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TMI Blog2020 (1) TMI 1245X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest from partnership firm and other parties, however, the substance of the matter is that where there is a nexus established between the borrowed funds and lending thereof, as in the instant case, a principle which is relevant both in context of business income and income from other sources, therefore, in such circumstances, there is no basis for disallowance of interest expenditure. The fact that the assessee has wrongly claimed the same in the return of income under one head instead of both the heads proportionally is not a bar against allowance of such claim of expenditure under respective heads when the substance of the transaction that the borrowed funds have been utlised for subsequent lending has not been disputed by the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upholding the action of AO in treating the agricultural income of ₹ 45,600/- as non agricultural income. 2. During the course of hearing, the ld AR submitted that the assessee in the return of income has declared interest from partnership firm M/s SRS Builders and M/s Murliwala Builders at ₹ 8,53,556/- under the head income from business and interest from parties at ₹ 5,11,292/- under the head income from other sources . He also paid interest on the funds borrowed at ₹ 6,63,196/- and claimed it as deduction under the head income from other sources . The AO observed that assessee has not furnished satisfactory explanation as to how the interest expenses relate to earning of interest income when the loans taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s deployed, interest received is ₹ 13,64,848/-. Thus, it is evident that borrowed funds had been utilised for earning the interest income from partnership firm and other parties. The ld. CIT(A) has also accepted this fact but only on the ground that assessee has not claimed the interest expenditure against the interest income from partnership firm has disallowed the entire claim of interest. This is not justified as there is no bar in the Act that if assessee has claimed the deduction of expenditure under one particular head of income, the same cannot be allowed under any other head of income. Further, disallowance of the entire expenditure even as per ld. CIT(A) is not justified for the reason given by her for confirming the disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch circumstances, there is no basis for disallowance of interest expenditure. The fact that the assessee has wrongly claimed the same in the return of income under one head instead of both the heads proportionally is not a bar against allowance of such claim of expenditure under respective heads when the substance of the transaction that the borrowed funds have been utlised for subsequent lending has not been disputed by the Revenue and a specific contention was raised before the lower authorities. In the result, the ground of appeal is allowed. 7. Regarding ground no. 2, the ld. AR submitted that the assessee owned 1.33 bigha of land at village Mangarh, Tehsil Basi on which he declared agricultural income of ₹ 45,600/-. The AO tre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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