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2013 (5) TMI 922 - AT - Income TaxNetting of Interest income and expenditure - Deduction u/s 10AA/10A- The assessee has raised grounds in regard to treating the FDs kept as margin money with Bank against credit facilities as income from other sources instead of income from business and not netting such interest against interest payment to Banks, for calculation of deduction under Section 10AA & 10A. HELD THAT:- Interest income and expenditure income has to be netted of, if there is a nexus. Netting of interest is allowed and AO is directed to compute the net income of interest or expenditure. If after netting of interest it is found that interest income is more than the interest expenditure then the surplus income has to be treated as income from other sources, otherwise no deduction is to be made while calculating deduction under Section 10AA/10A. Decision in the case of M/S ACG ASSOCIATED CAPSULES PVT. LTD. (FORMERLY M/S ASSOCIATED CAPSULES PVT. LTD.) & OTHERS VERSUS THE COMMISSIONER OF INCOME TAX, CENTRAL-IV, MUMBAI & OTHERS [2012 (2) TMI 101 - SUPREME COURT], relied upon. "Services" under IT Act and SEZ Act - Deduction u/s 10AA - The AO disallowed the deduction under Section 10AA by observing that the exemption claimed u/s. 10AA is applicable only for manufacturing unit as per the Act, whereas the assessee was involved in trading activities in Surat SEZ areas. Income Tax Act defines "service' essentially as professional and technical services. The assessee has done simple trading and, therefore, on trading activity deduction under Section 10AA is not allowable. Assessee claimed that SEZ Act section 2(z) defines "services' to include tradable services. - HELD THAT: - According to Section 51 of the SEZ Act, it has been provided that the provision of SEZ Act will override the provision of Income Tax Act. Trading done by the assessee is a service and, therefore, deduction u/s 10AA is allowable. Decision in the case of DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-2 VERSUS GOENKA DIAMOND & JEWELLERS LTD. [2012 (3) TMI 258 - ITAT JAIPUR], relied upon.
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