TaxTMI 
TaxTMI 
2024 (3) TMI 771
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....wing grounds of appeal: "1. That the LD. A.O. has erred both in law and on facts while disallowing of interest expenses of Rs. 54,32,948/- of the I.T. Act. 1961. Hence, it is required to be deleted. 2. That the Ld. A.O. has without considering the facts and circumstances of the case disallowed interest expenses of Rs. 54,32,948/- is against the principal of natural justice and therefore it requires to be deleted. 3. That the Ld. A.O. has disallowed the notional interest of Rs. 54,32,948/- without considering the facts that the advances given to the persons are paying tax at maximum marginal rate and therefore there is no any question of tax evasion. However the disallowances made without considering the above fact....
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...."5.10 In view of the above facts and the legal discussion made, the interest expenses claimed by the assessee u/s. 57(iii) are not allowable to the extent they are attributable to the lower interest charged by the assessee than 12% pa on the advanced made. The same have been worked out in the following manner: Sr.No. Name Interest Rate of interest Amt. of interest chargeable @ 12% 1. Bhaumik R.APatel 434795 9 579727 2. M. Enterprise 540000 6 1080000 3. P.C. Trading 156164 6 312328 4. Saurin & Co. 31233 12 31233 5. Shree Sehaj Alloy Pvt.Ltd. 450000 9 600000 6. Sh. V.R. Shah - Smruti Adarsh Education Trust 2067333 9 2756444 7. Vimlac....
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....ficer in his order passed u/s. 143(3) of the Act himself interprets the provisions of section 57(iii) of the Act and notes that for allowability of expenses under the said section, the nexus of the expenditure with the earning of income is essential conditions to be fulfilled as reproduced at Paragraph No.5.5 of his order as under: "5.5 From the above, provisions, it can be appreciated that deduction from interest income is allowable u/s. 57(iii) only. An analysis of this sub- section would show that in computing the income under this head the assessee is entitled to deduction in respect of the expenditure incurred solely for the purpose of earning such income, provided the expenditure is not of a capital nature and does not includ....
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....r the head 'income from other sources'. This contention of the assessee, however is devoid of substance, in view of the fact that the amount of interest paid by the assessee is higher than the amount of interest received. Had the primary motive of the assessee been to earn interest, no loss would have been possible on this account." 5.2. The Ld.CIT(A) has confirmed this finding of the Assessing Officer. 5.3. This basis of the Assessing Officer is completely devoid of any merits, what the section requires is that expenses must have been incurred for the purpose of earning income to be eligible to claim the same against the said income. There is no question of interpreting the term "income as profits". The moment expenditure has been in....