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TMI Blog2017 (6) TMI 917X X X X Extracts X X X X X X X X Extracts X X X X ..... confirming the order of AO in disallowing the expenses of Rs. 15,56,592/- ignoring the written submission without giving any reasons. ii. The Ld. CIT(A) has erred in law and facts in upholding that these expenses are attributable to exempt income or income from House 2 Property and not to interest income. He ought to have allowed expenses against interest income. The Ld. CIT(A) has failed to appreciate that interest income is business income. iii. The Ld. CIT(A) has erred in law and facts in observing that these expenses may be sham or related to other earning activities carried on by the appellant or others without basis and without giving any evidence. It is apparent that appellant has not carried on any other activity as envisaged by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e character of this income being passive, that is assessee need not carry any organized activity to earn them, no expenses are allowed u/s 57 of the Act." 4. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) relied of the judgment of the Hon'ble Madras High Court in the case of South India Shipping Corporation Ltd. vs. CIT (2000) 163 CTR 617 and held that the interest income is liable to be assessed under the head "income from other sources". The Ld. CIT(A) upheld the disallowance of expenses of Rs. 15,56,592/- made by the AO as it was not attributable to earning interest income from fixed deposits etc. 5. Before us, the Ld. Counsel of the assessee filed in paper book containing a cop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of business, but temporary lull in activity. The Tribunal allowed the plea of the assessee. 7.1 We find that a similar issue arose before the Hon'ble Madras High Court in the case of South Indian Shipping Corporation Ltd. (supra), relied on by the learned CIT(A). In that case, the assessee is a public limited company engaged in shipping business. For the assessment year 1976-77, it reported an income of Rs. 1,75,79,871/- under the head "Business (shipping) income". Of that sum, a sum of Rs. 87,51,231/- was stated to be income by way of interest received on short term bank deposits. The Income-tax Officer treated the income received by the assessee by way of interest on bank deposits as being taxable under the head "Other sources". The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank deposits and loans could only be taxable as "business income". (ii) Interest paid on overdraft obtained for the purpose of business cannot be deducted from the interest earned on monies kept in fixed deposits as such income derived by way of interest on fixed deposits has to taxed under the head "income from other sources". (iii) However, though the assessee may not be entitled to have interest paid by it on the overdraft to the bank, deducted from the interest received by it on the short term fixed deposits, the assessee is entitled to deduction of the same from its business income. 7.2 Facts being similar, we follow the ratio laid down in the above judgment of the Hon'ble Madras High Court and hold that the AO has rightly broug ..... X X X X Extracts X X X X X X X X Extracts X X X X
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