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2023 (10) TMI 617 - AT - Income TaxAccrual of income - Notional Interest on FDs under Restraint Order - Treating the interest income accrued on the fixed deposits as under attachment by the orders of CBI Court - right to receive - whether Placing of prohibitory orders over the deposits has not affected the accrual of interest and as per section 5 of the Act, and there is accrual of interest income in the subject assessment year? - HELD THAT:- Interest income of the assessee can be recognized only when there is no uncertainty and significant scope to receive the same. Therefore, in the case of assessee, accrued interest on bank deposit on which prohibitory order placed by CBI Hyderabad cannot be treated as interest income of the assessee during these two assessment years, until the assessee has actually received it from the bank though it was subject to TDS. This view of ours is fortified by the order of Tribunal in the case of Selvi J. Jayalalitha [2016 (9) TMI 1662 - ITAT CHENNAI] Deduction of TDS u/s 194A - As held by [2021 (11) TMI 577 - KARNATAKA HIGH COURT] and the Hon’ble High Court vide order dated 21.9.2021 Hon’ble Court that “the entitlement of interest accruing on the FDs to the assessee would be dependent on the result of the pending Court/CBI proceedings and consequently, till the conclusion of the said court proceedings, the interest accruing on the FD cannot be considered as income for the purpose of deduction of TDS u/s 194A and directed the bank not to deduct TDS on the interest of FDs. However, it cannot be treated as absolving the assessee of its liability to pay tax on the interest accruing on the FD if the petitioner becomes entitled to the same after conclusion of the court proceedings.” Being so, in our opinion, the lower authorities has committed an error in bringing the interest accrued on FD which is subject to prohibitory order by CBI Hyderabad into tax in these assessment years under consideration and the same has to be taxed in assessment year when it was actually received by the assessee or right to receive accrued to the assessee - assessee has to pay the tax on the same on actual accrual of right to receive this impugned interest by the assessee in any assessment year and not in these assessment years. Accordingly, this ground of appeal of the assessee is partly allowed. Disallowance u/s 14A - expenditure related to exempt income - assessee argued that as AO has considered certain investments though it was not exempted income yielding investment - HELD THAT:- We hold that disallowance should be restricted to the amount of exempted income earned by the assessee after considering only the exempted income yielding investments, so as to apply the formula contained in Rule 8D. Accordingly, the issue is restored to the file of ld. AO for fresh consideration. This ground of assessee is partly allowed for statistical purposes. Computation of income u/s 115JB - As main grievance of ld. A.R. is that he has not followed the provisions of section 115JB r.w. Explanation in proper perspective and in our opinion, this issue requires to be examined by ld. AO and to pass a fresh order in total conformity with the provisions of section 115JB r.w. all the explanations therein. This ground of appeal is partly allowed for statistical purposes
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