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TMI Blog2020 (8) TMI 435X X X X Extracts X X X X X X X X Extracts X X X X ..... herein above, are of the view that the disallowance sustained by the Ld. CIT(A) was not justified, accordingly, the same is deleted. Appeal of the Assessee is allowed. - ITA NO. 247/Chd/2019 - - - Dated:- 23-7-2020 - Shri. N.K. Saini, VP And Shri, Sanjay Garg, JM For the Assessee : Shri Raman Kumar Goyal, CCIT(Retd) For the Revenue : Shri Arvind Sudarshan, JCIT DR ORDER PER N.K. SAINI, VICE PRESIDENT This is an appeal by the Assessee against the order of the Ld. CIT(A)-4, Ludhiana dt. 18/01/2019. 2. In the present appeal Assessee has raised the following grounds: 1. The order of CIT(A) is bad in Law. Disallowance of deduction under section 57(iii) 2. The CTT(A) erred is not considering the decision of ITAT Agra in the case of Raj Kumari Agarwal (ITA No. 176/Agra/2013) that relied upon decision of Supreme Court in the case of Sasoon J David Co. (118 ITR 261) 3. The CIT(A) erred in relying upon decision of Hon'ble Supreme Court in the case of Dr. V.P. Gopinathan 248 TTR 449, Wherein the Assessee did not claim deduction U/s 57(iii), whereas the Assessee claimed deduction U/s 57(iii). 4. The CIT(A) erred is not noticing that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act is reproduced here as Section 57(iii) of the act clearly provides that the income chargeable under 'Income from other sources' shall be computed after making the .... Deduction namely (interalia)..any ..expended wholly and exclusively for the purpose of making or earning such income. The question here is that we really need to adjudicate on whether or not interest paid on the loan against the fixed deposit can be said to have been incurred wholly and exclusively for the purpose of earning of interest income from fixed deposits. The legal connotations of expressions wholly and exclusively came up for consideration before a coordinate bench of this Tribunal, though in the context of deductions from business income, and the coordinate bench, extensively reproducing from binding judicial precedents, observed as follows in the case of A/ay Singh Deal Vs. [JCIT (91 ITD 196) 2004] : .. It is thus clear that as long as the expense is incurred wholly and exclusively for the purpose of earning an income, even if it is not necessarily for earning that income, it will still be deductible in computation of income. What thus logically follows is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u. Further, it was requested to justify that the expenditure of interest has been incurred wholly and exclusively for the purpose of making or earning such income as prescribed u/s 57 (iii) of the IT Act, 1961. The proceedings were fixed on hearing on 26.08.2016 but no reply has been filed, today. Please explain. 3.2 In response the assessee stated as under: I had given money to my son to avoid premature encashment of the fixed deposits, for that purpose which would have resulted in net loss to me, I took loan against fixed deposit so as to keep the fixed deposit intact and earn the interest income thereon. As if I had premature FDR instead of taking loan, my income would be less as compared to at present. Same was held in case of Raj Kumari Aggarwal Vs DCIT, Circle Agra ITANo. 176/Agra/2013 Ay 2008-09 dated 19.07.2014. The assessee has relied upon the following judgments: Ajay Singh Deol Vs. [JCIT (91 ITD 196] 2004 Raj Kumari Aggarwal Vs DCIT, Circle Agra 3.3 The A.O., however, was not satisfied from the explanation of the assessee and made the addition of ₹ 28,93,281/- by observing in para 3.3 of the assessment order dt. 28/11/2016 as under: 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the bank, if FDR with bank are encashed Pre Maturity, then there is penalty of 1.5% by the bank. The Assessee got loan against the security of FDR ₹ 102.55 lacs @ 10.15% i.e; 1% higher. The Interest receivable on FDR i.e; 9.15%. Had the Assessee got FDR Pre matured, then she will lose % more and it works out total ₹ 51275/-. Your honour will appreciate that the Assessee has got more Income on account of Interest on FDR during the year, even after making payment of interest on loan received against security of these FDR. Thus during the year assessee received interest of ₹ 45,49,341/- against the FDR and paid a sum of ₹ 28,93,281/- in respect of loans raised against the FDR s Assessee claimed the above referred amount of ₹ 28,93,291/- as deduction against the interest received as deduction under section 27 of IT Act. However the learned assessing officer has disallowed the claim of the assessee and made addition of ₹ 28,93,281/- to the income of the assessee. Aggrieved the said addition, assessee has filed an appeal before your goodself. Assessee has raised the following grounds of appeal: 1. The learned assessing officer h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ras of CIt Vs. V.P. Gopinathan 248 ITR 449 are reproduced as under: 4. Learned counsel appearing for the assessee before the Tribunal had made it clear that the assessee s case did not rest upon the provisions of Section 57(iii) of the Act. In other words, it was not the contention of the assessee, very rightly, that he was paying interest to the bank to facilitate the earning of interest from the bank. 5. The argument before us on behalf of the assessee was that the real income of the assessee is only ₹ 27,034/-. 6. It was not disputed, as it could not be, that if the assessee had taken a loan from another bank and paid interest thereon his real income would not diminish to the extent thereof. The only question then is does it make any difference that he took the loan from the same bank in which he had placed the fixed deposit. There is no difference in the eye of the law. The interest that the assessee received from the bank was income in his hands. It could stand diminished only if there was a provision in law which permits such diminution. There is none, and, therefore, the amount paid by the assessee as interest on the loan that he took from the bank did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exlusively for the purpose of making or earning such income . It is thus clear that as long as expenditure is incurred wholly or exclusively for the purpose earning an income, such, expenditure constitutes an admissible deduction in computation of the income. Reference was made to the case of Raj Kumar Agarwal ITAT AGRA ITA No. 176/Agra/2013 dated 18-07-14(copy enclosed) As can be seen above the case of the assessee falls within the ratio of the judgment of ITAT Agra Bench in the case of Raj Kumari Aggarwal Vs. DCIT Circle 2 Agra in ITA no. 176/Agra/2013 where the facts of the case of assessee are identical. The decision of Hon'ble Supreme Court is distinguishable in view of the fact that factual situation is different as the issue of necessity of loan and the loss arising due premature encashment of FDR was not before the Supreme Court. The ITAT AGRA has also relied upon the SC DECISIONS. Keeping in view the above explained position, it is respectfully prayed that assessee may be allowed deduction as claimed in the return of income at ₹ 28,93,281/-. 5. Ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia Pvt. Ltd. Vs. DCIT, Circle-1(1), Chandigarh in ITA No. 1174/Chd/2017 order dt. 06/02/2019 CIT Vs. U.K. Bose in ITA No. 258/2010 (Del HC) order dt. 30/11/2012 CIT Vs. J.B. Royd in ITA No. 546/2010 (Del HC) order dt. 30/11/2012 8. The Ld. Counsel for the assessee submitted that the Ld. CIT(A) had given the findings without considering the reply of the assessee which shows that the Ld. CIT(A) has prejudged the issue. It was contended that the Ld. CIT(A)referred the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Dr. V.P. Gopinathan reported at 248 ITR 449 which was relied by the A.O. however the said judgment was distinguishable on facts because in the said case there was no issue relating to the disallowance under section 57(iii) of the Act. It was further submitted that in the said case which was relied by the A.O. and considered by the Ld. CIT(A) the loan was taken by the assessee from another bank and interest was paid on the said loan and the interest earned on FDR was from different bank while in the case of assessee the loan was raised against the FDR to save the interest and not to pay the penalty. 9. In his rival submissions the Ld. Sr. DR ..... X X X X Extracts X X X X X X X X Extracts X X X X
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