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TMI Blog2025 (1) TMI 386X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. We are considered opinion that the assessee is entitled to claim a deduction under section 57(iii) of the Act in respect of interest expenditure while computing the income under the head income from other sources . Accordingly, the impugned disallowance made by the AO and upheld by the learned CIT(A) is deleted. Appeal of the assessee is allowed. - Shri Amarjit Singh, Accountant Member And Shri Sandeep Singh Karhail, Judicial Member For the Assessee : Shri Surji D. Chheda, CA For the Revenue : Shri Bhangepatil Pushkaraj Ramesh, Sr.DR ORDER PER SANDEEP SINGH KARHAIL, J.M. The assessee has filed the present appeal against the impugned order dated 29/05/2024, passed under section 250 of the Income Tax Act, 1961 ( the Act ) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [ learned CIT(A) ], for the Assessment Year 2020-21. 2. In this appeal, the assessee has raised the following grounds: The learned CIT(A) has erred in law and in facts in confirming the action of AO to make the addition of interest of Rs. 60,53,499/- inspite of the fact that there is no show cause notice issued for the above addition and failed to appreciate tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has erred in law and in facts to held that the appellant assessee has submitted so much, but appellant has not provided any information so at to bring on record the rate of interest at which the funds have been advanced to various related parties but failed to appreciate that issue in show cause notice was notional interest on loan given and not rate of interest and the appellant has not failed in giving any details demanded either to AO or appellate authorities as apparent from orders. 10. The learned CIT(A) has erred in law and in facts in confirming the action of AO inspite of the fact that the learned AO ought to have allowed the interest expenditure when nothing in the reply is found wrong and there is nothing to suggest that interest expenditure has not been spent for earning income from other source. 3. The brief facts of the case are that the assessee is an individual and is a partner in two partnership firms. For the year under consideration, the assessee declared a total income of Rs. 11,94,710/- under the head salary, business and profession and income from other sources in her return of income filed on 10.01.2021. The return filed by the assessee was selected for scruti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 19.09.2022 passed under section 143(3) r.w.s. 144B of the Act agreed with the contention of the assessee that interest cannot be charged on a notional basis, however restricted the interest expenditure to the rate of 5.22%, i.e., the average rate at which the interest was earned by the assessee. Accordingly, the excess interest expenditure to an extent of Rs. 60,53,499/- was disallowed and added to the returned income of the assessee on the basis that the assessee has failed to furnish any business exigency for which the loan was given at a lower rate. 5. The learned CIT(A), vide impugned order, dismissed the grounds raised by the assessee and inter alia held that the funds taken on interest are being given by the assessee to family members or related firms at lower rate or without interest which is not at all business prudence or business expediency of any nature or at any level. Accordingly, the learned CIT(A) upheld the disallowance of interest expenditure of Rs. 60,53,499/-. Being aggrieved, the assessee is in appeal before us. 6. We have considered the submissions of both sides and perused the material available on record. As evident from the record, the assessee borrow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... related firms. Further, there is no material on record to show that there was any impediment on the assessee to give the money as a loan to her family members or related firms. Thus, there is no material to dispute the fact that the assessee utilized the interest-bearing borrowed funds for advancing the loans to her family members or related firms. In the present case, the Revenue has emphasized on the aspect of business prudence in advancing the loans to the sister concern at lower rates than the rate at which the funds were borrowed by the assessee. In this regard, it is pertinent to note that it is trite law that the test of commercial expediency/business prudence is required to be judged from the point of view of the businessman and not the Revenue. Therefore, we do not find any basis for restricting the interest expenditure claimed by the assessee under section 57(iii) of the Act. 9. During the hearing, the learned DR placed reliance upon the decision of the Hon ble Supreme Court in CIT vs. Dr. V.P. Gopinathan, reported in (2001) 248 ITR 449 (SC). From the perusal of the aforesaid decision, we find that in the facts of the case, the taxpayer did not rest its case upon the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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