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2020 (10) TMI 22 - AT - Income TaxAddition of interest income on term deposits under the head income from other sources - allowability of interest expenditure u/s.57 to the extent of interest income - Against these interest receipts, the assessee had claimed deduction of interest expenditure u/s.57 on the amounts outstanding to related three notified broker entities M/s. Harshad Mehta, M/s. J.H. Mehta and M/s. Ashwin Mehta - HELD THAT - As decided in own case 2020 (3) TMI 1252 - ITAT MUMBAI wherein this Tribunal had restricted allowability of interest expenditure u/s.57 of the Act to the extent of interest income. Decided in favour of assessee. Charging of interest u/s.234A, 234B 234C which was charged without giving credit for tax deducted at source - HELD THAT - Interest levied under section 234 A. 234B 234C be recomputed after excluding the income which is subject to TDS. Therefore, as directed to recompute the interest accordingly. In the result, these grounds of appeal are allowed for statistical purpose. Disallowance of interest made u/s.14A - HELD THAT - As decided in own case 2020 (3) TMI 1252 - ITAT MUMBAI we are of the view that to the extent the interest relate to the investment, i.e. being disallowable under Section 57 will become part of cost of acquisition of shares and therefore the AO is directed to take it as part of the cost of shares for determining profit on sale of the shares. Thus, the additional ground stands allowed to that extent.
Issues involved:
1. Disallowance of interest deduction under section 57 of the Income Tax Act. 2. Charging of interest under sections 234A, 234B, and 234C without giving credit for tax deducted at source. 3. Capitalization of disallowance of interest made under section 14A of the Act. Analysis: Issue 1: Disallowance of interest deduction under section 57 of the Income Tax Act The first issue in the appeal was regarding the confirmation of interest disallowance by the ld. CIT(A) amounting to ?4,13,695. The assessee had claimed deduction of interest expenditure under section 57 of the Act against interest income on term deposits. The AO disallowed the deduction on the grounds of provisional and contingent liability. The Tribunal, following a previous decision, restricted the disallowance of interest to the extent of ?4,13,695, being the interest income received on term deposits. Issue 2: Charging of interest under sections 234A, 234B, and 234C The second issue raised by the assessee was regarding the charging of interest under sections 234A, 234B, and 234C without giving credit for tax deducted at source. The Tribunal directed the AO to recompute the interest after excluding the income subject to TDS, based on a previous decision in a similar case. Issue 3: Capitalization of disallowance of interest made under section 14A of the Act The only issue in the revenue's appeal was the capitalization of the disallowance of interest made under section 14A of the Act amounting to ?2,86,67,490. The Tribunal, following a previous decision, dismissed the revenue's grounds and upheld the findings of the ld. CIT(A) in capitalizing the disallowance of interest. In conclusion, the appeal of the assessee was allowed for statistical purposes, and the appeal of the revenue was dismissed based on the Tribunal's analysis and decisions on the issues raised in the case.
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