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TMI Blog2020 (8) TMI 151X X X X Extracts X X X X X X X X Extracts X X X X ..... ification for disallowing interest expenditure so incurred. Even if the interest received by the assessee is treated as taxable under the head Income from Other Sources then still the deduction on a/c of interest paid by the assessee to the parties from whom the assessee taken loan and utilized to advance the money to persons from whom interest received should be allowed to the assessee. For computing the income taxed under the head Income from Other Sources u/s 56 of the Income tax Act the deduction of payment of interest made to earn such income should be allowed to the assessee as per provisions of section 57 (iii). Even otherwise also if it is presumed that the assessee did not commence its business operation and was under pre-commencement period than still in view of following case law the interest expenses should be allowed against interest earned in pre-commencement period. We confirm the detailed findings so recorded by the ld. CIT(A) which is as per materials placed on record, requiring no interference at our part. - Decided against revenue. - ITA No. 720/JP/2019 - - - Dated:- 3-8-2020 - Shri Ramesh . C. Sharma , AM And Shri Vijay Pal Rao , ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;s claim of expenses made in a revised computation filed in assessment proceedings where income from other sources had been re categorized as income from business expenses held to be allowable. In the order it was held as under- As the assessee has filed a revised computation in the course of the assessment proceedings itself, in my view, it holds good as except the change of head of income being from other sources to business income, all other supporting material remained the same including the audit report claiming expenses against such income. The expenses of ₹ 12,84,124 /-are therefore held to be allowable against the said lease income from business as the primary object of the assessee as per the Memorandum is also to deal in immovable properties such as land and buildings and to acquisition, handle, manage, operate, sale, purchase, acquire, take or give on lease or in exchange or in any other lawful manner in India or abroad land including agricultural land, plot, buildings, structures, farm house etc. This ground of appeal is treated as allowed. The main objection of the AO in the assessment proceedings is that since no commercial activity h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r HIGH COURT OF MADRAS decision in Commissioner of Income-tax v. VGR Foundations298 ITR 132 (Madras) it has been opined that- Section 57 of the Income-tax Act, 1961 - Income from other sources - Deductions Assessment years 1997-98 and 1998-99 - Interest on moneys borrowed for period prior to commencement of business was to be allowed as deduction from interest under section 57 while computing 'Income from other sources' in respect of interest received In Bokaro Steel Ltd. 119991 236 ITR 315, it was a case of a Government company which during the period of construction of the plant had advanced monies to contractors on which it was earning interest, received rent from quarters let out to employees, received hire charges on plant let out to contractors and received royalty on stones removed from the assessee's lands. The Supreme Court considered all these activities to be intricately connected with the construction activity and accordingly held that interest received, rent received, hire charges and royalty, etc., would be reduced from the cost of the assets and it would not be treated as income. Similar view was expressed by the Supreme Court in the case Kar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for earning such interest income is to be allowed while computing net income under the head Income From Other Sources . 2.8 We have considered the rival contentions and carefully gone through the orders of the authorities below. From the record, we found that the assessee is a company registered with ROC Jaipur on dated 06/12/2007. Registrar of companies had issued certificate of commencement of business on 19/12/2007. The main object of the company is to deal in immovable properties such as land and building and to acquisition, sale, purchase, given on lease of land, building develop the real estate projects and leasing the land, Building and Land Building. The company has started development of real estate project in the F.Y. 2009-10 which can be easily verified in previous year figure stated in the Balance sheet of F.Y. 2010-11. The company received the lease rent from leasing out its land and during the year it received rental income of ₹ 11,00,000/- which is shown in Profit loss account for the year 2010-11. The rental activity is part of main object of the assessee company and thus the same is chargeable as income from business profession. Reliance is pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee taken loan and utilized to advance the money to persons from whom interest received should be allowed to the assessee. For computing the income taxed under the head Income from Other Sources u/s 56 of the Income tax Act the deduction of payment of interest made to earn such income should be allowed to the assessee as per provisions of section 57 (iii) of the Act. Findings of ld CIT(A) in this regard is at page 22-23 of his order. Therefore, even otherwise also if it is presumed that the assessee did not commence its business operation and was under pre-commencement period than still in view of following case law the interest expenses should be allowed against interest earned in pre-commencement period. For this purpose, reliance may be placed on the following decisions. (i) Hon'ble HIGH COURT OF MADRAS in the case CIT v. VGR Foundations 298 ITR 132 (Madras). [Ld CIT has taken note of this case law at page No 22 of his order]. (ii) Hon ble Supreme Court in the case of Bokaro Steel Ltd. [1999] 236 ITR 315, [Ld CIT has taken note of this case law at page No 22 of his order] (iii) HIGH COURT OF DELHI in Vodafone South Ltd v. Commissioner of Income-tax 61 ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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