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2016 (4) TMI 383 - AT - Income TaxInterest paid to third parties - Held that:- What has been estimated is not the gross profit but net profit. When computing the net profit, the expenditure incurred by the assessee in respect of earning of income under the head “business” is rightly to be allowed. Here, the books of account of the assessee has been rejected, the interest paid to third parties falls under the head “business expenditure” which is liable to be deducted while computing the net profit. In the present case, as the net profit itself has been estimated no further addition to the same by picking and choosing items from expenditure account can be made. Consequently, we are of the view that the interest paid to third parties are liable to be allowed and further addition made by the Assessing Officer on account of the interest paid to third parties stands deleted. Interest received from the bank on FDs - Held that:- As noticed that the interest income of the assessee from fixed deposit is not “business income” of the assessee. It is liable to be assessed under the head “income from other sources”. The business of the assessee is not making any Fixed Deposit and deriving interest there from. Further, the assessee has also not been able to show as to how the bank interest was in any way intrinsically connected to the business activity of the assessee for the purpose of claiming that the interest received on the FDRs are business income. In the circumstances, the findings of the learned CIT (A) in confirming the addition ₹ 70,709/- on account of bank interest especially under the head “income from other sources” stands confirmed.
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