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2021 (7) TMI 439 - AT - Income TaxInterest disallowance u/s 36(1)(iii) - CIT-A justification in treating the interest income from debentures to be taxed under the head “income from other sources‟ as against “income from business‟ offered by the assessee - HELD THAT:- There is absolutely no dispute that the borrowed funds from IBFSL had been utilized in investment in convertible debentures of M/s KA Hospitality Pvt Ltd (sister concern) of the assessee company. At the outset, we find that the borrowings were made in Asst Year 2012-13 and utilization of the same by way of making investment in convertible debentures of M/s KA Hospitality Pvt Ltd was also made in Asst Year 2012-13. The assessee had paid interest for the period 19.3.12 to 31.3.12 relevant to Asst Year 2012-13 and received interest income on debentures of ₹ 10,849/- in Asst Year 2012-13. The net interest paid for Asst Year 2012-13 was disallowed by the ld AO u/s 36(1)(iii) of the Act which was deleted by the ld CIT-A. As pointed out that the revenue could not prefer any appeal before this tribunal against this order on the ground of low tax effect on disputed issue due to circular issued by CBDT. Accordingly, we hold that the issue of allowability of interest paid on loans need to be examined independently in Asst Year 2013-14 dehors the fact of non-filing of appeal by the revenue before us for Asst Year 2012-13. CIT-A had enhanced the income by treating the interest income on debentures to be taxed under the head “income from other sources” and disallow the entire gross interest paid on loans u/s 36(1)(iii) of the Act. Since the aforesaid issue of allowability of interest paid is set aside to the file of the ld CITA this interconnected issue of interest income on debentures getting taxed as income from other sources is also set aside to the file of ld CITA for fresh adjudication in the light of aforesaid directions. Grounds raised by the assessee allowed for statistical purposes.
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