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TMI Blog2020 (4) TMI 780X X X X Extracts X X X X X X X X Extracts X X X X ..... f the view that the assessee had in its return of income as well as in the course of the the assessment proceedings claimed deduction of the interest expenditure under Sec.57 (iii) therefore, it was disentitled from raising the claim for deduction of the aforesaid amount under Sec. 36(1)(iii) - HELD THAT:- We are unable to persuade ourselves to subscribe to the same - assessee had raised a claim for deduction under Sec. 36(1)(iii), based on the facts which were already available on record, therefore, the CIT(A) was well within his jurisdiction to have adjudicated upon the same. CIT(A) had summarily scrapped the aforesaid claim of the assessee, for the reason, that the same was raised for the very first time before him. See Pruthvi Brokers and Shareholders Pvt. ltd [ 2012 (7) TMI 158 - BOMBAY HIGH COURT] observed that assesses is entitled to raise an additional ground before the appellate authorities not merely in terms of legal submissions, but also additional claims to wit claims which were not made in the return of income filed by it. Accordingly, we are of the considered view that the CIT(A) ought to have considered the assesse‟s claim for deduction of the interest expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- claimed against interest income. 5. The appellant prays that the disallowance of ₹ 1,24,07,347/- made by the learned CIT(A) may be deleted returned income of ₹ 21,49,860/ - may be accepted. 6. The learned CIT(A) fai led to appreciate that the appel lant had correctly offered his income that no addition was called for to the returned income. (C) General 7. The above grounds of appeal are without prejudice to one another and the appellant craves leave to add, alter, amend, delete or modify any of the above grounds of appeal. Apart from that, the assessee has also sought the leave of the Tribunal for raising the following additional grounds of appeal: ( A) Without prejudice not allowing interest u/s. 36(1)(iii) (1) Without prejudice to the original grounds of appeal, the learned Commissioner of Income Tax (Appeals) erred on facts and in law in not allowing the interest disallowed by the AO of ₹ 1,24.07,347/ - u/s. 36(1)(iii) of the Income Tax Act. (2) The appellant prays that if the interest of ₹ 1,24,07,347/- is not allowable u/s. 57(iii) the same may be allowed u/s. 36(1 )(iii). (B) (General ) (3) The above Grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis of his aforesaid observations, the A.O restricted the assesses claim for deduction of interest expenditure to the extent of ₹ 1,73,70,287/- i.e to the extent the interest bearing funds were utilised for earning of interest income during the year under consideration. Consequently, the balance amount of interest expenditure of ₹ 1,24,07,347/- [₹ 2,97,77,635/- (-) ₹ 1,73,70,287/-] was disallowed by the A.O within the meaning of the provisions of Sec.57(iii) of the Act. In the backdrop of his aforesaid deliberations, the A.O assessed the income of the assessee company at ₹ 1,45,57,207/-. 4. Aggrieved, the assessee assailed the assessment order before the CIT(A). It was submitted by the assessee before the CIT(A) that as the interest bearing borrowed funds raised from the bank were either deployed for giving advances in the normal course of its business or advancing of interest bearing loans to certain parties, therefore, no disallowance of any part of the interest expenditure was called for in its hands. It was the claim of the assessee that as part of the interest bearing funds were deployed for its business purposes, therefore, no disallowance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n their projects. In order to fortify his aforesaid claim, the ld. A.R had drawn our attention to the correspondence of the assessee with some of the aforementioned parties at Page 88 - 93 of the assesses Paper book‟ (for short APB‟). Accordingly, the on the basis of his aforesaid contentions it was the claim of the ld. A.R that the CIT(A) was in error in not appreciating the contentions of the assessee in the right perspective. 7. Per contra, the ld. Departmental Representative (for short D.R‟) relied on the orders of the lower authorities. It was submitted by the ld. D.R that as the assessee had diverted part of the interest bearing funds for giving interest free loans/advances to third parties, therefore, the lower authorities had rightly disallowed the assesses claim for deduction of the corresponding interest expenses as was claimed in its return of income for the year under consideration. As such, it was the claim of the ld. D.R that as the appeal of the assessee was devoid and bereft of any force, therefore, the same did not merit acceptance and was liable to be dismissed. 8. We have heard the authorized representatives for both the parties, per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Aristo Shelters Pvt. ltd. pertains to the interest that was recoverable by the assessee from the said party. The assessee had way back in the month of December, 2010 given an interest bearing loan aggregating to ₹ 25 crores to M/s Aristo Shelter Pvt. Ltd. Although, the aforesaid principal amount of loan was received back by the assessee in F.Y. 2011-12, but the amount of the interest of ₹ 72,81,370/- had remained unpaid during the year and was subsequently received in the immediately succeeding year i.e on 09.10.2013. The aforesaid factual position can safely be gathered from a perusal of the copy of the account of M/s Aristo Shelter Pvt. Ltd. as appearing in the books of accounts‟ of the assessee company at Page 93 of the APB. In our considered view, as the amount of ₹ 72,81,370/- that was recoverable by the assessee during the year under consideration from the aforesaid party had no nexus with the interest bearing funds which were borrowed by the assessee from the banks, therefore, on the said count itself no disallowance of any interest expenditure pertaining to the said amount was called for under Sec. 36(1)(iii) of the Act. Independent of our aforesa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction of the interest expenditure under Sec.36(1)(iii) of the Act, specifically, when the same was being raised on the basis of the facts which were already available on record. As such, we are unable to persuade ourselves to concur with the declining on the part of the CIT(A) to consider the assesse‟s claim for deduction under Sec. 36(1)(iii) of the Act. Adverting to the merits of the claim of the assessee as regards its entitlement for deduction of the interest expenditure under Sec. 36(1)(iii) of the Act, we find, that it is the claim of the ld. A.R that as the aforesaid funds were deployed by the assessee in the aforesaid concerns in the normal course of its business, therefore, the correlating interest expenditure in respect of the same was allowable as a deduction under Sec.36(1)(iii) of the Act. In fact, the ld. A.R in order to drive home his claim as regards the entitlement of the assessee towards claim of the interest expenditure pertaining to the amounts advanced to the aforementioned parties, had therein submitted that the same was prompted by the principle of commercial expediency. In support of his aforesaid claim, the ld. A.R had drawn support from the judgmen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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