2020 (1) TMI 1245

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....rest income of Rs. 11,74,488/- declared under the head income from business and income from other sources. 2. The ld. CIT(A) has erred on facts and in law in upholding the action of AO in treating the agricultural income of Rs. 45,600/- as non agricultural income." 2. During the course of hearing, the ld AR submitted that the assessee in the return of income has declared interest from partnership firm M/s SRS Builders and M/s Murliwala Builders at Rs. 8,53,556/- under the head "income from business" and interest from parties at Rs. 5,11,292/- under the head "income from other sources". He also paid interest on the funds borrowed at Rs. 6,63,196/- and claimed it as deduction under the head "income from other sources". The AO obse....

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....+9,71,327). Further on unsecured loan of Rs. Rs. 1,39,30,139/-, interest paid is Rs. 6,63,196/- whereas on the funds deployed, interest received is Rs. 13,64,848/-. Thus, it is evident that borrowed funds had been utilised for earning the interest income from partnership firm and other parties. The ld. CIT(A) has also accepted this fact but only on the ground that assessee has not claimed the interest expenditure against the interest income from partnership firm has disallowed the entire claim of interest. This is not justified as there is no bar in the Act that if assessee has claimed the deduction of expenditure under one particular head of income, the same cannot be allowed under any other head of income. Further, disallowance of the ent....

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....le which is relevant both in context of business income and income from other sources, therefore, in such circumstances, there is no basis for disallowance of interest expenditure. The fact that the assessee has wrongly claimed the same in the return of income under one head instead of both the heads proportionally is not a bar against allowance of such claim of expenditure under respective heads when the substance of the transaction that the borrowed funds have been utlised for subsequent lending has not been disputed by the Revenue and a specific contention was raised before the lower authorities. In the result, the ground of appeal is allowed. 7. Regarding ground no. 2, the ld. AR submitted that the assessee owned 1.33 bigha of land a....