TaxTMI 
TaxTMI 
2026 (8) TMI 1473
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....ich the assessee advanced certain funds on interest out of his personal borrowing from HDFC Ltd and Tata Capital Housing Finance Ltd. ['TCHFL']. The assessee was deriving remuneration/salary income from these companies and further interest income on the funds so advanced to them beside other income. 2.2 For the year, the assessee was in receipt of interest income of Rs.44,57,203/- out of which Rs.41,61,177/- was received from former three companies. A net Income From Other Sources ['IOS'] of Rs.3,06,026/- was arrived & offered to tax after deducting an interest expense of Rs.5,48,234/- paid to HDFC Ltd. and further interest expense of Rs.36,12,943/- was paid to TCHFL on funds borrowed to repay the earlier borrowing of HDFC Ltd. 2.3 With the aforestated IOS income, the assessee filed his return of income on 31/03/2017 declaring total income at Rs.1,00,43,140/-. The case was selected for limited scrutiny to verify the correctness of the deduction claimed u/s 57 of the Act. 2.4 During the course of assessment proceeding, the Ld. AO invoking the provisions of section 28(ii)(a) of the Act treated the interest received from former three companies and interest paid to HDFC & TCHF....
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.... income. The Hon'ble Supreme Court dealt with the allowability & set off forward contract business losses against the profits & gains of agency business & general merchant. The present case is not concerned with allowability of forward business contract loss. 6. Insofar as the case of 'CIT Vs Piara Singh' (supra) is concerned, it was averred by the Ld. DR that, their Hon'ble lordships upheld the order of Hon'ble High Court wherein their lordship allowed losses arisen on account of confiscation of currency note by custom authorities, as deduction while computing the business income. Similarly the ratio laid in the case of 'Dr TA Qureshi Vs CIT' (supra), wherein the losses arisen on account of confiscated 'drugs-held as stock-in-trade' was allowed as deduction while computing the business profit on commercial principle irrespective of legitimacy of business. 7. The facts & circumstance of the present in case are highly distinguishable with that of former twin cases relied by the assessee. The ratio laid therein cannot be applied to present case as devoid of facts & circumstances. In view thereof, placing strong reliance on current findings rendered b....
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....me as PGBP, the Ld. AO invoked the provisions of sub-clause (ii) of clause (ii) of section 28 of the Act. In view of the Ld. AO the interest income received by the appellant from companies were in the nature of compensation or other payment for managing the whole or substantially the whole of the affairs of an Indian company at or in connection with the termination of his management or the medication of the terms and conditions relating thereto. In appeal the Ld. NFAC could hardly dealt with appellant's contest in this regard. 13. At the outset, it shall suffice to state that, the provision of section clause (ii) of section 28 of the Act applies to a transactions concerning termination or modification of agency or management contracts and not otherwise. In the present case, the interest income received by the appellant assessee is attributable to & an accretion to the funds advanced to three companies wherein the appellant is a substantial promoter shareholder & key management person. Admittedly there is no contract between the appellant assessee and former three companies for managing their affairs. Further there is no agency contract between them. The said transaction of inter....
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....any expenditure, not being capital expenditure, laid out or expended wholly and exclusively for the purpose of making or earning income chargeable u/h 'Income from Other Sources', be allowed as deduction. The settled legal position is that there must be a proximate and live nexus between the expenditure incurred and the income sought to be earned. 18. In the present case, on perusal of records, it is evident that the interest income from all three private limited companies & other bank interest etc. are arisen to the appellant out of investment which were financed by & out of borrowed funds for which interest expenditure was incurred. Such interest expenditure claimed as deduction u/s 57(iii) of the Act against corresponding interest income. The appellant assessee has demonstrated, with reference to the computation and the notes thereto, that the claim of deduction represents the interest relatable to the funds advanced to the said entities, from which the interest income has been earned and offered to tax u/h 'IOS'. 19. The lower authorities have not doubted the genuineness of the interest expenditure, nor have they recorded any finding that the interest income in question w....