2019 (2) TMI 2034

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....st expenditure on borrowings utilized for advancing loan to the partners was not allowable u/s. 57(iii) of the Act while assessing the interest received on loans as income from other sources thereby wrongly upholding the order of the Assessing Officer treating the same as part of project cost. 3. Fact in brief are that the AO during the course of assessment proceedings, noticed that the assessee has debited a sum of Rs. 49,84,677/- as finance cost in the profit and loss account and not capitalized and debited it to cost of construction. Accordingly, the assessee was asked to explain why interest debited to the profit and loss account should not be disallowed and treated as capital expenditure and added to the cost of building and also aske....

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.... developed any increase In the project cost shall ultimately be of benefit to the appellant, inasmuch as the taxable profits shall be subsequently reduced subject to of course other provisions of law governing the subject matter. Be that as it may,  in fact remains that the nature of interest income earned, not being inthe course of business of the appellant has to be treated as income from other sources and the Interest expense incurred by the appellant only has a remote reference if any to section 57. In the result, the treatment by the Assessing Officer of the impugned amount is hereby confirmed and the ground is in respect thereof are hereby dismissed. 5. Learned AR vehemently submitted before us that the facts of the case were no....

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....Ramesh P. Bhatia to the tune of Rs. 58,20,000/- which is duly evidenced by the bank statement. Thus, learned AR submitted that there is direct nexus between the money borrowed and paid and accordingly interest incurred should be allowed u/s. 57(iii) while computing income from other sources. Finally learned AR also made without prejudice, submission that in the case the arguments as stated hereinabove, do not find favour of the Hon'ble Bench, the same should be treated as business activity and interest income should be assessed accordingly by allowing corresponding deduction in respect of interest paid. Learned AR also distinguished the decision relied on by learned CIT(A) of Hon'ble Supreme Court in the case of Dr. V.P. Gopinathan ....