2012 (1) TMI 375

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..... Whether the CIT(A) is correct in holding that interest payable to Citi Bank for part financing investments in 54EC Bonds is allowable as deduction u/s 57(iii) of the Act? 2. Whether the assessee s own certification that the loan funds are towards purchase of tax saving capital gain bonds could have been ignored by the CIT(A) in rendering any decision on the allowability of interest on such loan bonds? 3. The only issue for consideration relates to allowing deduction under sec. 57(iii) of the Act on account of interest paid to Citi Bank for part financing investments in Bonds specified in sec.54EC of the Act. 4. The facts of the case stated in brief are that during the course of assessment proceedings, the Asse .....

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..... iii) of ₹ 42,24,410/- on the ground that there was no nexus between the interest earned and interest paid by the assessee. 6. Before the learned CIT(A) the assessee claimed that deduction for interest paid on loan taken for investment is allowable as deduction under sec. 57(iii) of the Act as there is direct nexus between the interest earned and interest paid. The learned CIT(A) on consideration of above facts came to the conclusion that income earned on bonds has been offered for tax as income from other sources and therefore, expenditure incurred for earning such income is allowable under section 57(iii) of the Act. The fine distinction has been made by the AO between making an investment and earning interest on such inves .....

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..... chase price was payable in F.Y. 2004-05 and an amount equal to remaining 15% held back was payable in F.Y. 2005-06. Against the long term capital gain of ₹ 48,94,23,992/-, the assessee claimed deduction under sec. 54EC. In addition to his own sources, he availed long term loan from Citi Bank amounting to ₹ 6,42,80,000/-for acquiring bonds specified in sec. 54EC of the Act. The total sale consideration to be received by the assessee in Assessment Year 2005-06 was ₹ 51,85,52,790/-. The entire sale consideration was not received by the assessee . The Assessing Officer has disallowed the claim of interest simply on the ground that the purpose for which the loan was obtained was different from the earning of interest. There is .....

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