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TMI Blog2018 (7) TMI 947X X X X Extracts X X X X X X X X Extracts X X X X ..... sec. 57(iii) of the Act, what can be allowed as a deduction against income from other sources is an expenditure (not being in the nature of capital expenditure) laid out and expended 'wholly and exclusively' for the purpose of making or earning such income. Thus, the onus is squarely on the assessee to substantiate that the expenses claimed against the interest income has been expended wholly and exclusively for the purpose of earning the said income. In the absence of any evidence to suggest that the amount of Rs. 26,01,772/- has been expended towards earning such interest income, the Assessing Officer disallowed the claim and made an addition of Rs. 26,01,772/- to the total income of the assessee. 4. On appeal, since the assessee was not able to substantiate that the expenses claimed against the interest income had been expended wholly and exclusively for the purpose of earning the income of Rs. 26,01,772/-, the CIT(A) affirmed the addition made by the Assessing Officer. 5. Against this, the assessee is in appeal before us. The Ld. AR submitted that this issue is covered in favour of the assessee by the order of the Tribunal in assessee's own case in ITA No. 1156(Coch)/1987 dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred to by the Full Bench was the case of Hoystead vs. Commissioner of Taxation (1926) AC 155 (PC). Speaking for the Judicial Committee, Lord Shaw stated : "Parties are not permitted to begin fresh litigations because of new views they may entertain of the law of the case, or new versions as to what should be a proper apprehension by the Court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted, and there is abundant authority reiterating that principle. Thirdly, the same principle- namely, that of a setting to rest rights of litigants, applies to the case where a point, fundamental to the decision taken or assumed by the plaintiff and traversable by the defendant, has not been traversed. In that case also a defendant is bound by the judgment, although it may be true enough that subsequent light or ingenuity might suggest some traverse which had not been taken." These observations were made in a case where taxation was in issue. This Court in Parashuram Pottery Works Co. Ltd. vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igatory on the part of the judicial or quasi-judicial authority to pass a reasoned order while exercising statutory jurisdiction. The same view was reiterated by the Supreme Court in the case of K.R. Deb vs. CCE AIR 1971 (SC) 1447 and Union of India vs. K.D. Pandey (2002) 10 SCC 471. 7.4 The Supreme Court in a case reported in Santosh Hazari vs. Purushottam Tiwari (Dead.) By Lrs (2001) 170 CTR (SC) 160 : (2001) 2 JT (SC) 407 by learned representatives held as under: "The appellate Court has jurisdiction to reverse or affirm the findings of the trial Court. First appeal is a valuable right of the parties and unless restricted by law, the whole case is therein open for hearing both on questions of fact and law. The judgment of the appellate Court must, therefore, reflect its conscious application of mind, and record findings supported by reasons, on all the issues arising along with the contentions put forth, and pressed by the parties for decision of the appellate Court." ................ While reversing a finding of fact the appellate Court must come into close quarters with the reasoning assigned by the trial Court and then assign its own reasons for arriving at a different f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is allowed for statistical purposes. 8. The next ground is with regard to the addition of Rs. 3,72,64,177/- as interest accrued. 9. The facts of the case are that the assessee claimed interest income arising out of fixed deposits in banks is a hypothetical income on which tax cannot be levied. For this proposition, the Ld. AR relied on the order of the High Court of Kerala in the case of M/s. Kerala State Horticulture Products Corporation and Kerala State Coconut Development Corporation (233 ITR 228). The CIT invoked powers u/s. 263 on the assessment completed by the Assessing Officer pertaining to the above assessee-Corporations. The CIT had invoked powers u/s. 263 of the Act directing the Assessing Officer to make fresh assessment which was quashed by the ITAT which was accepted by the Department. While examining the above orders, it was observed that the issues involved in the above mentioned cases and the instant case are not similar. In the former cases, loans to these Corporations were advanced pursuant to orders of Govt. of Kerala and the assessee-company had not received any interest on these advances. In the present case, interest income was accrued on fixed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... close of the previous year and if it so accrues, it becomes the income of that particular assessment year, liable to be taxed in that year. 7. Yet another argument of the learned Counsel for the respondent is that under Section 194A of the Act, it is the obligation of the banker to pay tax on the interest due. The failure on their part has now resulted in action against the assessee. In view of the fact that the assessee had exercised the option to let the interest accumulate to the deposit and thereby earned and thereby earned compound interest by the end of the deposit term, it would not mulct any liability on the bank to pay tax on periodical accrual of interest to the income tax authorities. The Bank's liability to deduct tax at source arises only when it pays the interest. The amount that is to be received as interest, is known to the assessee and was accounted, as income accrued by way of interest in the account books of the assessee following the mercantile system. The interest income that accrued cannot, by any stretch of imagination, be termed as hypothetical income. 8. The reliance placed by the assessee on an earlier decision of this Court in ITA Nos, 114, 173 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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