AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 834
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....ant and in law Ld. NFAC has erred in upholding the Assessing Officer's contention of disallowing the deduction of Rs. 31,92,000/-clained by the appellant u/s. 57 of the Act. 2) That on the facts and in the circumstances of the case of the appellant and in law Ld. NFAC has erred in negating the submissions filed by the appellant duly substantiating the interest expenditure amounting to Rs. 31,92,000/-. 3) That on the facts and in the circumstances of the case of the appellant and in law Ld. NFAC has erred in ignoring the alternative submission raised by the appellant of deductible interest as per Section 37 of the Act. 4) That on the facts and in the circumstances of the case of the appellant and in law Ld. NFA....
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....the AO to allow the expenditure even when the relevant Income has been claimed as exempt u/s. 10(2A) of the IT Act (as claimed by the assessee profit received from the firm amounting to Rs. 70,11,333/-). Subsequently the AO issued Show Cause notice and the Video Conference as well to the assessee and against the same the assessee submitted certain details. The Ld.AO was not satisfied with the same and the assessment was concluded making the following additions : * Disallowance of Rs. 31,92,000/- claimed as interest expenditure * Disallowance of Rs. 50,000/- claimed u/s. 80C and Rs. 25,000/- claimed u/s. 80D of the IT Act. Aggrieved by the same, the assessee has preferred this present appeal 3. Before the Ld.CITA the ....
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.... year. The said statement is contradictory to appellant's own statement whererin the appellant had claimed "the interest expense of Rs. 31.92.000/- is incurred wholly and exclusively for earning interest income of Rs. 27.87.672/- as offered to tax under section 56 of the Act by your appellant" as how come the same borrowed loans has been used wholly and exclusively to earn two different type of Income. 7.3.3 During the course of the appellate proceeding, the appellant had relied upon the provisions of section 57(iii) of the IT Act in order to allow the interest expenditure, however it may be noted that the appellant has received 10(2A) exempt Income of Rs. 70,11,333/- being profits from the firm Raksha Bullion. From the above d....
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....sources, however in the instant case the facts are entirely different as the borrowed loan(to whom Interest payment claimed as Interest Expenditure) are wholly and exclusively taken to invest in the Firm to promote the business as stated by the Appellant himself. 7.4 In view of above discussion, it is very clear that the appellant has not incurred the Interest Expenditure wholly and exclusively to earn the Interest from Bank but merely used the available amount in the firm account on daily basis to transfer in his bank account to earn the interest Income without even recording the same in the books of accounts. Therefore, the appellant's contention is not tenable and against the facts of the case. Accordingly, the appellant'....
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....ansferred by the firm to the assessee FD account and on the next day the same is withdrawn. As assessee's bank was offering a higher rate of interest on the savings bank account even for a single day. The assessee thus treated the said interest income to be exclusively out of the funds of the partnership exclusively from out of the funds of the partnership and thus concluded that interest expenses of Rs. 31,92,000/- could be set off against the interest income of Rs. 27,627/- u/s. 56 of the Act. The Ld.AR prayed for the claim to be allowed. 6.1 On the contrary the Ld.DR submitted that, both these interests have different character and therefore cannot be set off against each other. The Ld.DR relied on the orders passed by authorities bel....