57 of the Act. The Assessing Officer will allow the claim of assessee of interest expenditure incurred by assessee qua the income of interest earned and declared as income from other sources. This issue of assessee s appeal is partly allowed as indicated above. From the above precedent, we hold that assessee is very much entitled to claim the expense incurred in the form of interest against the impugned interest income. 9.2 Next question before us arises that how to compute interest expense qua to the interest income. In this regard, we find that the assessee has adopte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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