Case Law Details
ACIT Vs Ms. Mini Muthoottu Credit India (P) Ltd. (ITAT Cochin)
It is established clearly that the assessee used the borrowed funds for the purchase of agricultural land. The Assessing Officer has considered the proportionate interest funds used for the purchase of agricultural land and considered only Rs.90,73,279/- out of the total interest paid of Rs.1,39,31,775/-. Being so, there cannot be further allowance of any relief to the assessee. In other words, merely because the assessee did not earn agricultural income to the extent of disallowance of interest, disallowance cannot be reduced. It is not hard and fast rule that on each and every investment in exempted yielding asset, the assessee would earn income equivalent to the interest income. Earning of exempted income is not certain because it depends on various factors. The established facts are that the assessee used the borrowed funds for the purpose of acquisition of agricultural land and not for the purpose of business. Therefore, once the income is exempted u/s. 10(1) of the I.T. Act, the said income is directly related to the investment made in the agricultural land, it is not possible to accept the alternative contention of the Ld. AR that part of the interest may be disallowed out of the total disallowance made by the Assessing Officer. This contention of the Ld. AR is also rejected.
Further, there is no merit in the findings of the CIT(A) that the provisions of section 36(1)(iii) of the Act does not have clause of “put to use”. As per this section, interest expenditure could be allowed only if the loan was borrowed for the purpose of the business of the assessee and if it is used for the purchase of an asset which yielded exempted income, that interest expenditure cannot be allowed u/s. 36(1)(iii) of the Act.
FULL TEXT OF THE ITAT ORDER
This appeal filed by the Revenue is directed against the order passed u/s. 250 of the Act by the CIT(A), Kottayam dated 12/03/2018 and pertains to the assessment year 2012-13.
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