The assessee was engaged in development and purchased, sold and constructed and leased properties. The assessee was sanctioned a loan from Union Bank of India. The assessee paid certain amoun as advance towards purchase of properties. However, on account of adverse market conditions, the assessee decided to withdraw from the transaction and requested party to refund the earnest money. The party refunded the amount. The assessee thereafter lent money to other shareholders and made inter corporate deposits as against interest. The assessee claimed the interest paid as allowable deduction. On appeal the Tribunal disallowed the entire interest expenditure. On appeal the Court held that on the facts and circumstances of the case, the assessee was entitled to deduction under section 57(iii) of the Act. In any case, the Tribunal exceeded its jurisdiction in disallowing the entire interest expenditure as the power of the Tribunal was limited to passing an order in respect of subject matter of the appeal. Relied on Seth R.Dalmia v.CIT (1977) 110 ITR 644 (SC), CIT v. Rajendra Prasad Moody (1978) 115 ITR 519 (SC), CIT v. Corawara Plastic and General Industries (P) Ltd. (2007) 289 ITR 224 (All)(HC). (AY. 2009-10).
West Palm Developments LLP v. ACIT (2022) 445 ITR 511 (Karn.)(HC)
S. 57 : Income from other sources-Deductions-Advance towards purchase of properties-Not necessary that expenses should have resulted in income-Sufficient if nexus is established between expenses and income-Question Before Tribunal regarding extent of deduction allowable-Tribunal does not have power to disallow entire Deduction [S. 36(1)(iii), 57(iii), 254(1)]