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TMI Blog2022 (7) TMI 842X X X X Extracts X X X X X X X X Extracts X X X X ..... esides the above we have referred the paper book filed by the learned AR running and note that the assessee has filed the capital account maintained in the partnership firm which is placed - DR at the time of hearing has also not brought anything on record contrary to the arguments advanced by assessee. Thus, we hold that the expense shown by the assessee in the form of interest to the partnership firm is genuine. Whether the interest expense can be adjusted against the interest income? - As relying on Raj Kumar Aggarwal [ 2014 (7) TMI 867 - ITAT AGRA] we hold that the interest expense was incurred by the assessee on the money borrowed from the partnership firm as he failed to recover the deposits from the company. Thus, in our consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made deposits in a company known as Lubgraf Synoils Pvt. Ltd. on which he was earning interest income. As such the assessee in the year under consideration has claimed to have earned interest income for an amount of Rs. 19,51,695 only. The assessee has adjusted the amount of interest expenses against the interest income. 4. However, the AO was not satisfied with the adjustment made by the assessee against the interest income. According to the AO the fund borrowed from the partnership firm was utilized for the purpose of acquiring the residential property which is a personal asset. Therefore, the impugned interest expense being personal in nature cannot be adjusted against the income earned by way of interest on the deposits made with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany, the same would have been utilized for the purpose of acquiring the residential property instead of borrowing the money from the partnership firm. Thus in such a situation, there would not have been incurred any interest expenses and generated any interest income. Accordingly, there would not have been any question of showing interest income as well as claiming the interest expenses. In view of the above, the assessee prayed to the learned CIT-A to delete the addition made by the AO. 7. However the learned CIT-A was not satisfied with the contention of the assessee on the reasoning that the money borrowed from the partnership firm on interest was utilized for the personal purposes i.e. purchase of residential property. Therefore, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DR at the time of hearing has also not brought anything on record contrary to the arguments advanced by the learned AR for the assessee. Thus, we hold that the expense shown by the assessee in the form of interest to the partnership firm is genuine. 11.1 The 2nd controversy arises whether the interest expense can be adjusted against the interest income. Admittedly, the borrowed fund was utilized for the purchase of essential property which was not uses for the purpose of the business. Therefore, such interest expenses, generally should not be allowed as deduction. However, the facts of the case on hand are different and bit peculiar. It is for the reason that there were certain deposits made by the assessee in a company but the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overlooks is whether the expenditure is incurred for directly contributing to the beginning of or triggering the source of income or whether the expenditure is for protecting, and thus keeping alive, that source of income, in either case it is expenditure incurred wholly and exclusively for the purpose of earning that income. 11.3 The facts of the case on hand are identical to the facts of the case discussed in the aforesaid case. Accordingly, we hold that the principles laid down by the tribunal in the case as discussed above are squarely applicable to the present facts of the case. Therefore, we hold that the interest expense was incurred by the assessee on the money borrowed from the partnership firm as he failed to recover the dep ..... X X X X Extracts X X X X X X X X Extracts X X X X
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