2019 (4) TMI 1488 - HC - Income Tax

Broken period interest allowability as a deduction - Revenue argued that the entire cost of security would include such interest component and the same would, therefore, be in the nature of capital expenditure - assessee argued that there was separate interest component payment of which was an allowable deduction also accepted by ITAT - HELD THAT - This issue is no longer res integra. The Division Bench of this Court in case of CIT Vs. HDFC Bank Ltd 2014 (8) TMI 119 - BOMBAY HIGH COURT had ruled in favour of the assessee. We are informed that the appeal against such judgment of the High Court was also dismissed by the Supreme Court. In the result, the Income Tax Appeal is dismissed

Summary

Issues:
1. Challenge to the judgment of the Income Tax Appellate Tribunal by the Revenue.
2. Correcting an error in the Tribunal's order regarding a reference to a previous case.
3. Whether broken period interest is allowable as a deduction despite specific court decisions.

Analysis:
1. The appeal was filed by the Revenue to challenge the Income Tax Appellate Tribunal's judgment. The Tribunal remanded several issues back to the Assessing Officer. The High Court noted that there was no reason to interfere with this decision. An error in the Tribunal's order referencing a previous case was corrected in a subsequent order. This correction did not impact the issues at hand, and the development was noted for record-keeping purposes.

2. The remaining question raised by the Revenue was whether broken period interest is deductible despite specific court decisions to the contrary. The dispute arose from the purchase of securities and the payment of interest on them. The Revenue argued that the interest should be considered part of the security's cost, making it capital expenditure. However, the assessee contended that the interest was a separate component eligible for deduction. The Tribunal sided with the assessee, citing a previous decision of the High Court in favor of a similar argument. The High Court mentioned that this issue was no longer open to debate as a Division Bench had previously ruled in favor of the assessee, and the Supreme Court had dismissed an appeal against that decision.

3. In conclusion, the High Court dismissed the Income Tax Appeal filed by the Revenue, upholding the Tribunal's decision regarding the deductibility of broken period interest. The judgment highlighted the precedents set by the Division Bench and the Supreme Court in similar cases, reinforcing the validity of the assessee's position.