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TMI Blog2024 (8) TMI 755X X X X Extracts X X X X X X X X Extracts X X X X ..... d as margin for availing bank loan which was utilized for the business of the assessee, thereby establishing a nexus between the interest earned out of the FD with the business of the assessee and further held that the interest income was rightly netted off with the interest expenditure claimed by the assessee. The co-ordinate bench had relied on various decisions of the Hon'ble High Court and the Tribunal which held that the interest income out of such fund are to be treated as business income and not income from other sources . A.O. has failed to corroborate the fact that the FD made by the assessee is out of the surplus funds held by the assessee in a case where the assessee has borrowed huge advances from banks and has also availed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income received out of the fixed deposits which has not been offered to tax by the assessee in its return of income. 3. The ld. Assessing Officer ('A.O.' for short) passed the assessment order u/s. 143(3) on 29.12.2017 where the total loss was determined at Rs. 2,94,97,640/- after making an addition on the interest income amounting to Rs. 1,87,44,483/- and addition u/s. 36(1)(va) r.w.s. 2(24)(x) of the Act amounting to Rs. 2,36,769/- on the delayed deposits of employees contribution to PF. 4. Aggrieved the assessee was in appeal before the first appellate authority, who vide order dated 01.08.2023 had deleted the addition on the interest income received out of the fixed deposits on the ground that the said fixed deposits was not out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the order of the ld. A.O. 8. We have heard the rival submissions and perused the materials available on record. It is observed that during the year under consideration the assessee has shown the interest income out of the fixed deposit aggregating to Rs. 1.87 crores and had incurred interest expenditure of Rs. 88.19 crores on the bank over draft facility and on the existing term loans. The assessee had netted off the same. The ld. A.O. observed that the assessee has claimed the funds cost of Rs. 88.19 crores on interest and other charges on borrowing which was transferred to inventories as WIP. The ld. A.O. also observed that the assessee had advanced interest free loan of Rs. 440,31,75,517/- to related parties which according to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in the case of CIT vs. Abhishek Industries Ltd. 205 CTR P H 304, 2006 286 ITR 1 P H), wherein it was held that on identical facts, the Hon'ble High Court had disallowed the interest. The ld. A.O. disallowed the netting off thereby reducing the inventory in WIP from Rs. 7,32,70,123/- to Rs. 704,74,60,471/- and made an addition on the impugned interest income. The ld. CIT(A), on the other hand, held that the fixed deposits credited by the assessee was not out of the surplus fund, but it was only for availing banking facilities and that the assessee company was already paying a higher interest rate against bank over draft facilities and the existing term loan. The ld. CIT(A) relied on the decision of his predecessor in assessee s case f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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