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2024 (3) TMI 1150 - AT - Income TaxIncome from other sources - Deduction of interest expenditure - direction of the CIT A in restricting the deduction to the extent of income earned of term deposit - whether the expenditure of interest is laid out or expended wholly and exclusively for the purpose of making or earning such income is required to be tested - HELD THAT - Undoubtedly the assessee has earned bank interest of Rs. 41 lakhs. According to section 57 of the income tax act, assessee is entitled to deduction under section 57 (iii) of any other expenditure which is not in the nature of capital expenditure which is laid out or expended wholly and exclusively for the purpose of making or earning such income. Same has been verified and decided by the coordinate bench in case of assessee for assessment year 2013 14 till 2015 16 2020 (11) TMI 326 - ITAT MUMBAI . Further the direction of the CIT A in restricting the deduction to the extent of income earned of term deposit is also not in accordance with the decision of the coordinate bench wherein in case of Mr. Ashwin Mehta 2019 (11) TMI 1450 - ITAT MUMBAI wherein against the interest receipt of ₹ 1,801,778/ the coordinate bench has granted the deduction of ₹ 21,969,050/ . Thus we direct the learned assessing officer to allow the claim of the assessee of deduction of interest expenditure. Accordingly, ground is allowed. Charge of interest u/s 234B - HELD THAT - The proviso to section 209 (1) has been inserted with effect from 1 April 2012. Therefore if any income of the assessee on which tax is deductible, the interest under section 234B shall not be chargeable prior to 1 April 2012. AO is directed to compute the interest in accordance with the law as it was prevailing for assessment year 2006 07. Accordingly ground number 3 of the appeal is allowed with above direction. Issues Involved: Deduction of interest expenditure, chargeability of interest u/s 234B, and correction of income computation. Issue 1: Deduction of Interest Expenditure The assessee, Harsha Estate Private Limited, appealed against the CIT (A)'s decision to restrict the deduction of interest expenditure to Rs. 3,520,886/- out of a claimed Rs. 32,795,923/-. The assessee argued that the entire amount should be deductible. The Tribunal noted that the CIT (A) had restricted the deduction based on the proportionate interest income earned and the lack of bifurcation of interest expenses. The Tribunal referenced previous decisions in similar cases, including the assessee's own case, and directed the AO to allow the full deduction of Rs. 32,795,923/-. The same decision was applied to the assessment years 2005-06 and 2006-07, allowing the full claimed interest expenditure for those years as well. Issue 2: Chargeability of Interest u/s 234B The assessee contended that the interest u/s 234B was not calculated correctly. The Tribunal found that the CIT (A) had addressed the issue but directed the AO to compute the interest in accordance with the law prevailing for the relevant assessment year. This decision was consistent for the assessment years 1999-2000, 2005-06, and 2006-07, with the AO being instructed to recompute the interest u/s 234B as per the applicable provisions. Issue 3: Correction in Income Computation The assessee raised an additional ground stating that the AO did not carry out the CIT (A)'s direction to adjust the interest income. The Tribunal directed the AO to compute the correct income as per the CIT (A)'s direction, acknowledging the need for correction in the order. Conclusion The appeals for the assessment years 1999-2000, 2005-06, and 2006-07 were partly allowed. The Tribunal directed the AO to allow the full deduction of interest expenditure, recompute interest u/s 234B as per the law, and correct the income computation as per the CIT (A)'s direction. Order pronounced in the open court on 21.03.2024.
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