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2013 (11) TMI 1363 - AT - Income TaxAddition of Interest accrued but not due – accrual of income - broken periods - Held that:- Observation has been made by Hon’ble High Court in the case of American Express International Banking Corpn [2002 (9) TMI 96 - BOMBAY High Court] that the right to receive interest on the Government securities vested in the respondent only on the due date mentioned in the securities. Consequently, interest accrued on the securities only on the due dates and cannot be said to have accrued to the respondent on any date other than the date stipulated therein. The contention that interest accrues for broken periods between two consecutive dates stipulated in the agreement/instrument for payment of interest is without any basis in law – Observed that in respect of the securities held by the respondent on 31st March, 2001, the due date for payment of interest thereon had not arrived on 31st March, 2001 and that the assessee sold some of such securities prior to the next due date for payment of interest. It is only the holder of the security on such date to whom interest can be said to have accrued – Following the above observation by the Hon’ble High Court, in any event interest did not accrue to the respondent on 31st March, 2001, as admittedly interest was not payable on that date as per the terms of the said securities – Addition on account of interest deleted – Decided in favor of Assessee. Addition of interest amount received from the foreign Head Office – Held that:- Relying upon the Special Bench judgment in the case of Sumitomo Mitsui Banking Corpn [2012 (4) TMI 80 - ITAT MUMBAI], it has been held that interest, cannot be taxed in India in the hands of assessee bank, a foreign enterprise being payment to self which cannot give rise to income that is taxable in India as per the domestic law – Decided in favor of Assessee. Addition of Provision of Bad Debt for computing ‘book profit' under section 115JA of the Act – Held that:- In view of the retrospective amendment made by the Finance (No. 2) Act , 2009 w.r.e.f. 1-4-1998, the A.O. was justified in making the addition of the said provision of bad debts while computing the book profit/s 115JA of the Act – Decided against the Assessee. No portion of interest expenditure and operating expenditure would be attributed to the income claimed exempt u/s 10(15) and deleting the proportional disallowance made - Assessee has claimed exempt interest on foreign currency deposits with schedule banks and the same is exempt u/s 10(15)(iv)(fa) of the Act – Held that:- Reliance has been placed upon the assessee’s own case Dresdner Bank AG v. Asstt. CIT [2006 (10) TMI 175 - ITAT BOMBAY-F], wherein it has been held that exemption is allowable u/s 10(15) in respect of gross amount of interest - Any expenditure incurred in relation to earning to the exempt income is to be disallowed u/s 14A – Decided against the Assessee. Interest receivable by the Indian branch from its Head Office/Overseas Branches is the 'income' – Held that:- In the absence of any contrary material placed on record by the Revenue, deleted the disallowance of deduction of interest of Rs. 3,244,213/- - Decided in favor of Assessee.
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