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TMI Blog2024 (2) TMI 1532X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Appellant : Mr. Sunil Agarwal, SSC with Mr. Shivansh B. Pandya, JSC, Mr. Utkarsh Tiwari & Mr. Amaan Ahmed Khan, Advs. For the Respondent : Mr. Ajay Wadhwa, Ms. Ragini Handa & Mr. Ujjwal Jain, Advs. ORDER 1. The Income Tax Department ["Department"] questions the correctness of the order rendered by the Income Tax Appellate Tribunal ["ITAT"] dated 23 November 2017 and proposes the following questions of law for our consideration: A. Whether on the facts and circumstances of the case, the ITAT is legally justified in deleting the disallowance of Rs. 12,02,07,944/- made by the Assessing Officer on account of interest expenses even when the assessee had not started its business activities? B. Whether on the facts and circumstance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... findings: "10. We have carefully considered the arguments of both the sides and perused the material placed before us. The Revenue has heavily relied upon the decision of Hon'ble Apex Court in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd. (supra). The facts in that case were that for the purpose of setting up of the factories, the company had taken term loans from various banks and financial institutions. That part of the borrowed funds which was not immediately required by the company was kept invested in short-term deposits with banks. Such investments were specifically permitted by the memorandum and articles of association of the company. The company had also deposited certain sums with the Tamil Nadu Electricity Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. In view of the conflict of decisions between the Madras and Andhra Pradesh High Courts, the Tribunal referred the question regarding taxability of income, directly to the Supreme Court. 11. From the above, it is evident that in the said case, the term loans were obtained from the bank and financial institutions for the purpose of setting up of the factories. However, part of the borrowed funds which was not immediately required for the purpose for which it was borrowed, the same was invested in short term deposit by the bank. Initially, the assessee offered the interest received as its income from other sources which was set off against the business loss. Subsequently, the assessee filed revised return and claimed that interest income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct and clear nexus of money borrowed by the assessee and the money advanced by the assessee. 13. In the case of Tuticorin Alkali Chemicals and Fertilizers Ltd. (supra), admittedly, the money was borrowed for the purpose of setting up of the factory. However, since the borrowed funds were not immediately required, the same were invested in short term deposits with the bank. However, the facts in the case of the assessee are altogether different. The main object as per memorandum of articles of association is the development of infrastructure and real estate business. However, during the year under consideration, no infrastructure project or real estate development project had commenced and therefore, the question of borrowing of any money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowable u/s 57(iii). In the case under appeal before us, we find that the borrowed money has been utilized for the purpose of giving advances to others. There is a direct nexus between the money borrowed by the assessee and money advanced by the assessee. The assessee paid interest on the money borrowed by it and has received the interest on the money advanced by it. Therefore, we have no hesitation to hold that the interest paid by the assessee was incurred wholly and exclusively for the purpose of earning of interest income and therefore, the same was rightly claimed u/s 57(iii) and the learned CIT(A) rightly directed for allowing the same. 16. On these facts, the decision of Hon'ble Jurisdictional High Court in the case of Vodafon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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