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TMI Blog2025 (4) TMI 647X X X X Extracts X X X X X X X X Extracts X X X X ..... gwith reasons and evidences. 2)The learned CIT(A) has erred in law and in facts to confirm disallowance of interest expenses of Rs. 1,20,39,731/- claimed under income from other sources under sec 57(iii) of Income tax act. 3) The learned CIT(A) has erred to held that claiming deduction under sec 57(iii) of income tax act is a colorable device without bringing anything on record. 4)The learned CIT(A) has erred in law and in facts to confirm disallowance of interest inspite of fact that the learned AO has not considered submission and explanation provided. 5) The learned CIT(A) has erred in disallowing interest expenditure on wrong facts as observed para 6.5 & 6.6. of appeal order. 6) The learned CIT(A) has erred in disallowing interest expenditure on the ground of human probability. 7) The learned CIT(A) has erred in disallowing interest expenditure on the wrong fact that there is no claim of expenditure u/s 57(iii) for A.Y 2016-17. 8) The appellant craves leave to add, alter, delete or modify all or any the above ground at the time of hearing." 2. The brief facts of the case are that the assessee is an individual and during the year under consideration, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that the assessee had extended loans to various companies, the aggregate amount of which stood at Rs. 14,81,30,686/-. The details of these transactions, as submitted by the assessee, are as follows: Total unsecured Loan Rs. 18,68,37,305.00 Less: Interest bearing fund Rs. 17,45,12,305.00 Non-interest-bearing loan Rs. 1,23,25,000.00 LOAN GIVEN Total Loan given Rs. 14,81,30,686.00 Interest bearing loans Rs. 13,85,79,921.00 Non-interest bearing loan Rs. 90,50,765.00 The assessee had obtained loans for the purpose of maintaining the capital structure of a company in which the assessee serves as a director, and the borrowed funds were subsequently advanced to the said company. The average interest rate on the unsecured loans from creditors ranged between 9% and 12%, which was also the prevailing rate for the loans extended to the company. Out of the total interest, a sum of Rs. 23,34,069/- was suo motu disallowed by the assessee in the computation of income, on the ground that the amount of loans received exceeded the amount of loans advanced. This issue was previously raised and adjudicated in favour of the assessee by the ITAT, Mumbai Bench-G, in the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iance placed by the learned DR on the aforesaid decision is completely misplaced. 10. The learned DR also placed reliance upon the decision of the Hon'ble Kerala High Court in Mathew Joseph vs. ACIT, reported in (2017) 87 taxmann.com 317 (Kerala) and the decision of the Hon'ble Jurisdictional High Court in CIT vs. United Wire Ropes Ltd. reported in (1980) 121 ITR 762 (Bom). From the perusal of the aforesaid decisions, it is evident that the loan was given to the taxpayer for a specific purpose for which interest was payable and thus there was no permission by the bankers for the usage of the amount for a purpose other than for which it was given. Accordingly, the Hon'ble Courts denied the deduction claimed under section 57 of the Act. In the present case, no material has been brought on record to show that the assessee was barred by the loan lenders from further transferring the funds to the family members or related firms on loan. Thus, we are of the considered view that the transaction in this case stands entirely at a different footing and therefore, the aforesaid decisions relied upon by the learned DR are factually distinguishable. 11. Further, the learned DR placed relian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowed by the Ld.AO was fully justified and ought to be sustained. The relevant paragraphs of the Ld. DR's written submission are reproduced below: "The CIT(A) in para 6.5 also noted the assessee filed ITR-2 (for individuals not having proprietary business) in A.Y. 2017-18, whereas he had filed ITR-3 (business return) earlier. The assessee's grievance on this point is unclear, but nothing turns on it except to evidence that the assessee had no self-run business in 2017-18. This aligns with the assessee's status as an individual with income from salary, house property, and other sources. There is no dispute here to resolve - CIT(A) did not disallow the claim because of the ITR form used, but simply used it to emphasize the lack of business activity. * Ground 5's reference to "wrong facts in para 6.5 & 6.6" appears to allude to CIT(A)'s quantification of loans and their usage. In para 6.6, CIT(A) observed (in substance) that out of 220.42 crore borrowed, only about 714.64 crore was given as interest-bearing loans, while 25.78 crore went into non-income-yielding investments. The figure "214.64 lacs" in one line is a typographical error in the order it shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, contrary to the intent of the law and numerous judicial pronouncements. The AO's order (as upheld by CIT(A)) is a reasoned one, backed by Supreme Court and High Court rulings, and does not suffer from any procedural unfairness or factual mistake that would warrant interference. We pray that the Hon'ble ITAT be pleased to dismiss the assessee's appeal, and uphold the addition of Rs.1,20,39,731/- to the assessee's total income. This will ensure that the assessee is taxed on the real income (gross interest) as mandated by law, without the shelter of an illusory deduction." 5. We have heard the rival submissions and perused the documents available on record. Upon examination, we find that apart from interest income from property and business amounting to Rs. 8,37,810/- and Rs. 5,71,487/- respectively, the assessee also earned interest income from loans amounting to Rs. 1,43,73,800/-. It is observed that the assessee had borrowed funds exceeding the amount lent. Accordingly, the assessee computed a proportionate interest expense of Rs. 23,34,069/-, which was voluntarily disallowed suo motu in the computation of income. The Revenue has relied on the judgment of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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