The Tax Publishers2020 TaxPub(DT) 4770 (Mum-Trib)


Section 57(iii)

Interest expenditure was to be allowed after reducing proportionate interest out of interest earned on term deposits.

Income from other sources - Deduction under section 57(iii) - Interest expenditure -

Assessee was a notified person under the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 and all her assets, including bank accounts were attached and vested in the hands of the Custodian appointed under the said Act. AO as per computation, noticed that assessee had received dividend income of Rs. 23,29,223, which was claimed as exempt. AO observed that assessee had earned interest income on term deposits of Rs. 88,354 and claimed interest on loan at Rs. 4,50,52,976. The assessee had claimed deduction of Rs. 4,50,52,976 under section 57 of the Income Tax Act. The assessee was asked as to why deduction under section 57 in respect of interest expenditure should not be disallowed. During the assessment proceedings, assessee was asked to furnish the basis of the provisions of interest expenditure made in their accounts along with the written contract, including the terms and conditions between the creditors and the assessee. However, AR had relied on certain claims made before the Special Court. As there was no specific order from the Court, this claim was rejected. Accordingly, AO rejected the contention of the assessee and passed assessment order under section 143(3) by making disallowances on account of interest expenses on loans. CIT(A) disallowed interest expenditure on the ground that details pertaining to nexus between borrowed funds and the investments in various assets was not available on record and hence, it was not possible to determine the quantum of interest expenditure allowable. However, this issue had been decided in the past in the assessee's case for various years and deduction had been allowed by Tribunal. Held: Tribunal had deleted the disallowance of interest and directed the AO to allow the deduction of interest after reducing proportionate interest out of the interest earned on deposits.

Followed:Order in assessee's own case for assessment year 2010-11 & 2011-12 ITA No. 419 & 420/Mum/2016, dated 27-12-2017, Sudhir Mehta v. Dy. CIT [ITA No. 5799/Mum/2015, dated 27-12-2017 for assessment year 009-10 Cascade Holdings (P) Ltd. v. Dy. CIT for assessment year 2012-13, 2013-14 & 2015-16 ITA Nos. 6965, 6966 & 6968/Mum/2018, dated 16-3-2020. Relied: Pratima H. Mehta v. Dy. CIT for assessment year 2014-15 in ITA No. 5839/Mum/2018, dated 27-11-2019, Cascade Holdings Pvt. Ltd. v. Dy. CIT for assessment year 2014-15 ITA Nos. 6967/Mum/2018, dated 23-9-2020 : 2020 TaxPub(DT) 3893 (Mum-Trib), Aatur Holdings Pvt. Ltd. v. Dy. CIT for assessment year 2013-14 to 2015-16 in ITA Nos. 6954-6956/Mum/2018 in Order, dated 13-3-2020, Harsh Estates Pvt. Ltd. v. DOT for assessment year 2013-14 to 2015-16 in ITA Nos. 6957-6959/Mum/2018, dated 15-9-2020 : 2020 TaxPub(DT) 4724 (Mum-Trib)and Orion Travels Pvt. Ltd. v. Dy. CIT for assessment year 2013-14 to 2015-16 ITA Nos. 6960-6962/Mum/2018, dated 23-9-2020.


FAVOUR : In assessee's favour (Partly).

A.Y. : 2012-13 & 2013-14


Section 45 Section 48 Section 55


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