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2019 (3) TMI 1112 - BOMBAY HIGH COURTExemption u/s 10(23G) - exemption u/s 10(23G) has to be on the net and not on the gross interest receipt - AO held that such exemption would be available on net income and not on the gross interest receipt - assessee raised foreign loan from which infrastructure projects were funded - As per assessee he had sufficient interest free funds and therefore, the AO was not correct in disallowing interest expenditure on local borrowings - HELD THAT:- Tribunal noted that the assessee is not a Banking Company as defined under the Banking Regulations Act, 1949. It is also not a company registered under the Companies Act 1956. In fact, the assessee was a public finance institution constituted under the Act. The Tribunal also noted that the assessee had substantial own funds which were deployed in bonds and securities which yielded receipts exempt under Section 10(23G) of the Act. In our opinion, the Tribunal, therefore, correctly applied the decision of this Court in the case of Reliance Utilities & Power Ltd [2009 (1) TMI 4 - BOMBAY HIGH COURT]. Revenue had not been able to establish any direct co-relation between the assessee's local borrowings and its investments in infrastructure development projects. For such reasons, no question of law arises. Hence, this question is not entertained. - decided against revenue Exemption under Section 10(33) - HELD THAT:- The Tribunal relying on the same principle as in the previous question and applying the decision of this Court in the case of Reliance Utilities and Power Ltd (supra), ruled in favour of the assessee. We do not see need to give separate reasons for confirming this decision of the Tribunal. - decided against revenue Taxability of interest on non-performing assets ("NPA") u/s 43D - Interest received during the year - when it accrued, was exempt and the assessee was not even required to file return, however, the assessee had maintained accounts clearly establishing the accrual of income and section 43D would not apply to the assessee - HELD THAT:- Section 43D of the Act makes special provisions in case of income of public financial institutions, public companies etc and provides that notwithstanding anything to the contrary contained in any other provision of the Act, in the case of a public financial institution or a scheduled bank or a co-operative bank, the income by way of interest in relation to specified bad or doubtful debts shall be chargeable to tax in previous year in which it is credited by such institution to its profit and loss account or the year in which it is actually received whichever is earlier. This provision, thus, makes a receipt of specified NPAs taxable on receipts or crediting in the account whichever is earlier. In this context, the Tribunal correctly observed that though the assessee was not required to or even eligible to file return, it had maintained accounts and the interest income was embedded in the profit / loss. This was during the period which such income was exempt from tax. - decided against revenue
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