TaxTMI 
TaxTMI 
2019 (12) TMI 357
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.... Nil, interest and remuneration from partnership firm at Rs. 2,03,113/- and interest income of Rs. 29,45,261/- in his return of income. The AO has completed assessment at Rs. 79,42,679/- as against the returned income of Rs. 30,04,530/- u/s 143(3) of IT Act vide order dated 07.12.2017 wherein the only addition of Rs. 49,38,149/- was made by the AO by disallowing the assessee's claim of deduction of interest u/s 57(iii) of the Act against the interest received by him. 4. Aggrieved assessee went in appeal before the ld. CIT(A) he has confirmed the addition made by the AO by observing vide para nos. 7.5 to 7.9 as follows: "7.5 Having considered the appellant's grounds of appeal, submissions, and facts of the case in light of the provisions of section 57(iii) and the interpretation of the same by some of the highest judicial authorities, I have reached to the conclusion that no deduction under section 57(iii) is allowable to the appellant. It is true that no question has been raised by the A.O. as regards the nexus of the interest expenses with the interest income earned by the appellant. But a mere perusal of the provisions of that section reveals that fulfilment of thi....
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....s context, go against his claim of deduction under section 57(iii). The appellant's argument that he has claimed deduction on a proportionate-basis and not in full, does not help his cause. This is so because such an argument does not have any bearing in the context of deductibility under the provisions of section 57(iii). If the intention to earn income is missing in any such expenditure, no deduction under section 57(iii) can be allowed even if it is not claimed in full. It will be prudent to note that the loan taken by the appellant from India Bulls Housing Finance Ltd. was for the purpose of acquiring some immovable property. Hence, it can be easily observed that the claim of interest of Rs. 14,46,688/- out of the total claim of deduction of Rs. 49,38,149/- that was in relation to the loan from India Bulls Housing Finance Ltd., cannot be allowed as deduction under section 57(iii) because its intent, purpose and use was not to earn interest-income. However, there is nothing on record that can substantiate his contention that these loans were taken by the appellant for the purpose of lending funds to his sister concerns 7.6 The appella....
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....s no. 1.1, 1.2, 1.3, 1.4, 1.5 and 1.6 are decided accordingly and are dismissed." 5. The ld. Counsel has reiterated the submissions made before the ld. CIT(A). He submitted that asseessee is an individual and has no business income; that he has interest income as shown under the head income from other sources; that he has claimed deduction on a proportionate-basis and not in full, and in the instances of excess payments, he has himself disallowed the interest payments on proportionate in the instances wherever payments were made to related concerns on case to case basis. The ld. AR argued that as per provisions of section 57(iii), the intention is apparently that such expenditure incurred by the assessee to earn income and it is conclusively proved. Thus, deduction under section 57(iii) can be allowed even if it is not claimed in full. In support, he relied upon the decision of Rajendra Prasad Moody (SC) on 57(iii). The Counsel contended that the ld. CIT(A) has misplaced reliance on the case of Smt. Swapna Roy (All HC), CLPB, Pg 76. In that case there was no income in the past, whereas in the present case, the assessee has income in the earlier years. 6. Per contra, the Ld....
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....t of such amount of interest on those borrowed funds before debiting its legitimate claim of expenditure u/s 57(iii) of the act which has not been not been appreciated in positive spirit by the authorities below according to us. Thus, we conclude that the assessee has not advanced loan to parties at lower rate with an intention to incur losses as held by the ld. CIT(A) to benefit the related four family companies. We further find that the Learned A.O. while passing the order u/s 143(3) has neither considered the details of interest paid and interest received provided by the assessee and nor established any nexus between the amount of interest paid and the amount of interest received on such advanced and borrowed funds to the sister concerns particularly the funds advanced out of none of the four parties disputed and concluded that the assessee has advanced loans to various parties at low rate or equal rate of interest as the interest expenditure is higher than the interest income. In view of that matter, the contention of the assessing officer is not maintainable as it is not based on correct facts and the Ld. CIT(A) was not justified in confirming the finding of the AO without ....
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....from which it could earn interest income. The assessee had invested the amount by giving loan to the related concerns on which the assessee earned interest income in the earlier years. However, in the earlier years on the said loan no such addition was made by the AO. The Ld. A.R. has contended that earning income from the expenditure incurred is not a condition precedent for allowing the deduction under section 57(iii) of the Act. It is only for the purpose of making or earning of income which is required for allowing the deduction under section 57(iii) and not the actual income earned by the assessee. He relied upon the decision of "CIT vs. Rajendra Prasad Moody", (Supra) and and "ACIT Vs. Sanjeev Agrawal" ITAT Delhi Bench, ITA No. 3418/Del/2011 (Asst Year 2006-07). 13. In the present case also the assessee had provided to the assessing officer with the bank statements in which it is clearly visible that the funds raised from the unsecured loan taken from various parties is utilized for lending money to various parties. It means that the interest paid on unsecured loans is expended wholly and exclusively for earning the interest income from loans and advances. In additio....