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TMI Blog2019 (10) TMI 636X X X X Extracts X X X X X X X X Extracts X X X X ..... e were not directly related to the business of the assessee. Even otherwise, if the said expenditure is not allowable as a business expenditure, then the interest expenditure is allowable as a deduction u/s 57(iii) . During the year under consideration, the assessee had earned interest on FDR amounting to ₹ 13,41,303/- and a total expenditure on interest on loan and bank interest amounting to ₹ 14,90,125/- As per the language of section 57(iii) the expenditure which is wholly and exclusively incurred for the purpose of earning income chargeable under the head income from other sources, is allowed as deduction from the said income of the assessee. Thus, it can be concluded that there is a direct nexus between the income earned and the expenditure incurred which should allowable as a deduction u/s 57(iii) - Appeal of the assessee is allowed. - I.T.A .No.-3083/Del/2018 - - - Dated:- 16-10-2019 - Shri H.S. Sidhu, Judicial Member For the Appellant : Shri Ved Jain, Adv., Mrs. Surbhi Goyal, CA For the Respondent : Ms. Ekta Vishnoi, Sr. DR. ORDER This appeal by the assessee has been directed against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness and profession and income from other sources as in earlier years. In this case the assessee has shown interest income of ₹ 6,38,869/- as income under the head other sources and has adjusted the balance interest of ₹ 7,02,434/- against the interest paid on loans. However, during the proceedings, the AO alleged that the entire income received by way of interest has been set off towards the bank charges and loan taken from the bank without considering the fact that the assessee has shown the income of ₹ 6,38,869/- as income under the head other sources. AO further observed that the interest on loan and bank charges debited to P L account do not have a direct relationship with the profession of the assessee and cannot be claimed as a business expenditure and also observed that since the this amount of loan was invested in FDR and interest was received on this investment, the assessee has not utilized the loan for which it was availed. Assessee submitted that as these loans were obtained for a business purpose, therefore the interest expenditure on these loans is allowed u/s. 36(1)(iii) of the Act and also since the assessee could not find a suitable premise, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifies that the purposes for which the funds are being used is business purposes only, i.e., the amount has to be invested in the business only. It is on the assessee s discretion when to invest the borrowed funds, provided it is invested for the business purposes. To support his contention, he relied upon the decision of the Hon ble Karnataka High Court in the case of CIT vs. Anand Technology Resource Park Pvt. Ltd., ITA Nos. 625 to 627 of 2006, order dated 30.8.2011. He also filed a paper book containing pages 1-102 attaching therewith various documentary evidences. 3.1 On the contrary, the Ld. DR placed reliance on the order passed by the authorities below. She stated that since the amount of loan was invested in FDR and interest was received on this investment, the assesee has not utilized the loan for which it was availed. Hence, the addition was rightly made by the AO and sustained by the Ld. CIT(A). 4. I have heard both the parties and perused the records especially the orders of the authorities below, paper book; synopsis and case law relied upon by the assessee s counsel. I find that in this case the CIT(A) vide its order dated 31.03.2018 has u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business and the receipt of dividend is only incidental or ancillary, then Section 36(1)(iii) is attracted. 4.1. Since the assessee intended to purchase a business premise from the funds borrowed, it can be very well concluded that the purpose for which these loans were obtained were business purpose only. It is noted that assessee could not find any suitable office, he invested these idle funds into FDRs to reduce the burden of interest cost to be borne on the borrowed funds and the funds are readily available to the assessee as when a suitable office is found for investment. 4.2 It is a well settled law that revenue cannot sit in the armchair of a businessman to decide the reasonableness of a decision taken by a businessman. Here, in this case also, the AO has alleged that the borrowed funds were not for a business purpose while the assessee has clearly established the nexus between the purpose of business and the expenditure incurred. To support this view, I rely upon the judgment of the Hon'ble Supreme Court of India in the case of S.A. Builders vs. CIT(A) Civil appeal No. 5811 of 2006 with 5812 of 2006, wherein it was held as under:- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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