2019 (12) TMI 402

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.... of Rs. 65.25 lakh. 3. Brief facts are, the assessee company is engaged in the business of investment in shares, securities and derivatives. For the assessment year under dispute, the assessee filed its return of income on 20th September 2012, declaring total income of Rs. 57,47,631. Subsequently, the assessee filed a revised return of income on 11th February 2014. During the assessment proceedings, the Assessing Officer noticing that the assessee had claimed deduction of Rs. 65.25 lakh towards rental expenses called for the necessary details and asked the assessee to justify such claim. In response, it was submitted that the premises was taken on lease for setting-up a office to facilitate the directors to meet potential investors and inv....

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....se, hence, the expenditure incurred has to be allowed as business expense. Without prejudice, the learned Authorised Representative submitted, even if the premise taken on lease by the assessee is used by the directors for the purpose of their residence, the rental expenditure can be allowed as business expense since the said premise is also used by the directors for official work of the company. In support of such contention, he relied upon the following decisions:- i) ACIT v/s Stuish Capital Service Pvt. Ltd., ITA no.5482/ Mum./2016, dated 21st May 2018; and ii) ITA no.5083/Mum./2018 &Ors., dated 24.06.2019. 6. The learned Departmental Representative strongly relied upon the observations of the Assessing Officer and learned Commissio....

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....he Assessing Officer on the basis of AIR information called upon the assessee to reconcile the interest income earned by it during the year. From the details furnished, the Assessing Officer found that as against interest income earned during the year amounting to Rs. 1,57,55,088. The assessee had claimed interest expenditure on pro-rata basis. On further query from the Assessing Officer, the assessee submitted that it had incurred interest expenditure of Rs. 1,35,29,967, against loan taken from India Infoline Investments Services Ltd. and the said loan amount was utilized for trading in derivatives and non-convertible debenture (NCD). Whereas, it has received interest income on NCDs amounting to Rs. 1,57,55,088. It was submitted, since the....

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....d perused the material on record. The short issue arising for consideration is, whether the interest expenditure incurred by the assessee is in relation to interest income earned during the year so as to allow it as deduction under section 57(iii) of the Act. It is the specific contention of the assessee that the borrowed funds on which the assessee has paid interest was utilized for investing in derivatives and NCDs. It is the claim of the assessee that in the year under consideration, it has earned interest of Rs. 1,57,55,101, on the NCDs. Therefore, a part of interest expenditure is relatable to interest earned on NCDs, hence, has to be set-off against such income. In our view, if the borrowed fund or part of it has been utilized in acqu....