TaxTMI 
TaxTMI 
2020 (5) TMI 164
X X X X Extracts X X X X
X X X X Extracts X X X X
..../15-16 dated 29/09/2016 on following grounds of appeal:- 1. Whether on the facts of the case and in law the Ld. CIT(A)erred in allowing the appeal of the assessee on account of disallowance of expenditure u/s 57(iii) of the I.T.Act, ignoring the fact that during the course of assessment proceedings the assessee failed to provide any proof to A.O. to prove that the expenses claimed were incurred for earning interest on fixed deposits under the head Income from other sources. 2. Whether on the facts of the case and in the circumstances of the case and in law the Ld. CIT(A)erred in allowing the appeal, on this issue when during the course of assessment proceedings the assessee itself stated that the expenses have been incurre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....interest on fixed deposits for Rs. 6.86 Lacs. It has also earned interest on Income-Tax refund for Rs. 2.95 Lacs. Against gross interest of Rs. 9.82 Lacs as offered under the head Income from other sources, it claimed expenditure of Rs. 285.16 Lacs which consist of Management & Trusteeship fees for Rs. 280.74 Lacs and other expenses for Rs. 4.41 Lacs. The break-up of the same has already been given on page-6 of the impugned order. After adjusting suo-moto disallowance u/s 14A for Rs. 3.97 Lacs, net expenditure thus claimed was Rs. 281.19 Lacs. Finally, the loss under the head Income from other sources has been claimed as Rs. 271.37 Lacs, the set-off of which has been claimed from Long-Term capital gains. The amount of expenditure of Rs. 281....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e investment manager raises funds from contributors at beginning of fund life, parks the same for time being in FDR with Bank, invest the same in investee company, realizes income from investment, make exit at appropriate time, park surplus money in bank FDR and distributes fund amongst contributors. The assets of fund which the investment manager is supposed to manage are in the form of liquid money in bank, FDR with Bank and investment in investee company. In the above background, it was submitted that management fees were incurred wholly and exclusively for earning income from venture capital investment as well as Bank FDR. The assessee also placed on record the position of disallowance made in preceding as well as succeeding years which....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 57(iii) which mandate that any expenditure laid out or expended wholly or exclusively for the purposes of earning such income, would be allowable. However, in the present case, the management / trusteeship fees and other expenses which mainly consist of audit fees, professional fees etc. were directed towards the prime activity i.e. venture capital investment, the income from which has been assessed under the head Capital Gains. Therefore, we find that there was no direct nexus of these expenditure vis-à-vis interest income earned by the assessee. The rule of consistency would not be applicable since matter of disallowance u/s 57(iii) arose in AY 2010-11 also. The decision of Tribunal for AY 2009-10 was concerned with disallowance u....