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TaxTMI 
TaxTMI 
TaxTMI 
2018 (12) TMI 1051
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....r 2013-14 on 30.07.2013, declaring total income of Rs. 38,28,609/-. The case of the assessee was subsequently selected for scrutiny assessment under 143(2) of the Act. 3. During the course of the assessment proceedings the A.O observed that the assessee had offered interest income of Rs. 20,51,062/- in his return of income. On a perusal of the details, it was noticed that the assessee had earned interest income of Rs. 58,35,655/- viz. (i). Interest on Fixed deposits : Rs. 57,48,933/-; and (ii). Other interest : Rs. 87,727/-. It was observed by the A.O that the assessee after claiming deduction of interest expenses of Rs. 37,84,593/- pertaining to a loan raised from the bank (against the security of FDR), had offered the balance interest in....
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.... wholly and exclusively incurred by the assessee for earning of the interest income, the CIT(A) taking support of the judgments of the Hon‟ble High Court of Bombay in the case of Bai Bhuriben Lallubhai Vs. CIT (1956) 29 ITR 545 (Bom) and that of the Hon‟ble Supreme Court in the case of Vijaya Laxmi Sugar Mills Ltd. Vs. CIT (1991) 191 ITR 641 (SC), upheld the disallowance of the claim of deduction of the assessee under Sec. 57(iii) of the Act. The alternative contention of the assessee, that the interest expenditure incurred on the borrowed funds utilized for purchase of residential property would be entitled for deduction under Sec. 24(b), also did not find favor with the CIT(A). The CIT(A) observed that as the assessee had neit....
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....t expenditure did not bear any nexus with the earning of the interest income on the fixed deposits as required per the mandate of Sec. 57(iii) of the Act, therefore, the same was rightly disallowed by the lower authorities. The ld. D.R in order to fortify his aforesaid contention relied on the following judicial pronouncements: (i). CIT Vs. V.P Gopinathan (2001) 248 ITR 449 (SC) (ii). Smt. Padmavati Jaikrishna Bs. Addl. CIT (1987) 166 ITR 176 (SC) (iii). CIT Vs. Amritaben R. Shah (1999) 238 ITR 777 (Bom) (iv). Saluja Farms Vs. CIT (2002) 254 ITR 172 (Del) The ld. D.R taking support of the aforesaid judicial pronouncements, submitted that the Hon‟ble Courts in the aforementioned cases involving identical facts, had concluded t....
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....hat as the interest expenditure of Rs. 37,84,593/- incurred by the assessee on the loan raised for purchase of property (against the security of FDR‟s), cannot be construed as having been laid out or expended wholly and exclusively for the purpose of making or earning of the interest income on the said FDR‟s, therefore, the same cannot be allowed as a deduction as against the interest income of the assessee. We are of the considered view that the existence of an inextricable nexus between the incurring of the interest expenditure and earning of the interest income is a pre-requisite condition for allowability of the interest expenditure as a deduction under Sec. 57(iii) of the Act. We find that our aforesaid view stands fortifie....
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....e of Rs. 37,84,593/- was incurred on the funds borrowed for acquisition of a property, thus, the same would be entitled for deduction under Sec. 24(b) of the Act. We are of the considered view that as the assessee had claimed the aforesaid interest expenditure of Rs. 37,84,593/- as a deduction under Sec. 57(iii), therefore, for the said reason he had not raised a claim as regards seeking deduction of the same under Sec. 24(b) of the Act. However, we find that the assessee had unsuccessfully raised such claim before the A.O and the CIT(A). On a perusal of the reasoning given by the CIT(A) for not accepting the said claim of the assessee, we find that he had declined to accept the same, for the reason that the assessee had neither furnished t....
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....We find that our aforesaid view is fortified by the judgment of the Hon'ble High Court of Bombay in the case of CIT Vs. Pruthvi Brokers and Shareholders Pvt. Ltd. (2012) 349 ITR 336 (Bom). The Hon‟ble High Court in the aforementioned case, had observed that the assessee is entitled to raise not merely additional legal submissions before the appellate authorities, but is also entitled to raise additional claim before them. The Hon‟ble High Court further observed that the appellate authorities have jurisdiction to deal not merely with additional grounds which became available on account of change of circumstances or law, but also with additional grounds which were available when the return was filed. We further find that the Hon'b....