TaxTMI 
TaxTMI 
2018 (10) TMI 849
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.... on all the points of additions and disallowances. 2. That on the facts and circumstances of the case, the Learned Commissioner of Income Tax (Appeals) has erred in upholding the action of the Assessing Officer deduction ? 20,71,233/-, out of interest paid on loan taken for payment of booking in a future project being developed by M/s. Ansals Properties & Infrastructure Ltd.(Ansals) against interest received by the appellant on cancellation of the booking. 3. That on the facts and circumstances of the case, the Learned Commissioner of Income Tax (Appeals) has erred in not adjudicating on Ground No. 3 relating to action of the Ld. Assessing Officer adopting the figure of income under the head "Income from Other Sources" at ....
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....nder : Financial Year Ending Amount 31.03.2008 485,251 31.03.2009 10,25,375 31.03.2010 9,57,124 31.03.2011 9,65,176 34,32,926 During the impugned year, the HUF cancelled the booking from M/s. Ansal Properties & Infrastructure Ltd., since no project was forthcoming and took back the amount paid to them. On the refund of booking amount of Rs. 75,00,000/-, M/s. Ansal Properties & Infrastructure Ltd. gave interest of Rs. 20,71,233/-. The HUF set off the interest received from the interest paid to ICICI Bank through Co-parcener u/s. 57 of the IT Act. The AO after considering the submissions of the assessee, did not allow the interest paid on the said loan taken by the Co-parcener of the HUF. He refer....
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.... However, Assessing Officer was not satisfied and he held that provision of section 57(iii) is not applicable to the facts of this case. Reasoning given by the Assessing Officer is contained at Page 6 of Assessing Officer's Order. Amongst other, Assessing Officer relied upon two judgments as noted at Page 4 of his Order. Both these judgments are in fact in favor of assessee as would be explained hereinafter. At the CIT(A) stage, all the facts as well narrated to the Ld. AO were reiterated and it was claimed that the deduction u/s 57(iii) is required to be allowed because there was direct nexus of the funds borrowed on which interest was paid and it was the same funds on which interest has been earned by the assessee. The Ld. CIT....
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.... vs. ACIT 166 ITR 176 (SC). The Hon'ble Supreme Court at Page 178 of the said judgment in this case has by relying upon its own judgment in CIT vs. Rajendra Prasad Moody [1978] 115 ITR 519 (SC) has observed as under:- "This being an investment company, if it borrowed money and utilized the same for its investments on which it earned income, the interest paid by it on the loan will clearly be a permissible deduction under section 12(2) of the Income-tax Act." In CIT v. Rajendra Prasad Moody [1978] 115 ITR 519, this court observed (page 521): "The determination of the question before us turns on the true interpretation of section 57(iii) and it would, therefore, be convenient to refer to that section, but before we ....
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.... tax, wealth tax and annuity deposit by the assessee, which was his personal obligations. Therefore, both the judgments relied upon by the Assessing Officer clearly laid down the proposition that if the borrowed funds were realized for the personal purposes, then possibly the deduction u/s 57(iii) cannot be claimed. However, when the borrowed funds have been utilized for the purpose of making investment on which income earned is taxable, then the deduction for the interest on the borrowed funds is required to be allowed. As already clarified there is no dispute about the fact that assessee has earned interest from M/s. Ansal on the funds borrowed for the purpose of making investment in a flat. Therefore, there is a direct ....