Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2015 (7) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (7) TMI 356 - AT - Income TaxDisallowance of the interest expenditure from being set off against the interest income offered under the head “Income from other sources” - whether the interest paid on the borrowings which were source of funds parked in term deposits has to allow as expenditure or not? - Held that:- The interest earned by the assessee is assessable u/s 56 and only such expenditure can be allowed which has been set out in clauses (i) to (iii) in section 57. In that case it was not the case of the assessee that the interest payable by it on the term loans should be allowed as deduction u/s 57. Here also if the interest payable on the borrowed funds are directly relatable to setting up of the project, then perhaps the decision of the Ld. CIT(A) would be assailable, but here in this case, the assessee’s claim is that interest expenditure was directly related to earning the interest income taxable under the head “Income from other sources.” Hence the decision of Hon’ble Supreme Court in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd. (1997 (7) TMI 4 - SUPREME Court) and other decisions as relied upon by the Ld. CIT(A) will not be applicable. In order to establish that such an interest expenditure was directly related to the interest income, the matter is being restored back to the file of the AO to verify the assessee’s contention and to see, whether there is a direct nexus of the interest expenditure incurred to the interest income earned. If that is so, then AO will allow the interest expenditure or set off against such interest income, while doing so AO will give due and effective opportunity to the assessee to demonstrate its case before him. - Decided partly in favour of assessee for statistical purpose.
|