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2017 (5) TMI 299 - HC - Income TaxDeduction u/s 80P(2)(a)(i) - Held that - Income Tax Appellate Tribunal is right in law in holding that the appellant is not entitle to deduction up to ₹ 1,48,64,914/- u/s 80P (2)(a)(i) as against the business income assessed at ₹ 1,60,74,331/- and not entitled to deduction as envisaged under the said provision the Income Tax Act, 1961. See Totgars Co-operative Sale Society Ltd. V. ITO, 2010 (2) TMI 3 - SUPREME COURT Deduction of expenses on account of interest paid on the borrowed funds under Section 57 - income of the assessee had been assessed as income from other sources under Section 56 - Held that - In the present case, the appellant had claimed the income to be business income and therefore, no claim for deduction under Section 57 of the Act was made. Once the income of the assessee is treated as income from other sources by the revenue authorities, the assessee would be entitled to claim deduction under Section 57 of the Act in respect of expenses incurred for earning that income. Thus, it would be in the interest of justice that the matter is remitted back to the Assessing Officer to decide the claim of the assessee for deduction under Section 57 of the Act. Accordingly, the issue under thisquestion is sent back to the Assessing Officer, who shall decide the same afresh, in accordance with law, after affording an opportunity of hearing to the appellant.
Issues:
1. Legality of orders and interpretation of provisions under Income Tax Act, 1961. 2. Entitlement to deduction under Section 80P (2)(a)(i) and Section 57 of the Act. 3. Correct interpretation of Section 80P (2)(a)(i) in line with judicial pronouncements. 4. Entitlement to deduction of expenses on borrowed funds under Section 57 when income assessed as income from other sources. Analysis: 1. The appellant challenged the order of the Income Tax Appellate Tribunal under Section 260A of the Income Tax Act, 1961, for the assessment year 2003-04, raising substantial questions of law. The questions included the legality of orders, entitlement to deductions under Section 80P (2)(a)(i), correct interpretation of provisions, and the deduction of expenses under Section 57. 2. The appellant admitted that some questions were general and not pressed for consideration. The Court held that question No. (iii) was covered against the appellant by previous judgments. The appeal was admitted for consideration of questions No. (iv) and (v), which related to the deduction of expenses on borrowed funds under Section 57 when the income was assessed as income from other sources under Section 56. 3. The Court relied on a previous decision where a similar issue was remitted back to the Assessing Officer. In the present case, since the income was treated as income from other sources, the appellant could claim deductions under Section 57. Therefore, the Court remitted the issue under question No. (iv) back to the Assessing Officer for fresh consideration in accordance with the law. 4. The Court modified the impugned order to allow the appellant to claim deductions under Section 57 and disposed of the appeal accordingly. The judgment emphasized the importance of ensuring that the appellant could claim deductions for expenses incurred in earning income assessed as income from other sources, in line with the provisions of the Income Tax Act, 1961. This detailed analysis of the judgment highlights the key issues involved and the Court's decision on each issue, ensuring a comprehensive understanding of the legal aspects discussed in the case.
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