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Commissioner of Income Tax II, Chandigarh Versus M/s Agro Dutch Industries Limited, Chandigarh

2016 (1) TMI 227 - PUNJAB AND HARYANA HIGH COURT

Interest on FDRs - Whether Tribunal has failed to adjudicate the issue in treating the interest on FDRs income under the head income from other sources and allowed the corresponding deduction of interest expenses under section 36(1)(iii) instead under section 57(iii) - Held that:- The FDRs were kept in the bank as margin money of obtaining loans. In support of the connection of the interest paid on loan with the FDRs in question, the assessee has enclosed the relevant account statements, details .....

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re was no material has been referred to by the CIT(Appeals) to hold that the interest expenditure has not been expended for the impugned FDR, we do not find any weight in the aforesaid conclusion by the CIT(Appeals). As a consequence, it has to be held that the interest paid to ICICI and IDBI band on funds utilized to make the impugned FDRs is an allowable deduction under section 57(iii) against the interest income on such FDRs. Thus, the claim of the assessee under section 57(iii) of the Act on .....

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dvocate Ajay Kumar Mittal,J. 1. This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short, the Act ) against the order dated 15.10.2008, Annexure A.3 passed by the Income Tax Appellate Tribunal, Chandigarh Bench, 'B' in ITA No.356/Chandi/2008, for the assessment year 2001-02, claiming following substantial question of law:- Whether on the facts and in the circumstances of the case and in law, the order of ITAT is perverse as Tribunal has faile .....

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d 'income from business and profession' of ₹ 1,36,478/- and a loss of ₹ 25,617/- under the head 'income from other sources'. The loss under the head 'income from other sources' was computed as under:- Interest from banks on FDRs ₹ 11,31,147/- Less :Interest expenditure ₹ 11,56,764/- Loss ₹ 25,617/- The Assessing officer vide order dated 20.12.2007, Annexure A.1 determined income at ₹ 26,27,973/- under the head 'income from other sou .....

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y the CIT(A). Consequently, the appeal was partly allowed by the CIT(A) vide order dated 27.2.2008, Annexure A.2. Against the balance income of ₹ 10,12,524/- in revenue account assessable under the head 'income from other sources', the assessee claimed deduction under section 57(iii) of the Act amounting to ₹ 11,56,764/- before the Tribunal by filing appeal. The Tribunal vide order dated 15.10.2008, Annexure A.3 relying upon the decision of the Apex Court in CIT vs. Karnal Co .....

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sources'. Once that was so, any expenses incurred by the assessee for earning the said income would fall under Section 57(iii) of the Act. Accordingly, amount of ₹ 11,56,764/- which were the expenses incurred by the assessee for earning the interest under the head 'income from other sources' was rightly allowed by the Tribunal. The relevant findings recorded by the Tribunal read thus:- 10. In our considered opinion, the documents and the material on record clearly establishe th .....

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in relation to the letters of credit obtained for import of capital goods stands capitalized i.e. it has been reduced from the capital cost by the CIT(A). The interest income remaining relates to the imports on revenue account alone which is not disputed by the Department. 11.The observation of the CIT(A) in para 12 to the effect that 'the interest expenses in the case of the assessee has not been expended for the purchase of earning the interest income', in our considered opinion,is deh .....

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