Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2016 (9) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (9) TMI 651 - AT - Income TaxPenalty imposed under section 271(1)(c) - AO was opinion that the assessee has reduced the incidence of tax by claiming deduction of interest expenditure against salary income, and thus, he deserves to be visited with penalty - Held that:- . In the first round of litigation upto the level of the Tribunal, it has been held that interest expenditure cannot be allowed as set off against salary income, but this order was recalled by the Tribunal in Misc. Application, as noticed by the ld.CIT(A) in the finding extracted supra. The Tribunal has allowed set off of the interest expenditure against interest income of ₹ 35,203/-. This reasoning of the Tribunal would indicate that interest bearing funds were used by the assessee for making investment in the company. In other words, he would earn interest income. It is a different matter that in this year, the income was to the extent of ₹ 35,203/-. Had there been more interest income, then, the total claim of interest expenditure would have been set off. So, the question is whether the claim of the assessee was not tenable at all or it was not allowed because sufficient interest income was not there for a set off. Even if a part of the interest expenditure is being set off against alleged interest income, it would falsify the reasoning of the AO. The assessee, as such exclusively not claimed the interest expenditure against the salary income, rather, his stand is to be construed that he claimed interest expenditure on the ground that such interest bearing funds were used for making investment in the company. To my mind, in such situation, he cannot be visited with penalty under section 271(1)(c) of the Act. - Decided in favour of assessee.
|