TaxTMI 
TaxTMI 
2019 (11) TMI 88
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....ssessee preferred an appeal before the CIT(A) who partly allowed the appeal of the assessee by allowing the benefit of netting. The revenue preferred appeal before the Tribunal and the Tribunal vide consolidated order number 2963, 2969, 2968 and 2967/Del/2010 order dated 27.08.2010 remanded the matter back to the file of the AO for fresh adjudication for the limited purpose of determining the allowable deduction strictly in the manner provided in section 57(iii) of the IT Act. Despite opportunity granted by the AO none appeared on behalf of the assessee for which the AO completed the assessment determining the total income at Rs. 47,30,830/-. 3. In appeal the Ld. CIT(A) upheld the action of the AO by observing as under :- 6. "I have considered the facts of the case and the submissions of the appellant. I find that although the Hon'ble ITAT had restored back the issue to the file of the Assessing Officer for a limited purpose of determining the allowable deduction strictly in the manner provided in section 57(iii) of the Act but owing to the non-compliance he restored to assessee the same income of Rs. 47,30,830/- which was assessed in terms 23.12.2009. The Assessing Off....
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....deduction i.e. there must be clear nexus between the expenditure incurred and the income sought to be earned. 6.2 The appellant in this case had failed to establish that the interest earned on FDRs had intrinsic and inseggregable nexus with the facilities provided under the EBRD and PCFC schemes or for that matter with demand loan. For claiming deduction of expenses u/s 57 (iii) against income from other sources, the expenditure must be laid out or expended wholly and exclusively for the purpose of earning of such income. 6.3 Thus, in the instant case, since the appellant had failed to prove that the interest earned had nexus with the expenditure incurred on account of interest paid, I hold that the interest paid by the appellant cannot be allowed as deduction u/s. 57 (iii) of the Income-tax Act, 1961 from the interest income earned by it. Accordingly, no interference is made with the order of the Assessing Officer which is hereby confirmed." 4. Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal by raising the following revised grounds of appeal :- 1. That the Ld. Commissioner of Income Tax (Appeals) - 26, New Delhi ....
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....ir undertaking was Rs. 1,27,54,242/- and AO has allowed deduction u/s 10A on this amount @ 90% (PB Pg 16). The assessee has claimed interest paid against the business of Rs. 49,85,698/- (PB Pg 18) after netting off the same. It is submitted that close scrutiny of the balance sheet (PB Pg 17) would clearly show that assessee firm had secured loans of Rs. 1.57 crores and has obtained EBRD i.e. Export Bill ReDiscounting of Rs. 9,40,70,000/- and PCFC i.e. Packing Credit Finance of Rs. 55,12,500/-. Thus, more than Rs. 11.50 crores has been taken from banks. Copy of credit facilities letter issued by the Central Bank of India dated 28th Nov 2005 is enclosed at pages 47 - 51. It would be seen that bank has sanctioned the credit facilities to the assessee. It is necessary to state that in the balance sheet (PB17) your goodself would notice that FDRs has been shown of Rs. 3,99,76,865/- and interest receivable has been shown of Rs. 21,10,098/-. The assessee however, has declared accrued interest of Rs. 38,39,642/- as noticed by the AO in the assessment order and after adjusting against the interest paid of Rs. 88,28,084/- , assessee has claimed interest of Rs. 49,85,698/- after claiming cert....
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....d to be netted against such interest income in the pre-operative phase." It is submitted that assessee firm is not in the pre-operative phase but running its business for the last more than eight years, hence the condition stated at S.No.(iv) is not applicable on it and there was direct nexus between the expenditure incurred and the earnings made by the assessee for giving margin money after the drawing from the same bank account as explained above. Hence, the claim of the assessee for netting off against the income paid is required to be allowed as held in assesseee's own case in Ay 2003-04. It is submitted that the assessing officer himself has allowed this claim in AY 2009-10 and 2010-11 copy of these orders are placed at pages 79 to 84. It is therefore, humbly prayed that appeal of the assessee may kindly be allowed. 6. Relying on various decisions he submitted that when the assessee has proved the nexus of interest received and interest paid the netting off of such interest should be allowed. Further the AO in subsequent years has himself allowed the netting off of interest in A.Y.2009-10 and 2010-11. Therefore, there is no reason for deciding fro....