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TMI Blog2023 (1) TMI 527X X X X Extracts X X X X X X X X Extracts X X X X ..... it was not having any liquid fund and therefore it was not in a position to return the money to the assessee for the purpose of the investment. In such a situation, the assessee prudently decided to borrow the money from the partnership firm on interest as there was no loss to the assessee. We are of the view that in the given facts and circumstances the assessee should not be penalized by way of making the disallowance of interest expenses. Whether the impugned interest expense was capital in nature and therefore the same cannot be allowed as deduction under section 57(iii)? - We note that the order of the authorities below is silent. Nevertheless, what is gathered from the preceding discussion is that the assessee has not capitalize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : Shri Dilip Kumar, Sr. D.R ORDER PER WASEEM AHMED, ACCOUNTANT MEMBER: 1. The captioned appeal has been filed at the instance of the assessee against the order of the Learned Commissioner of Income Tax(Appeals), Gandhinagar, Ahmedabad dated 05/02/2018 arising in the matter of assessment order passed under s.143(3) of the Income Tax Act, 1961 (here-in-after referred to as the Act ) relevant to the Assessment Year 2014-15. 2. The assessee has raised the following grounds of appeal: 1. The learned CIT(A) has erred both in law and on facts of the case in confirming the action of AO in disallowing interest expense paid to Gokul Overseas of Rs. 1,15,64,054/- u/s. 57 of the Act. 2. The learned CIT(A) has erred both in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rief are that the assessee in the present case is an individual and deriving income from firm, property and interest income. The assessee is also a partner in the partnership firm namely M/s Gokul Overseas. The assessee time to time on need basis was withdrawing money from the partnership firm in the form of loan and as per partnership deed the assessee was required to pay interest @ 12% to the firm on withdrawal. The total outstanding liability of the assessee on account of withdrawal from the firm was standing at Rs. 10,52,07,072/- on which assessee incurred interest expenditure of Rs. 1,15,64,054/- only. 5. The assessee, likewise, has made deposits and advanced loan to two parties namely M/s Gokul Infracon Pvt. Ltd and M/s Gokul Found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case, assessment order and submission filed by the appellant. The AO disallowed the interest expenses claimed by the appellant as paid to Gokul Overseas in view of the fact that the fund received from Gokul Overseas where the appellant is a partner, has been utilized for acquisition of immovable property by her, jointly with her husband. The appellant has claimed that she had sufficient funds and that there was direct nexus between the interest paid and interest income earned. It is seen from the material on record that the funds transferred to the appellant from Gokul Overseas amounting to Rs.3,14,91,750/- have been used to make payment for a plot to Gokul Infracon Pvt. Ltd. In fact even the fees for stamp duty and registration of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st expenses as there is a direct nexus. 9. On the other hand, the learned DR before us vehemently supported the order of the authorities below. 10. We have heard the rival contentions of both the parties and perused the materials available on record. The facts of the case are not in dispute which have been elaborated in the preceding paragraph. Therefore, for the sake of brevity and convenience, we are not inclined to repeat the same. The controversy arises before us further the assessee is eligible for deduction of the interest expenses paid on the money borrowed from the partnership firm which was utilized in making the personal asset being land against the interest income earned from the deposits made with the parties namely M/s Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of interest expenses. 10.1 Moving further, a question also strikes to our mind whether the impugned interest expense was capital in nature and therefore the same cannot be allowed as deduction under section 57(iii) of the Act. In this regard, we note that the order of the authorities below is silent. Nevertheless, what is gathered from the preceding discussion is that the assessee has not capitalized the interest expense incurred by him. It is for the reason that the assessee has claimed the interest expense against the interest income which evidences that the assessee has not claimed any interest expenses as capital in nature. Moreover, if we apply the reasoning given in the immediate preceding paragraph that had the assessee not borro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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