TMI Blog2016 (12) TMI 1879X X X X Extracts X X X X X X X X Extracts X X X X ..... viii) of the Act, only net interest income to be considered from the activities of mortgaged back security and interest from loans advanced to deposit holders. This ground of appeal is partly allowed. Disallowance u/s.36(1)(viii) in respect of the interest being the referral fee from insurance companies and other income - HELD THAT:- Getting properties and persons insured is not a mandatory requirement for carrying on the business of providing long term housing finance. Therefore, the income received by way of commission has no direct nexus or its not incidental to the long term housing finance. Accordingly, this issue was decided against the assessee. CIT(A) had not admitted the additional grounds raised by the assessee - exclusi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holders of ₹ 1,22,963/-. 3. The facts of the issue are that the assessee claimed deduction u/s.36(1)(viii) of the Act in respect of interest on mortgaged back security of ₹ 41,72,737/- and interest from loans advanced to deposit holders of ₹ 1,22,963/- was rejected by the lower authorities on the reason that it was not mandatory investment as required by any statutory requirements by carrying on business by providing loans and housing finances. According to AO, these incomes from interest on these activities cannot be termed as derived income from long term finance. The income received as no direct nexus or is not incidental to the long term housing finance. Accordingly, the AO dismissed the claim of the assessee u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27 28/Mds./2008 for assessment years 2003-04 2004-05 vide order dated 14.08.2008 wherein held in para -11 as follows: getting properties and persons insured is not a mandatory requirement for carrying on the business of providing long term housing finance. Therefore, the income received by way of commission has no direct nexus or its not incidental to the long term housing finance. Accordingly, this issue was decided against the assessee. 7.1 In view of the Order of above Tribunal cited supra, we upheld the order of Ld. CIT(A) on this issue. Hence, this ground of the appeal of the assessee stands dismissed. 8. The third issue raised by the assessee in its appeal is that Ld. CIT(A) had not admitted the additional gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use. Purchase of a house is not complete without the purchase of undivided share of land. Hence, the assessee company is allowed deduction u/s.36(1)(viii) in respect of home loans. However, loan given for the purchase of land cannot be equated with the loan given for purchase of a house or construction of a house. Therefore, the AO disallowed the income earned on loans given for the purchase of lands u/s.36(1)(viii) of the Act. On appeal, the Ld. CIT(A) confirmed the order of AO. Aggrieved by the order of lower authorities, the assessee is in appeal before us. 9. At the outset, ld. A.R submitted that on similar facts for assessment year 2006-07, the AO himself re-worked the deduction u/s.36(1)(viii) of the Act by revising working of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntended before us that the interest received on securities held by the assessee as statutory liquidity reserve (SLR) was earned in the course of carrying on the business of long term finance as referred in Sec. 36(1)(viii) of the Act. He has further submitted that NHB the regulatory authority governing the assessee requires that the assessee has to maintain the statutory liquidity reserve in specified securities and its non-compliance would debar the assessee from carrying on business of housing finance. Thus, he has contended that the income derived from the investment to maintain the SLR is part of its business for providing tong term finance, as investment In Sec.36(1 )(viii) of I.T. Act. It Is further contended that the statutory liquid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the National Housing Bank Act, 1987 and consequently the assesee has earned income o these Investments. The assesee claimed said interest income on these investments under section 36(1)(viii) income derived from business for providing long term housing finance. The Income-tax Authorities disallowed the said deduction on the ground that the interest income earned by the assessee is not directly derived from loan from housing finance. It Is undisputed fact that the Investment made, by the assessee is strictly as per the statutory requirement of NHB Act and without compliance of this requirement the assessee cannot carry on its business of providing long term finance. Thus the investment made in the notified security as per the statutory requi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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