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TMI Blog2011 (6) TMI 1009X X X X Extracts X X X X X X X X Extracts X X X X ..... the firm, which was disallowed u/s 14A r.w.r 8D of I T Rule by the Assessing Officer . 3. The assessee is a partner in the firm/S Signet Chemical Corporation. He has earned interest @ 12% on the capital contributed in the partnership firm as per the partnership deed. Part of the capital in the firm contributed out of the money borrowed from the bank. The assessee had claimed interest expenditure of ₹ 24,40,917/- paid on the bank overdraft facility in the capital assets against the interest income of ₹ 1,46,13,460/- earned on the capital invested in the firm. The total interest received by the assessee includes the interest of ₹ 40,66,150/- earned from the firm only in the capital contributed by it out of bank overdraft. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred the details of the capital balances of various partners in the firm and profit sharing ratio amongst the partners and submitted that there is no direct relation between the profit sharing ratio of the partners and their capital invested in the partnership firm. He has supported the order of the CIT(A) and submitted that it is settled proposition of law that the interest paid on funds for the purpose of contribution in the partnership firm cannot be treated as expenditure incurred for earning profit in the partnership firm. Moreover, in the partnership deed, interest payment is provided on the capital invested by the partner; therefore, there is no direct nexus between the capital invested by the partner and the profit-sharing ratio. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hip firm is treated as business income in the hands of the partners as per sec. 28(v) then any expenditure incurred in relation to the earning of the said income, which is treated as income from business or profession is allowable claim against the said income. An Identical issue has been considered and decided by the coordinate Bench of the Tribunal in the case of Delite Enterprise (P) Ltd (supra), in which one of us - Judicial Member - is the party, wherein the Tribunal has decided the issue in para 13 as under: "13. From the facts mentioned above it has been clearly noticed that the assessee borrowed funds from M/s Reliance Capital Limited and the same funds were invested in M/s Sreenath Enterprises. One to one nexus between the borrow ..... X X X X Extracts X X X X X X X X Extracts X X X X
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