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TMI Blog2021 (2) TMI 169X X X X Extracts X X X X X X X X Extracts X X X X ..... out wholly and exclusively for the purpose of business or profession' - HELD THAT:- Since the funds were borrowed from external sources, interest was payable by the assessee to its unsecured lenders. The partner claimed the deduction which it was entitled u/s 36(1)(iii) and 37 with income earned from other sources of income under the same head i.e. Vehicle hire, Commission Income and Consultancy income. This resulted in a loss arising from one source under the head business which was set-off with another source of income under the head of PGBP in terms of section 70. Interest, salary, bonus, commission or remuneration received or receivable from the firm by the partners shall be assessable in the hands of the partners as income from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : Shri. Narendra Sharma, Advocate Revenue by : Shri. Ganesh R. Ghale, Jr. Standing Counsel ORDER This is an appeal by the assessee against the order dated 21.05.2019 of CIT(A), Bengaluru, relating to Assessment Year 2016-17. 2. The only issue that arises for consideration in this appeal is as to whether the Revenue authorities were justified in disallowing a sum of ₹ 23,23,496/- which was claimed as interest expenditure in relation to business of the assessee. 3. The assessee is an individual. The assessee filed his Income tax return for the AY 2016-17 on 21.12.2016, declaring Total Income of ₹ 8,01,860/-. The assessee is a partner in the firm M/s Rama Hi-Power Tech and all income from the partnership firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 3 Commission Income 12,07,082 4 Interest on Partner capital from M/s Rama Hi-Power Tech NIL TOTAL 27,30,129 Less: Interest on borrowed funds (23,23,496) Net income taxable under head PGBP 4,06,633 5. The assessee was engaged in other business in his personal capacity viz., i.e. Vehicle hiring business, Commission Income and Consultancy services. The income from these businesses were set off against loss from the business of Income and salary from the par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee is in appeal before the Tribunal. We have heard the rival submissions. The learned AR reiterated submissions made before AO and the learned DR relied on the order of the CIT(A). 8. We have carefully considered the rival submissions. It is an undisputed fact that in AY 2016-17 the partnership firm incurred heavy losses from its business and was not in a position to pay any interest on capital for the investment. Due to the poor financial condition of the partnership firm, the partners of the firm mutually decided to delay the withdrawal of interest on capital from the partnership and withdraw the same only when the partnership firm starts making profits. Though the partners were entitled to interest on capital @12% p.a. from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1969) 74 ITR 57 (SC) held the share of the partner as business income in his hands and being business income expenditure necessary for the purpose of earning that income and appropriate allowances are deductible there from in determining the taxable income of the partner. The Court held that the amount paid as salary and bonus to staff, expenditure for maintenance and depreciation of motor cars and travelling expenses expended by him in earning the income from firm are deductible from the income. The Delhi High Court in CIT vs. Sohan Lal Nayar (1974) 95 ITR 90 (Del) held that section 67(3) is not exhaustive and any deduction otherwise allowable under section 37(1) will have to be allowed even if it does not fall within the ambit of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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