9911796707
TMI Blog2024 (3) TMI 771X X X X Extracts X X X X X X X X Extracts X X X X ..... excess of the interest charged on loans given by the assessee. Which means that in sum and substance he accepted the usage of interest bearing funds for earning interest income when he allowed that portion of interest expense which was in parity with the interest charged by the assessee on loans/advances given. Having accepted this fact therefore the AO was precluded from making any disallowance of interest u/s. 57(iii) since the only requirement to be fulfilled for claiming expenses under the said section is that they must have been incurred wholly and exclusively for the purpose of earning income from other sources. What is relevant therefore is only the nexus of expenditure for earning income and the quantum of expenditure incurred there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at there ought to be a clear nexus between the expenditure incurred and the income earned as observed in SETH R. DALMIA VERSUS COMMISSIONER OF INCOME-TAX, DELHI [ 1977 (9) TMI 1 - SUPREME COURT] . AO has not stated as to how in the light of the facts stated by the assessee, the nexus was not established, he has just summarily dismissed the contention of the assessee. In the absence of the AO pointing out as to how despite the assessee s explanation, there was no nexus between the interest bearing-funds and their utilization for making advances for earning interest income, no disallowance u/s. 57(iii) of the Act was tenable. Assessee appeal allowed. - Smt. Annapurna Gupta, Accountant Member And Ms. Madhumita Roy, Judicial Member For the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Act, 1961 (hereinafter referred to as the Act for short) amounting to Rs. 54,32,948/-. The orders of the authorities below reveal the facts of the case as that the assessee had shown interest income of Rs. 1,08,39,837/- under the head income from other sources and claimed expenses against the same of Rs. 1,08,52,717/-. Thus, the assessee has returned the loss of Rs. 12,880/- under the head income from other sources . Out of this claim of Rs. 1.08 crores of interest expenses the Assessing Officer disallowed expenses to the tune of Rs. 54,32,948/- which were in relation to loans taken by the assessee on which the rate of interest paid was found to be more than the rate at which the loans were advanced. The Assessing Officer noted that whil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above, he has disallowed that portion of the interest expense incurred on loans taken which was in excess of the interest charged on loans given by the assessee. Which means that in sum and substance he accepted the usage of interest bearing funds for earning interest income when he allowed that portion of interest expense which was in parity with the interest charged by the assessee on loans/advances given. Having accepted this fact therefore the AO was precluded from making any disallowance of interest u/s. 57(iii) of the Act since the only requirement to be fulfilled for claiming expenses under the said section is that they must have been incurred wholly and exclusively for the purpose of earning income from other sources. What is releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.1 Therefore, clearly the disallowance made u/s. 57(iii) of the Act of Rs. 54,32,948/- is contrary to law as interpreted by the Revenue authorities themselves. Moreover, we have noted that the Revenue authorities have also misinterpreted the provision of section 57(iii) of the Act by stating that expenses under the section can be allowed only if income is earned from the incurrence of the said expense, and the term income means profit earned. The Revenue authorities have made the disallowance in the present case noting that assessee had made losses and therefore as earned no income. This finding of the Assessing Officer is at Paragraph No.5.6 of his order reads as under: 5.6. Now coming to the reply of the assessee and the contention that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n comparison to the interest income earned. If no income was earned by the assessee, as is the case of the Revenue authorities, then the entire interest expense ought to have been disallowed. Further, we find that the Assessing Officer mentions at Paragraph No.5.8 in his order that the assessee claimed to have been interest from his OD account with Kalupur Bank for lending money and receiving money and thus establishing nexus between the funds borrowed on interest and utilized for making advances for earning interest thereon for claiming interest expenses against the interest income earned. We find that the Assessing Officer has dismissed this contention of the assessee stating that there ought to be a clear nexus between the expenditure in ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
