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2012 (6) TMI 132 - AT - Income TaxTreatment of interest income from FDRs under Tonnage Tax Scheme - the assessee had received interest income on FDs which he had not offered for taxation and had instead taken the sum as covered under Tonnage Scheme – assessee contested that he had borrowed funds from bank for shipping activities placing the FDRs with the bank as collateral securities and the interest income received was conclusively linked to the shipping activity - Held that:- Placing FDRs with bank cannot be considered as activity for operating ships or activity of shipping contract or shipping trades -it can be considered as an incidental activity but under the Tonnage Tax Scheme, the incidental activities have been separately defined in Rule- and which clearly does not contain the activity of placing FDRs - under the Tonnage Tax Scheme, only profit from core activities and profit from incidental activities are included and as regards the interest income, the source of such income is FDR and not the shipping activity either core or incidental – against assessee. Only the net interest income should be assessed as assessee had used borrowed funds for making the FDRs – Held that:- While computing interest income expenses incurred for earning interest income have to be excluded - restore the submission of the assessee regarding netting of income to the file of CIT(A) for deciding the same after necessary examination and after hearing the assessee – in favour of assessee. Assessment of other income consisting of sundry balance written back, excess provision written back and miscellaneous income - AO assessed such income as income from other sources in addition to income under Tonnage Scheme – Held that:- Since the CIT(A) had not adjudicated the issue the matter should be sent back to CIT(A) for fresh adjudication and after allowing opportunity of hearing to the assessee.
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