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The Tax Publishers2020 TaxPub(DT) 4812 (Mum-Trib) INCOME TAX ACT, 1961
Section 57
Where there was a nexus between the borrowed funds on which assessee had paid interest and the investment on which it had earned interest income, deduction of interest expenditure under section 57 would be allowable to assessee to the extent of interest income earned.
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Income from other sources - Deduction under section 57 - Nexus between borrowed funds and investment -
Assessee had shown interest income on term deposits under the head 'Income from other sources' and claimed deduction of interest expenditure under section 57. AO made disallowance of the said claim on the ground that the said liability was only provisional and contingent, whereas CIT(A) restricted allowability of interest expenditure only to the extent of interest receipts under the head 'Income from other sources. Held: There was a nexus between the borrowed funds on which assessee had paid interest and the investment on which it had earned interest income. Therefore, the assessee should get deduction of interest expenditure to the extent of interest income earned Further, in assessee's own case, AO himself had allowed claim of deduction of interest expenditure to the extent of interest income earned during that year. In view of the aforesaid, AO was directed to restrict the disallowance of interest to the extent being the interest income received on term deposits.
REFERRED :
FAVOUR : In favour of assesse.
A.Y. : 2013-14 & 2014-15
INCOME TAX ACT, 1961
Section 234A Section 234B Section 234C
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