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TMI Blog2021 (4) TMI 665X X X X Extracts X X X X X X X X Extracts X X X X ..... n granted by its holding company to M/s GBL which was also transferred to the assessee under the said agreement. The net interest, thus earned, has been offered to tax. We find that there is clear nexus between the interest income as well as interest expenditure. As rightly noted by Ld. CIT(A), it was not the case the case where the funds were borrowed for the purpose of business and the excess funds were parked by the company for earning interest income. This was a case where the funds for the Lohegaon project were transferred separately and the loan to GBL in the books of the holding company was transferred to the assessee along with equal liability. There was a direct nexus of loan (asset) with loan (liability) in the books of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessment for the year under consideration was framed by Ld. Assessing Officer u/s 143(3) on 27/12/2016. The assessee being resident corporate assessee is stated to be engaged in development of infrastructure projects. 3. We have carefully heard the rival submissions and perused relevant material on record including the orders of lower authorities. Our adjudication to the subject matter of appeal would be as given in succeeding paragraphs. 4.1 The impugned interest disallowance stems from the fact that during assessment proceeding, it transpired that the assessee entered into an agreement on 30/03/2013 with its holding company namely B.E.Billimoria Co. Ltd. (BEBL) wherein Lohegaon Project situated at Pune being developed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GBL loan to the assessee, BEBCL was earning interest and paying tax thereon. It is seen that BEBCL transferred the Lohegaon project receipts and expenses to the assessee company. It is also seen that BEBCL also transferred the loan given to the GBL to the books of the assessee along with equal amount of liability on which the assessee was liable to pay interest to BEBCL. The interest earned from the GBL has a direct nexus with funds of BEBCL for which the appellant paid interest. This has been sufficiently demonstrated by the assessee through the accounts of the company. Therefore the interest paid to BEBCL cannot be capitalized to Lohegaon project as the interest paid to BEBCL has anything to do with funds used in Lohegaon project. Thus th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s loan from M/s BEBL to the assessee for which the assessee paid interest expenditure of ₹ 398.52 Lacs during the year. The assessee also earned interest income of ₹ 423.17 Lacs from loan granted by its holding company to M/s GBL which was also transferred to the assessee under the said agreement. The net interest, thus earned, has been offered to tax. We find that there is clear nexus between the interest income as well as interest expenditure. As rightly noted by Ld. CIT(A), it was not the case the case where the funds were borrowed for the purpose of business and the excess funds were parked by the company for earning interest income. This was a case where the funds for the Lohegaon project were transferred separately and the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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