2018 (9) TMI 955 - AT - Income Tax

Denial of deduction u/s 10AA on interest on FDR - addition treating the interest as income from other sources not eligible for deduction under section 10AA - Held that - Assessee has now filed the additional evidence in the shape of sanction letter of the Bank granting term loan and working capital credit limit to the assessee. The said sanction of loan is subject to the condition that the assessee should make FDR equivalent to 15% of the cash generated by the assessee. The issue to the record of the AO for consideration of additional evidence filed by the assessee which is relevant for determination of the issue of allowability of the claim under section 10AA of the Act. Hence in view of the earlier order of this Tribunal, we set aside the matter to the record of the AO for readjudication of the same after considering the additional evidence filed by the assessee and in the light of the various decisions on the issue.- Decided in favour of assessee for statistical purposes.

Summary

Issues:
Delay in filing appeal - Condonation of delay
Deduction under section 10AA on interest on FDR

Analysis:
1. Delay in filing appeal - Condonation of delay:
The appeal was filed with a delay of 52 days, and the assessee sought condonation of the delay. The assessee explained that due to favorable decisions by the ITAT in previous years, they believed the issue was settled in their favor and did not file the appeal within the stipulated time. The ITAT considered the explanation and held that the assessee had a reasonable cause for the delay. The Tribunal found the explanation not to be malafide and decided to condone the delay, emphasizing that the appeal should be decided on its merits rather than dismissed on technical grounds.

2. Deduction under section 10AA on interest on FDR:
The main issue raised by the assessee was the denial of deduction under section 10AA on interest on Fixed Deposit Receipts (FDR). The assessee argued that the interest on FDR was related to working capital and bank guarantees for export-oriented units (EOU), making it eligible for deduction under section 10AA. The assessee also submitted additional evidence, including the bank's sanction letter, to support their claim. The Department, however, relied on previous court decisions stating that interest income from deposits falls under income from other sources and is not eligible for deduction under section 10AA.

The Tribunal noted that the AO disallowed the claim based on the nature of the income and past judicial decisions. However, considering the additional evidence provided by the assessee and a similar decision in the assessee's favor for previous years, the Tribunal remitted the issue back to the AO for reevaluation. The Tribunal emphasized the importance of considering the additional evidence and various legal precedents before making a final decision on the allowability of the deduction under section 10AA.

In conclusion, the Tribunal allowed the appeal for statistical purposes, indicating that the matter was remitted back to the AO for fresh adjudication considering the additional evidence and legal precedents. The judgment highlighted the importance of thorough consideration of evidence and legal principles in tax matters.