TMI Blog2004 (10) TMI 263X X X X Extracts X X X X X X X X Extracts X X X X ..... idered for deduction under s. 10(15)(iv)(fa) as against the 'net interest' considered by the AO as per the decision of the Supreme Court in Escorts Ltd. vs. Union of India(1992) 108 CTR (SC) 275 : (1993) 199 ITR 43 (SC), (i.e., gross interest reduced by the expenses attributable to earning of interest on foreign currency deposits)." 2. The factual matrix giving rise to this dispute before us is as follows. The assessee is a foreign bank and it operates in India through its permanent establishment in Mumbai. During the course of assessment proceedings, the AO noticed that in the IT return the assessee had made a claim of exemption of interest income of Rs. 25,58,820 under s. 10(15)(iv)(fa) of the Act. Vide letter dt. 9th Sept., 1997, howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me minus the expenditure incurred to earn that interest income. The AO, relying upon the judgment of Hon'ble Supreme Court in the case of CIT vs. United General Trust Ltd. (1994) 116 CTR (SC) 194 : (1993) 200 ITR 488 (SC), concluded that "where it is not possible to determine accurately the expenses, proportionate expenses have to be determined". The AO further observed that as per P L a/c of the assessee, it has incurred an expenditure of Rs. 46,07,69,133 to earn an income of Rs. 44,51,43,674 resulting in a net loss of Rs. 1,56,25,459. On this basis, it was concluded that "the proportionate expenditure for earning income claimed to be exempt would be more than the income". The AO thus inferred as "that means there is net loss for income cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (15)(iv)(fa) which provides as follows: "10. In computing total income of a previous year of any person, any income falling within any of the following clauses shall not be included: (iv) interest payable- (fa) by a scheduled bank to a non-resident or to a person who is not ordinarily resident within the meanings of sub-s. (6) of s. 6 on deposits in foreign currency where the acceptance of such deposits by the bank is approved by the Reserve Bank of India." In the context of the above legal provision and as evident from the ground of appeal itself, Revenue's reliance on the judgment of Hon'ble Supreme Court in the case of Escorts Ltd. vs. Union of India (1992) 108 CTR (SC) 275 : (1993) 199 ITR 43 (SC) appears to be misplaced. No dou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of the aforesaid interest" and the CIT(A) has, on this basis, held that on these facts it was not open to the AO "to estimate the expenditure without any scientific basis". We have noted that this finding of the CIT(A) has not been challenged by the Revenue. Once the Revenue accepts this finding, as they have chosen to do in the case before us, the grievance raised before us is rendered purely academic. It does not merit any adjudication by us. In any event, no specific costs have been pointed out which are incurred by the assessee to earn the eligible interest. We, therefore, decline to entertain and adjudicate on this academic question i.e. whether the exemption under s. 10(15)(iv)(fa) is to be allowed on gross basis or on net basis. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
