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TMI Blog2022 (1) TMI 414X X X X Extracts X X X X X X X X Extracts X X X X ..... g his jurisdiction for initiating proceedings under section 263 of the Act, without appreciating that the Ld. AO had passed the assessment order after making due enquiries and verification of records and hence the said order is not erroneous and/or prejudicial to the interest of the revenue. The Appellant prays that the order passed under section 263 is not in consonance with the provisions of the Act and hence liable to be quashed. 3* On the facts and in the circumstances of the case and in law, the Ld. Pro CIT erred in initiating proceedings under section 263 of the Act on the ground that interest paid of Rs. 3,62,71,333 should be allowed as deduction in computing business income and not from Income from other sources. The Appellant prays that the Ld. AO was correct in allowing deduction of interest expenses of Rs. 3,62,71,333 while computing income under the head 'Income from Other Sources' and hence, the assessment order cannot be treated as erroneous and / or prejudicial to the interest of the revenue. 4* On the facts and circumstances of the case and in law, the Ld. Pro CIT erred in initiating proceedings under section 263 of the Act on the ground that disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 57(iii), the same needs to be expended wholly and exclusively for the purpose of earning such Income. Hence the expenditure claimed on account of Interest payments amounting to Rs. 3,62,71/333/- is not an allowable deduction u/s.57(iii) from out of the Income from other sources, even though, the same can be allowed under the head 'Income from business', 3.1 Thus, according to the CIT, Income from business and therefore deduction u/s. 80IA had been computed at a higher figure to this extent and Income from other sources had been computed by allowing expenditure of Rs. 3,62,71,333/- which is not allowable. 3.2. In view of the above, the CIT held that the order passed by the AO u/s 143(3) of the Act dated 30.11.2016 was apparently erroneous in so far as it is prejudicial to the interests of revenue as per the provisions of section 263 of IT Act. Accordingly, a show cause notice u/s. 263, dated 13-11-2018 was issued to the assessee as to why the Assessment order dtd. 30-11-2016 should not be revised as per the issues mentioned therein. 4. In response to the above said notice dtd.13-11-2018, the AR of the assessee submitted as under: 2.0 The first relevant issues are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'Income from business'. Therefore, the Income arrived in the Assessment order has to be recomputed as under: Income under the head - Business: Loss returned from business Rs. 1,10,08,215 Add: Disallowance U/s. 14A Rs. 2,67,05,035 Income from business Assessed Rs. 1,56,96,820 Less: Interest expenditure claimed under the head "income from other sources" Rs. 3,62,71,333 Loss from business Rs. 2 05,74,513 Income under the head-Other sources: Income admitted u/s 56(2)(viia) Rs. 96,21 893 Interest received - ICD, FDR & Others Rs. 21,19,85,085 Income from other sources Rs. 22,16,06,978 computation of Total Income: Loss from business Rs. 2,05,74,513 Income from other sources Rs. 22,16,06,978 Income from house property Rs. 13,63,103 Taxable income Rs. 20,23,95,568 e, Thus, the income should be assessed at Rs. 20,23,95,568/- as against income assessed u/s. 143(3) at Rs. 18,66,98,748/-. This resulted in short computation of Income to the tune of Rs. 1,56,96,820/-. 2.1 On this Issue, the reply of the assessee is as under: I. Note on claim of interest expenditure under the head 'Income from Other sources' During t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he CIT observed that it is clear that the assessee is unable to show how the interest expenditure was claimed can be allowed against the income from other sources. The assessee failed to prove the nexus between the interest income and expenditure incurred. The assessee claimed expenditure u/s.57(iii) of Rs. 3,62,71,333/-(Interest on term loan from IDFC Anthiyur unit Rs. 2,18,33,217 + Interest expenses considered In other sources Rs. 1,44,38,116) from out of the other sources amounting to Rs. 21,19,85,085/-(Interest received on FDs, ICDs & CCD) as against the correct claim of such interest expenditure against business income. Therefore, this expenditure has to be allowed against Income assessed under the head income from business as narrated in the show cause notice re-produced supra, and the deduction u/s 80lA deserves to be recomputed accordingly. 5.1 In view of the above, the CIT held that the order passed u/s. 143(3) dated 30-11-2016 Is erroneous and prejudicial to the interest of revenue on the above issue as the expenditure of Rs. 3,62,71,333/- has been wrongly allowed against Income from other Sources and deduction u/s 80IA has been allowed is excess as detailed above. 6. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thiyur unit Rs. 2,18,33,217/- and ii) interest expenses considered in other sources Rs. 1,44,38,116/- totalling to Rs. 3,62,71,333/-. According to CIT, as per the provisions of Section 57(iii), the same needs to be expended wholly and exclusively for the purpose of earning such income. Hence the expenditure claimed on account of interest payments amounting to Rs. 3,62,71/333/- is not an allowable deduction u/s.57(iii) from out of the Income from other sources, even though, the same can be allowed under the head 'Income from business'. Since the assessee failed to prove the nexus between the interest income and expenditure incurred, the CIT set aside the order of AO, who allowed the same under the head "income from other sources". Even before us, the ld. AR of the assessee failed ot prove the nexus between the interest income and expenditure incurred and, therefore, we uphold the order of CIT on this issue and dismiss the grounds raised by the assessee on this issue. 11. As regards ground No. 4 relating to the disallowance u/s 14A should also be added to the profits compute du/s 115JB, , the ITAT in the AY 2008-09 being ITA No. 196/Del/2013 vide order dated 25-4-2016, repor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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