TaxTMI 
TaxTMI 
2023 (9) TMI 319
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.... Assessing Officer under section 57 of the Income-tax Act, 1961(in short, 'the Act'). 3. The assessee is a partnership firm engaged in the business of trading in shares. The assessee filed its return of income for A.Y. 2017-18 on 28/08/2017 declaring Nil income and on 11/07/2018 for A.Y.2018-19 declaring Nil income. The case was selected for scrutiny and the statutory notices were duly served on the assessee. The assessee in the return of income has declared income from business as well as income from other sources. The assessee in the return of income for A.Y. 2017-18 has claimed interest on loan and OD of Rs. 68,92,787/- out of which Rs. 47,89,529 was claimed under section 57 and the balances as business expenditure. For the A.Y. 2018-19....
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....MATURED -3,20,00,000.00 07-12-2016 FD WITH KOTAK MAHINDRA BANK 99,00,000.00 07-12-2016 07-12-2016 99,00,000.00 06-03-2017 FD WITH HDFC BANK 99,00,000.00 07-03-2017 FD WITH HDFC BANK 99,00,000.00 07-03-2017 31,00,000.00 LOAN TAKEN FROM TARAMATI NISAR 07-03-2017 27,50,000.00 LOAN TAKEN FROM NAGJI NISAR 58,50,000.00 INTEREST RS.30,061 @9% P.A. ON 58,50,000 FOR 25 DAYS A.Y. 2018-19 S.No. Name of the lender Opening Balance in Rs.) Added during the year (in Rs.) Repaid during the year (In Rs.) Closing balance (in Rs.) Rate of Interest Interest Paid (in Rs.) 1 Ansh Jayesh Nisar 34502464 3366431 0 37868....
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.... assessee submitted before the CIT(A) that the loans taken are invested in fixed deposits and therefore the interest paid should be allowed as a deduction under section 57. The assessee further submitted that the claim of expenditure is restricted to the interest income earned and therefore there is no excess claim towards the difference in the interest paid and interest received. The assessee also made an alternate submission that if the interest is disallowed under section 57, the same should be allowed as a deduction from the business profits. The assessee relied on various judicial pronouncements in this regard. The CIT(A) did not accept the submissions of the assessee and upheld the disallowance made by the Assessing Officer for the re....
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....re, it is argued by the Ld.AR that no disallowance under section 57 is warranted. The Ld.AR also drew our attention to funds flow wherein the money received as loan from related parties have been used for keeping it in FD from where interest income is earned and submitted that this fact has been clearly explained to the Assessing Officer during the course of assessment. The Ld.AR further submitted that all the unsecured loans are not received during the year and in earlier years, no disallowance is made by the revenue. It is submitted that since the assessee has utilized the money borrowed both for business purpose as well as to keep in FD, the assessee could not apportion the interest expenses and accordingly, restricted the claim of inter....
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....t 31/03/2017 and 31/03/2018 to submit that there cannot be a one to one match between the loan amount used for investing in FD and used for business. We tend to agree with this contention for the reason that one of the partners' capital account is having a considerable credit balance (own funds) and there is also sizeable balance shown under the head "Span Margin" in the asset side which substantiates the claim that there is no one to one match between the source and the investments. The claim of the assessee that the amount borrowed from related parties has been used for investment in FD as well as business purpose has merits. Be that as may be for the purpose of claiming deduction under section 57, it is important to establish that th....