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| The Tax Publishers2020 TaxPub(DT) 3919 (Pune-Trib) INCOME TAX ACT, 1961
Section 57
Where assessee obtained term loan, advanced the same to its associate concerns and earned interest income and CIT(A) having examined the case of assessee held that assessee was entitled to get deduction under clause (iii) of section 57 but however without there being concrete finding to this effect that interest paid was for the purpose of earning interest, therefore, matter was remanded back to CIT(A) to verify the nexus between loans advanced and interest paid.
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Income from other sources - Deduction under section 57(iii) - Setting off of interest paid against interest earned -
The assessee itself admitted the borrowed funds were not utilized for the purpose of business for which they were obtained. Admittedly, the assessee borrowed funds to an extent of Rs. 7.63 crores under the scheme term loan facility. The assessee did not file any document to show on what condition the bank has granted said amount under the scheme term loan facility. However, the assessee admitted before the two lower authorities that the term loan has been obtained for the purpose of business and the same was not utilized for the purpose of business as it had enough capital. Held: The term loans are obtained for specific purpose, since the assessee was in the business of housing construction, the said term loan should have been used for the purpose of said business but however as noted above having enough capital and advances from customers the term loan fund advanced to its associate concerns and earned interest income. The CIT(A) having examined the case of assessee held that the assessee is entitled to get deduction under clause (iii) of section 57 of the Act but however without there being concrete finding to this effect that the interest paid is for the purpose of earning interest. The CIT(A) should not have remanded the matter to the file of AO which is contrary to the jurisdiction available to CIT(A). Assessee pointed that the assessee had mixed funds to an extent of Rs. 27.48 crores and no break up to that effect filed. In such a situation matter remanded to the file of CIT(A) to verify the nexus between loans advanced and interest paid for the purpose of interest earning in terms of clause (iii) of section 57 of the Act. Thus, the order of CIT(A) was set aside and the assessee was liberty to file all evidences if any in support of its claim in terms of clause (iii) of section 57 of the Act. The CIT(A) shall consider the same and pass the order, in accordance with law.
REFERRED :
FAVOUR : Matter remanded
A.Y. : 2008-09
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