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2023 (1) TMI 1206 - AT - Income TaxIncome from other sources - netting method - assessee had earned interest on fixed deposits with IDBI Bank and assessee had set off the same against the interest expenditure incurred for construction etc. and the net amount was capitalized - as argued interest by the assessee was earned during the course of its business and as such the same has been correctly been capitalized after netting off - HELD THAT - As in assessee s own case for assessment years 2012-2013 and 2013-2014 2021 (2) TMI 1328 - ITAT HYDERABAD Tribunal in the above case, by following the judgment of ACG Associates Capsules Pvt. Ltd. v. CIT 2012 (2) TMI 101 - SUPREME COURT had directed the A.O. to adopt the netting method. Thus we direct the A.O. to allow the netting off of interest.
Issues:
1. Treatment of interest income earned on fixed deposits as 'income from other sources' instead of being reduced from capital work-in-progress. 2. Disallowance of loss claimed under the head "Profits and Gains of business." 3. Charging of interest under section 234B of the Act. Issue 1: Treatment of Interest Income: The case involved a limited company engaged in hydroelectric power generation, where interest earned on fixed deposits with IDBI Bank was set off against interest expenditure for construction. The Assessing Officer (A.O.) treated the interest income as 'income from other sources,' rejecting the company's contention of it being earned during business operations and correctly capitalized. The A.O. cited judicial pronouncements to support this decision. The CIT(A) upheld the A.O.'s view based on past rulings. The company appealed before the Tribunal, arguing for netting off interest income as directed in a previous case. The Tribunal, following a Supreme Court judgment, directed the A.O. to adopt the netting method, allowing the company to set off interest income with expenditure, similar to the previous case. Consequently, the appeal was partly allowed. Issue 2: Disallowance of Loss Claimed: The company contested the disallowance of a loss claimed under the head "Profits and Gains of business." The CIT(A) upheld this disallowance based on the company's consent before the A.O. The company raised objections against this disallowance, arguing against the justification provided by the CIT(A). However, the Tribunal did not provide a specific ruling on this issue, as it primarily focused on the treatment of interest income. Issue 3: Charging of Interest under Section 234B: The company denied liability for interest charged under section 234B of the Act. It sought cancellation of this charge, emphasizing its position on not being liable. However, the Tribunal did not address this issue in the final ruling, as the primary focus was on the treatment of interest income. In conclusion, the Tribunal's judgment primarily addressed the treatment of interest income earned on fixed deposits, directing the A.O. to allow netting off of interest as per previous rulings. Other issues raised by the company were not specifically adjudicated upon, as the Tribunal's decision was centered on the interest income matter.
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