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2016 (12) TMI 1879 - AT - Income TaxDisallowance u/s.36(1)(viii) in respect of the interest on mortgaged back security and interest from loans advanced to deposits holders - A.R submitted that only the net interest to be considered for disallowance u/s.36(1)(viii) of the Act and not the gross interest - HELD THAT:- As rightly pointed out by the ld.D.R, provisions of Sec. 36(1)(viii) are applicable only in respect of loans granted for construction or purchase of house in India for residential purpose, as such Ld.CIT(A) rightly confirmed the disallowance. However, while computing the disallowance u/s.36(1)(viii) of the Act, only net interest income to be considered from the activities of mortgaged back security and interest from loans advanced to deposit holders. This ground of appeal is partly allowed. Disallowance u/s.36(1)(viii) in respect of the interest being the referral fee from insurance companies and other income - HELD THAT:- Getting properties and persons insured is not a mandatory requirement for carrying on the business of providing long term housing finance. Therefore, the income received by way of commission has no direct nexus or its not incidental to the long term housing finance. Accordingly, this issue was decided against the assessee. CIT(A) had not admitted the additional grounds raised by the assessee - exclusion of income earned on the land loans which were extended by the assessee in the normal course of business, and exclusion of the entire interest income from the computation of eligible profits for the purpose of deduction u/s.36(1)(viii) - HELD THAT:- We have gone through the assessment order for assessment year 2006-07 wherein the AO reworked the deduction u/s.36(1)(viii) of the Act by segregating the profit on the basis of various activities carried on by the company. On the same manner we direct the AO to compute u/s.36(1)(viii) of the Act for this assessment year also. Interest income on SLR investment is eligible for deduction u/s.36(1)(viii).
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