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2018 (3) TMI 207 - AT - Income TaxAddition u/s 14A - ‘net’ interest expenditure - Held that:- The interest expense incurred in the business of money lending was ₹ 2,0276,317/-. In the course of its business of financing, the assessee borrows and lends monies. The assessee pays interest on the borrowed funds and earns interest on the loans advanced. Therefore, both the interest income and the interest payment are intrinsically linked. There is complete inter lacing of funds and therefore, for ascertaining the tax effect, netting off of interest paid with interest received is necessary. It is for this reason that the net interest is reflected in the profit and loss account. AO should also have considered the interest on net basis. After setting off interest expense against the interest income, the assessee was let with negative figure of ₹ 6,08,163/- which had been suo moto disallowed by the assessee in its entirety. Thus the ‘net’ interest expenditure is to be considered for the purposes of disallowance u/s 14A and where after setting off interest earned against the interest expenditure no further interest expense remains then disallowance cannot be made u/s 14A of the Income-tax Act, 1961. - Decided in favour of assessee
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