SUNIL KHADAWALA LEGAL HEIR OF MANHAR KHADAWALA,MUMBAI V. INCOME TAX OFFICER - 12(1)(2), MUMBAI

ITA 4635/MUM/2025

AI Insights

The case revolves around the taxability of compensation received by the appellant, Sunil Khadawala, for the surrender of agricultural land, and the disallowance of certain expenditures claimed by him. The appellant contested the order from the National Faceless Appeal Centre, which had confirmed the Assessing Officer's decision to treat the compensation as income from other sources and disallow certain expenditures. The Tribunal examined the nature of the land, the character of the compensation received, and the relevance of various expenditures in relation to the income generated from other sources.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 775921 (ITAT-MUMBAI)
• Duration Of Justice: 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 21-07-2025
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAVITA KAUSHIK
• Assessee Lawyers: VIMAL PUNMIYA; MMHR AGAINST NIL
• Keywords: Capital asset; Proportionate interest; Revenue expenditure; Sale consideration of property below Jantri Value; Fair market value; Salary income; Rule of consistency; Capital receipt; Gift; Capital Gains; Principle of natural justice; Valuation report
• Section: 143(3); 50C; 2(14); 37(1)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, ‘F’ BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER ITA No.4635/Mum/2025 (Assessment Year :2011-12) Sunil Khadawala Legal Heir of Manhar Khadawala 13/15, A K Naik Marg Fort, Mumbai- 400 001 Vs. National Faceless Appeal Centre (NFAC)/ITO-12(1)(2) PAN/GIR No.AAGPK6317E (Appellant) .. (Respondent) Assessee by Shri Vimal Punmiya Revenue by Ms. Kavita Kaushik Date of Hearing 28/08/2025 Date of Pronouncement 09/09/2025 आदेश / O R D E R PER AMIT SHUKLA (J.M): This appeal, preferred by the assessee, arises from the order dated 24/06/2025 passed by the National Faceless Appeal Centre, Delhi, in relation to the assessment framed under section 143(3) of the Income-tax Act, 1961 (“the Act”) for Assessment Year 2011–12. 2. The assessee has raised multiple grounds of appeal, the gravamen of which pertains to the taxability of compensation received on surrender of agricultural land, the disallowance of interest expenditure under section 57(iii), and the denial of Printed from counselvise.com ITA No. 4635/Mum/2025 Sunil Khadawala Legal of Manhar Khadawala 2 deduction of salary expenses. For sake of completeness, the grounds are reproduced as under: “1. On the facts of the appellant's case and under the law, the Commissioner of Income Tax (Appeals) [CIT(A)] erred in passing the impugned order in the name of the deceased assessee and further the impugned order is bad in law in view of various judgements of the court. 2. On the facts and circumstances of case and in law, the Ld. CIT has erred in confirming the Assessment Order passed by the Ld. AO under section 143(3) of Income Tax Act which is passed against the principal of natural justice. 3. On the facts and circumstances of the case and in law the Ld. compensation CIT has erred in confirming the Rs.75,95,230/- as Income from Other Sources. of i. On the facts and circumstances of the case and in law the Ld. CIT has erred in confirming that the compensation received on surrender of land being treated as Income from other sources. ii. On the facts and circumstances of the case and in law the Ld. CIT has erred in confirming that the surrender of land is not an \"agricultural income\" and hence taxable. 4. On the facts and circumstances of the case and in law the Ld. CIT has erred in confirming the compensation received from surrender of land as taxable under the head \"Income from Other Sources\" instead of considering it as a Capital Receipt u/s and making it taxable under the head \"Capital Gain\". 5. On the facts and circumstances of the case and in law the Ld. CIT has failed to consider that a part of this land only was sold 2 years ago and Ld.AO has already considered it as agricultural income. Hence the same land cannot be taxed differently in different years. 6. On the facts and circumstances of the case and in law the Ld. CIT has erred in confirming the disallowance of interest Printed from counselvise.com ITA No. 4635/Mum/2025 Sunil Khadawala Legal of Manhar Khadawala 3 expenses amounting to Rs.1,63,373/-u/s 57(iii) of the Income Tax Act. 7. On the facts and circumstances of the case and in law the Ld. CIT has erred in confirming the disallowance of salary expenditure amounting to Rs.5,11,000/-. 8. The Appellant craves leave to add amend and or delete any of the above grounds of Appeals.” 3. Briefly stated, the assessee, an individual, carried on proprietorship business under the name and style of “M/s Vithal Restaurant,” engaged in running an eating house and permit room. For the year under consideration, he filed his return of income on 29.09.2011 declaring total income of ₹7,83,045/-. The return included income from business, capital gains (both short-term and long-term), and income from other sources. 4. The core controversy arises out of the receipt of ₹75,95,230/- as compensation from M/s Mahal Mira Holiday Resorts (MMHR) on cancellation of an agreement/allotment pertaining to 14 acres of land situated in Village Virani, Taluka Pen, District Raigad. The assessee had originally been allotted 68 acres (54 acres under agreement dated 25.08.1999 and 14 acres under allotment letter dated 14.09.1999) against consideration of ₹10,29,754/-. Complicated background transactions ensued, including acquisition by MMHR from M/s Aakanksha Developers and subsequent litigation culminating in consent terms before Hon’ble Bombay High Court. Ultimately, due to inability of MMHR to convey the land, the assessee surrendered his booking in June 2008 and received compensation. He claimed Printed from counselvise.com ITA No. 4635/Mum/2025 Sunil Khadawala Legal of Manhar Khadawala 4 that such compensation, being derived from agricultural land, was exempt. 5. The Assessing Officer, however, did not accept this contention. According to him, the land in question was not agricultural, but commercial in nature, as borne out by Collector’s permissions and Tehsildar’s report. He accordingly taxed the amount of ₹75,95,230/- as “income from other sources.” Alternatively, invoking section 50C, he computed long-term capital gains at ₹3,39,93,600/-, though ultimately the addition rested on taxing the compensation as income from other sources. 6. The AO further disallowed proportionate interest expenditure of ₹1,63,373/- under section 57(iii) and also disallowed salary expenses of ₹5,11,000/-, holding them as not relatable to income from other sources. 7. On appeal, the learned CIT(A) affirmed the AO’s action. His reasoning, running through a meticulous but adverse analysis, was that the land ceased to be agricultural after Collector permitted plotting for farmhouses and the agreement contemplated amenities such as roads and clubhouses. He further emphasized that the allotment of 14 acres was without consideration and thus no enforceable right accrued to the assessee; consequently, compensation could not be capital in nature but was rightly treated as income from other sources. “5.2.1. I have considered the submissions made by the Appellant. I have also perused the assessment order I find that the AO has treated the compensation received on cancellation Printed from counselvise.com ITA No. 4635/Mum/2025 Sunil Khadawala Legal of Manhar Khadawala 5 of allotment letter as Income from other sources. The AO has held: Income earned from the said lang agriculture income is satisfy the definition of agriculture income as since it does not easily provided u/s 2(1A) of the Act The 14 acres of land which was allotted to the Appellant vide 'letter of allotment was not an agricultural land since Collector had already given the permission for de-plotting of the land for the purpose of construction of farm houses. Further, the agreement also contains provisions for construction of internal roads, club houses etc. Also, the Tehsildar had reported to the Collector that the land was a barren land ie. it cannot be used for the purpose of agriculture The Appellant never had any intention to buy any agriculture land. He had sensed a commercial opportunity in the said land. 5.2.2. On appreciation of submissions made by the Appellant and the findings made by the AO, I am inclined to agree with the AO that the compensation of Rs. 75,95,230/- received by the Appellant is in the nature of 'Income from other sources'. In this regard, following issues arise for consideration: a. Whether compensation of Rs. 75,95,230/- received by the Appellant is in the nature of 'agricultural income? b. Whether the land against which compensation has been received by the Appellant is an agricultural land? And if so, whether it is not a capital asset since not covered under clause (a) or (b) of section 2(14)(iii) so as to take it out of the definition of capital asset and thus, the compensation not taxable as capital gains? c. If the land is not agricultural land and, therefore, a capital asset, does the surrender of the same against cancellation of the allotment letter (under peculiar facts of the case) amounts to transfer' u/s 2(47) of the Act? My findings on the above issues are as under a. Whether compensation of Rs. 75,95,230/- received by the Appellant is in the nature of agricultural income? Printed from counselvise.com ITA No. 4635/Mum/2025 Sunil Khadawala Legal of Manhar Khadawala 6 The compensation amount of Rs. 75,95-230/- is not in the nature of agriculture income as has been held by the AO The said receipt does not qualify as agriculture Income in terms of section 2(1A) of the Act. Also it is also not the case of the Appellant that the said compensation is agricultural income. b. Whether the land against which compensation has been received by the Appellant is an agricultural land? And if so, whether it is covered under clause (a) or (b) of section 2(14)(i) số as to take it out of the definition of capital asset and, thus the compensation as not taxable as capital gains? In my considered opinion the land is not agricultural land. It is undisputed fact in my considered onion that the Collector concerned was approached for giving permission for de-plotting of the said land. This fact is crucial since there was no requirement on part of the original owner of the land (through its partners) to approach the Collector for permission, Inter alia, for de-plotting unless and until it involved change of land use. In my considered opinion, the permission by the Collector for de-plotting of the land for construction of farm houses is change of land use. Thus, with permission of the Collector, the land was no more an agricultural land. This fact coupled with the provisions contained in the relevant agreement allowing construction of internal roads and club house etc. is indicative of the fact that post permission of the Collector, the land did not remain an agricultural land. The claim of the Appellant that he kept growing plants/fruits on such land, does not make the land agricultural land. Further, the Appellant has not furnished any evidences to establish this fact. This argument gets strengthened by the fact that during the relevant year, the Appellant has not shown any agriculture income. In this regard, it is also very important to take note of the fact that the Tehsildar had reported to the Collector that the land is a barren land Le not fit for cultivation. This fact has not been rebutted by the Appellant with any evidence. Thus, in view of these facts, I hold that the 14 acres of land against which compensation has been received by the Appellant is not an agricultural land. Consequently, I hold that the land in question is a capital asset in terms of section 2(14) of the Act. Printed from counselvise.com ITA No. 4635/Mum/2025 Sunil Khadawala Legal of Manhar Khadawala 7 C If the land is not agricultural land and, therefore, a capital asset, does the surrender of the same against cancellation of the allotment letter (under peculiar facts of the case) amounts to 'transfer' u/s 2(47) of the Act? It is an undisputed fact that M/s Mahal Mira Holiday Resorts (MMHR)vide agreement dated 25/08/1999 had sold 51 plots to Appellant for a total consideration of Rs.10.29,754/-. MMHR further allotted 14 acres of land to the Appellant vide letter of allotment dated 14.09.1999. For this, the Appellant did not make any payment to MMHR since, this land was supposed to be part of the agreement dated 25/08/1999, however, the same remained to be mentioned there. Thus, the land of 14 acres was allotted to the Appellant by MMHR against NIL consideration. It is undisputed fact that the Appellant has received an amount of Rs. 75.95,230/- as compensation from MMHR towards cancellation of the allotment letter dated 14.09.1999. It is also undisputed fact that the partners of MMHR and the Appellant are very closely related. This observation/finding by the AO has not been rebutted by the Appellant. In these facts, in my considered opinion, the various agreements vide which land has been allotted to the Appellant in two phases and subsequently cancelled vide two separate cancellation letters, seems to be self-serving documents. There was no intention to sell the land (51 plots + 14 acres = 68 acres) to the Appellant. To me, it appears to be a lax avoidance scheme. It is a settled issue that the compensation paid for cancellation of any allotment or booking, is invariably in the nature of revenue expenditure and claimed as deduction by the payer. In the case of MMHR, the compensation paid to the Appellant must have been claimed as expenditure, thus, reducing its tax liability. Further, the corresponding receipts in the hands of the Appellant has been claimed as tax exempt. Thus, there is overall reduction in tax liability by undertaking the above transition through self-serving documents. Coupled with the above findings/observation, I observe that the Appellant has not paid any amount against allotment of 14 acres of land vide allotment of letter. Under these facts, can it be said that the said 'allotment letter' has conferred certain Printed from counselvise.com ITA No. 4635/Mum/2025 Sunil Khadawala Legal of Manhar Khadawala 8 rights to the Appellant in the land (14 acres). In my considered opinion and putting thrust on the above arguments (that all these agreements are self-serving documents entered into with related parties to reduce overall tax liability), I hold that no rights in For transfer of any right, some consideration has to be there either in terms payment the 14 acres of land got transferred to the Appellant vide the said letter of allotment of cash or in kind. The said transactions not a gift as well since it is allotment by Firm transferred to the Appellant vide letter of allotment, there is no question of to the Appellant. In view of these facts. I hold that in absence of any rights being in absence of surrender of any rights, the compensation amount so received is not in subsequent surrender of any rights on cancellation of such letter of allotment. Thus, lieu of any transfer in terms of section 2/47) of the Act. In view of the same, the amount so received does not qualify as 'capital gain' as it does not involve transfer In terms of section 2(47) of the Act. Thus, the said compensation of Rs. 75.95.230/-does not fall under any of the four heads of income i.e. Income from HP, salary income. Income from business or profession or capital gain. Thus, the said compensation is to be treated as 'income from other sources as has been rightly done by the AO. In view of the above hold that the AO has correctly treated the compensation received as income from other sources and has taxed accordingly. Grounds are, thus, dismissed. 8. The learned counsel for the assessee submitted that the controversy is no longer res integra. He drew our attention to the Tribunal’s order for AY 2009–10 in assessee’s own case, wherein compensation received on surrender of part of the very same land had been held, after detailed remand proceedings, to pertain to agricultural land. In pursuance of Tribunal’s directions, the AO himself, in order dated 31/03/2015 giving effect to ITAT’s directions, categorically held the land to be agricultural. Reliance was also placed upon contemporaneous revenue records, certificates from the Printed from counselvise.com ITA No. 4635/Mum/2025 Sunil Khadawala Legal of Manhar Khadawala 9 Talathi and Gram Panchayat, as well as valuation reports establishing the agricultural character of the land. “We have considered the rival submissions and carefully perused the orders of the lower authorities and the material evidence brought on record in the form of paper book. It is not in dispute that the assessee was the owner of 51 Nos of farm plots. It is also not in dispute that during the year under consideration, the assessee has surrendered all those 51 Nos. of farm plot for a consideration of Rs. 2.04 crores The only point of dispute is that according to the assessee, the impugned farm plot were agricultural land and according to the Revenue authorities, the same were non agricultural land, thus, the issue relates to the chargeability of capital gain tax. It is a fact that in the remand proceedings, the AO has accepted the impugned farm land as agricultural land. However, we find that the Ld. CIT(A) has simply rubbished the remand report without assigning any reason. We also find force in the contention of the assessee that the Ld. CIT(A) has relied upon certain documents which do not pertain to the assessee for example 7/12 extracts. We also find that the report of the Inspector was not provided to the assessee though used against him thereby violating the basic principles of natural justice. The AO has invoked the provisions of Sec. 50C of the Act though the facts on record show that there was no registered Transfer Deed executed for the surrender of said farm plots which means that no Stamp Duty value was assessed The word \"assessable\" has been brought under the provisions of Sec. 500 from 1.10.2009 therefore not applicable for the year under consideration. We also find that the assessee has substantiated his claim by valuation report which was filed before the AO and if the AO was not satisfied, the matter should have been referred to the DVO. Considering these facts in totality and the facts that there was a denial of natural justice, we restore this issue back to the files of the AO. The AO is from the Thehsil records relating to the nature of the farm plots. The AO is also directed to refer the matter relating to the valuation to the District Valuation Officer and after receiving the report, the AO is directed to provide that report to the assessee. The assessee is directed to furnish all the necessary documents before the AO to substantiate his claim that the impugned farm plots are agricultural land The AO is also directed to verify the applicability of the provisions of Sec Printed from counselvise.com ITA No. 4635/Mum/2025 Sunil Khadawala Legal of Manhar Khadawala 10 50C of the Act on the reasonable and sufficient opportunity of Ground No. 1,2 & 3 are allowed for facts of the case after giving being heard to the assessee statistical purpose.” 9. In the said aside proceedings, the ld. AO examined all the details in pursuance of the direction of the Tribunal and held that the impugned land was agricultural land. In his order giving effect dated 31/03/2015. The detailed discussion of the ld. AO was given at para 5.1 to 5.4. The relevant finding in para 5.3 is as under:- 8.3 The assessee's submission as well as the report of the DVO, dated 19.03.2015, have been considered - (1) Certificate from the Talathi, dated 03.02.2011, states that the impugned land is more than 8 Kms from the Municipal limit (1) Certificate from Gram Sewak, Gram Panchayat, dated 09.01.2018, states that the total population of the Village Virani, where the impugned land is situated is 768. (ii) Report of Town Planning and Valuation Department, dated 11.06.2012, reveals that the Total Land at Village Virani where the impugned land is situated, comes partly under Agricultural land and partly under forest department zone. (iv) The assessee has submitted the 7/12 extracts of the impugned land which proves that the land is an agricultural land in the Land Revenue Records The assessee has been showing income from impugned land as agricultural income consistently for past few years and the assessee's contention in this regard has been accepted by the department in earlier assessment years. As per the directions of the Hon'ble IWAT, on perusal of the Tehsil records as per the Letter of the Talathi dated 20.11.2014, it is found that the impugned land is Pud Land a type of Agricultural land Printed from counselvise.com ITA No. 4635/Mum/2025 Sunil Khadawala Legal of Manhar Khadawala 11 As per the directions of the Hon'ble ITAT the valuation of the impugned land was referred to the District Valuation Officer, vide letter no. ACIT 12(1)/2014-15/MPK The DVO sent the Valuation report vide letter no VO/THN/CGT/2428/2014- 15/145, dated 19.03.2016. As per the report, the column no. 3.3, titled Specifications' states that- \"The subject property is agricultural land consisting of 51 Nos. Farm House Plots of land situated on Borgaon Virani Road. There is no compound wall/demarcation of the plots on the subject land defining boundaries, The land is of irregular shape and size. The subject property is very uneven, hilly lands surrounded by hillocks consisting similar plots. Full plot is covered by hedges and small plants. The property is surrounded in East side by llorgaon Virani Road, West side by Dhangarwadi, North side by Khuslanis plot and Sarpanchwadi by South. This property is located at about 8 km away from Pen City.\" On perusal of the replies by the DVO, to the objections filed by the assessee, in response to the Preliminary Valuation Report of the DVO dated 18.03.2015, it is noticed that the Reply of DVO to Objection-1 of the assossee states that \"While determining FMV of the subject property it has been already considered as Agricultural land and accordingly FMV has been estimated. However, now it is added in specification that subject property is an Agricultural land.\" 10. We have carefully considered the rival submissions and traversed the factual matrix in depth. It emerges that the issue before us is not a virgin one but stands squarely covered by earlier proceedings in the assessee’s own case. For A.Y. 2009–10, involving compensation received on surrender of part of the very same contiguous tract of 68 acres, this Tribunal had remitted the matter to the file of the Assessing Officer with a direction to ascertain, on the basis of revenue records and official evidence, whether the land in question Printed from counselvise.com ITA No. 4635/Mum/2025 Sunil Khadawala Legal of Manhar Khadawala 12 was agricultural. Pursuant to these directions, the Assessing Officer undertook a detailed enquiry. Certificates were obtained from the Talathi and the Gram Sewak confirming that the land was situated beyond eight kilometres of municipal limits in a village with a population below ten thousand. The revenue records particularly the 7/12 extracts unequivocally described the land as agricultural. The District Valuation Officer, in his report, also recorded that the land comprised uneven, hilly tracts used for farm plots and covered with hedges and small plants. In his order giving effect dated 31.03.2015, the Assessing Officer categorically concluded that the land constituted agricultural land. These findings were neither challenged nor reversed thereafter, and hence attained finality. 11. Once such a finding has been rendered after elaborate enquiry, supported by contemporaneous revenue records and the statutory authority of the District Valuation Officer, the principle of consistency inexorably applies. It is trite law that the Revenue cannot take diametrically opposite stands on identical facts pertaining to the same assessee and the same parcel of land. The doctrine of finality of facts and judicial discipline demands that what has been accepted as agricultural land in one year cannot be treated as non- agricultural in another, absent any material change in circumstances. The contention of the lower authorities that Collector’s permissions altered the character of the land stands diluted in light of the fact that the revenue records, statutory certificates, and prior adjudication all point to its agricultural character. Indeed, once the Assessing Officer Printed from counselvise.com ITA No. 4635/Mum/2025 Sunil Khadawala Legal of Manhar Khadawala 13 himself, in obedience to the Tribunal’s directions, has accepted the land as agricultural in earlier years, there remains little scope for disputation. We therefore hold that the compensation of ₹75,95,230/- received on surrender of the 14 acres, forming part of the same 68 acres, partakes of the same character and must be regarded as arising from agricultural land. Consequently, such receipt lies outside the definition of “capital asset” under section 2(14) of the Act and is not taxable either as capital gains or as “income from other sources.” 12. Coming now to the disallowance of salary expenditure of ₹5,11,000/-, we find that the approach of the Assessing Officer suffers from a fundamental misconception. The impugned salary was not claimed as a deduction against income from other sources but was debited in the regular business accounts of the assessee’s proprietorship concern, M/s Vithal Restaurant, and thus pertains squarely to business activity. The Assessing Officer, by mechanically linking this expenditure with the income from other sources, has conflated two distinct streams of income and their corresponding heads. The Income-tax Act is structured around the principle of compartmentalization of heads of income, and deductions permissible under one head cannot be disallowed by erroneously attributing them to another. Once it is accepted that the assessee carried on a business and salary expenditure was incurred wholly and exclusively for the purpose of that business, such expenditure becomes allowable under section 37(1) of the Act. No adverse material has been brought on record to suggest that the employees Printed from counselvise.com ITA No. 4635/Mum/2025 Sunil Khadawala Legal of Manhar Khadawala 14 were non-existent or that the services were not rendered. In these circumstances, the disallowance made by the Assessing Officer, and sustained by the CIT(A), rests on a flawed premise. We, therefore, hold that the salary expenditure of ₹5,11,000/- is to be allowed in full. The addition made on this score stands deleted. 13. Turning to the disallowance of interest expenses of ₹1,63,373/-, the relevant details of income and expenditure are tabulated as under: Sr. No. Particulars Amount 1 Interest on Fixed Deposit, Saraswat Bank, CST, Mumbai 12,34,612 2 Interest on Term Deposit (Autosweep) - Kotak Mahindra Bank 4,304 3 Interest on Fixed Deposit - Saraswat Bank Pen, Raigad 9,744 4 Interest on Fixed Deposit - State Bank of India, Empire House, Mumbai 79,222 5 Interest on savings account - HSBC Bank, M. G. Road, Mumbai 991 6 Interest on savings account - Saraswat Bank, CST (A/c. 8128) 137 7 Interest on savings account - Kotak Mahindra Bank 1,206 8 Interest on savings account - DCB Bank, Nesbit Road 3,599 9 Interest on Loan 5,52,065 Total Income from Other Sources 18,85,880 Deductions claimed 1 Interest paid on overdraft - Saraswat Bank, CST 4,46,486 2 Interest paid on overdraft (against LICs) - Saraswat Bank, CST (A/c. 2030) 10,262 3 Interest paid on loan against Fixed Deposit - Saraswat Bank, CST(A/c. 2240) 1,082 4 Amount paid to Kotak Securities Ltd 322 4,58,152 Printed from counselvise.com ITA No. 4635/Mum/2025 Sunil Khadawala Legal of Manhar Khadawala 15 14. The AO allowed proportionate deduction only to the extent relatable to overdraft against FDs but disallowed the balance. The assessee has cogently explained that had the overdraft facility not been availed, he would have been compelled to prematurely encash fixed deposits, thereby incurring penal charges and forfeiting accrued interest. By opting for overdraft at a marginal cost, the assessee effectively preserved the interest income stream while arranging liquidity. The interest paid, therefore, was inextricably linked to the earning of interest income; it was not an independent or extraneous outflow but a necessary incident of the chosen mode of financial management. The law under section 57(iii) requires that expenditure be “wholly and exclusively” incurred for the purpose of making or earning income from other sources. The present arrangement, being directly correlated with the assessee’s earning of interest income, satisfies that statutory test. We accordingly direct that the entire interest expenditure be allowed, and the disallowance of ₹1,63,373/- is deleted. 15. In the result, the appeal of the assessee succeeds on all substantive issues. On merits, the impugned additions stand deleted. Order pronounced on 9th September, 2025. Sd/- (PRABHASH SHANKAR) Sd/- (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 09/09/2025 KARUNA, sr.ps Printed from counselvise.com ITA No. 4635/Mum/2025 Sunil Khadawala Legal of Manhar Khadawala 16 Copy of the Order forwarded to : BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Printed from counselvise.com "