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TMI Blog2020 (12) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... rship firm wherein assessee was a partner, there cannot be any question of disallowance of interest on the borrowings. As relying on RAJENDRA PRASAD MOODY [ 1978 (10) TMI 133 - SUPREME COURT] we direct the ld. AO to delete the disallowance of interest under the head income from other sources . Disallowance of brokerage on borrowed loan - AO observed that the said expenditure is not incurred for the purpose of earning income under the head income from other sources and accordingly sought to disallow the same - HELD THAT:- There is no dispute that the borrowings made by the assessee were utilised for the purpose of investment in partnership firm from where interest has been received by the assessee and taxed under the head income fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Assessee : Shri K. Gopal / Ms. Neha Paranjpe For the Revenue : Shri R. Bhoopathi ORDER PER M. BALAGANESH (A.M): This appeal in ITA No.1518/Mum/2019 for A.Y.2012-13 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-26, Mumbai in appeal No.CIT(A)-26/IT-10193/2017-18 dated 31/12/2018 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3)of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 23/03/2015 by the ld. Income Tax Officer 27(2)(3), Mumbai (hereinafter referred to as ld. AO). 2. The first issue to be decided is with regard to disallowance of interest made u/s.57(iii) of the Act in the sum of ₹ 2,79,594/-. The interconnected issue involved thereon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad pleaded that the average rate of interest paid is only 13.4% and not 15% as observed by the ld. AO. This is in view of the fact, certain borrowings were made by the assessee at reduced rate of interest. We find that once the borrowings were accepted as genuine and one to one nexus is found to have been proved that the said borrowings were indeed utilised for investment in a partnership firm wherein assessee was a partner, there cannot be any question of disallowance of interest on the borrowings. Reliance in this regard is placed on the decision of Hon ble Supreme Court in the case of CIT vs. Rajendra Prasad Moody reported in 115 ITR 519 wherein it was held as under:- What section 57 (iii) requires is that the expenditure must be la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is. We find that there is absolutely no dispute that assessee had paid brokerage of ₹ 1,73,392/- to three parties for arranging loans for the assessee. As stated supra, there is no dispute that the borrowings made by the assessee were utilised for the purpose of investment in partnership firm from where interest has been received by the assessee and taxed under the head income from other sources. Hence, the brokerage paid becomes an expenditure incurred for the purpose of earning interest income in terms of Section 57(iii) of the Act and is squarely allowable as deduction. We find that the ld CIT(A) had deleted ₹ 73,392/- and sustained an adhoc disallowance on account of brokerage to the tune of ₹ 1,00,000/-. We direct the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat both the AO as well as ld. CIT(A) had only estimated the fair rental value of the house property without disputing the submissions made by the assessee before them. At the same time, we find that the rental income stated by the assessee @5,000/- per annum seems to be on the lower side. Hence in order to meet the ends of justice, we direct the ld. AO to determine the fair market value of property @₹ 10,000/- supra and from that statutory deduction of 30% should be given to the assessee and accordingly remaining sum of ₹ 7,000/- should be taxed as income from house property . Accordingly, the ground No.3 raised by the assessee is partly allowed. 5. In the result, appeal of the assessee is partly allowed. Order pronounce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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