ORDER

PER BRAJESH KUMAR SINGH, AM,

This appeal by the Revenue is against the order of National Faceless Appeal Centre (NFAC) [hereinafter referred to as the ‘Ld. CIT(A)] order dated 05.05.2025 arising out of the assessment order dated 16.04.2021 passed under section 143(3) r.w.s. 143(3A) & 143(3B) of the Income Tax Act, 1961 (hereinafter referred to as the ‘the Act’) passed by the National e-Assessment Centre, Delhi, (hereinafter referred to as the ‘AO’) pertaining to Assessment Year (AY) 2018-19.

1.1. There is a delay of 1 day in filing the present appeal before the Tribunal. The Ld. AR did not raise any objection against the said delay. Considering the nominal delay, the same is condoned and the appeal is taken up for adjudication.

2. Brief facts of the case: During the year, the assessee was engaged in the business of real estate and had filed its return of income in ITR 6 for AY 2018-19 on 25/09/2018, at a total income of Rs. 1,15,71,030/- under normal provisions of the I.T. Act and of Rs. 1,15,71,033/- u/s. 115JB of the Act. In the return of income filed, the AO noted that the assessee had admitted Nil income under 'Gross receipts from Business' and a Net Profit of Rs. (-) 3,62,362/- was shown. Further, the AO noted that the assessee admitted gross income of Rs. 3,58,05,065/- under the head 'Other Sources and had claimed expenses / deduction amounting Rs. 2,38,71,670/-, and the remaining amounting to Rs. 1,19,33,395/- (Rs. 35805065/- (-) Rs.23871670/-) was shown under 'Income from other sources'. The AO also noted that during the year the assessee had set-off the current year business loss of Rs. 3,62,362/- against the income of Rs. 1,19,33,395/- under the head 'Other Sources'.

2.1 The case was selected for complete scrutiny to examine the income from real estate with the underlying rationale that the "assessee is running real estate business and disclosing high closing stock as compared to turnover”.

2.2 On perusal of the submission filed dated 24.12.2020 by the Assessee, it was observed by the AO that during the year under assessment the assessee had no business income and the company had interest income amounting to Rs. 3,58,05,074/- which comprises the sum of Rs. 65,087/- - interest received from bank on FDR and Rs.3,57,39,987/- on account of interest received from loans given. In this connection, the AO noted that the assessee submitted the details of interest received statement showing the name of parties, PANs, their addresses, interest earned, TDS deducted and the relevant ledger a/c. details.

2.3. The AO vide notice u/s. 142(1) dated 15.02.2021, asked the assessee to give explanation pertaining to 'capitalization of interest expenses' of Rs.3,29,08,918/- and also as to whether the entire amount of loan received from M/s India Bulls Financial Services Ltd have been utilized for purchase of land.

2.4 The assessee vide its submission dated 15.02.2021 stated that the assessee has utilized only a part of the loan amount raised from M/s India Bulls Financial Services Ltd., for purchase of land, and part of the loan amount was either parked in FDRs or further advanced as interest bearing loan to various parties, from whom interest income has been earned and further stated that the net of interest paid of Rs. 1,19,33,395/- (Rs. 35805065/- (-) Rs. 23871670/-) has been offered to tax under 'Income from Other Sources'.

2.5. The AO noted that as per section 57(iii) of the Act, the deductions shall be allowed only if the interest expenses have been made wholly and exclusively for earning the interest income and in the present case, the interest expenditure of Rs. 2,38,71,670/- claimed as deduction against interest amount of Rs. 3,58,05,065/- was not an allowable expenditure as the same had not been laid down wholly and exclusively for earning the interest income and hence, the deduction of Rs. 2,38,71,670/- claimed u/s.57(iii) of the Act, was liable for disallowance. The AO further observed that on exact same facts and circumstances t