Deduction claimed u/s 36(1)(viii) for interest income from ...

Interest income disallowance partly allowed. Provisions & interest reapportioned based on business activity. Disallowance for tax-free bonds deleted. Non-compete fees held as capital receipts.

Case Laws     Income Tax

July 16, 2024

Deduction claimed u/s 36(1)(viii) for interest income from housing finance for non-residential purposes was disallowed, excluding such amounts from computing eligible profits. Following the appellate order for the previous year, the disallowance was partly allowed after recomputing eligible income afresh. Allocation of provisions for contingencies and interest on foreign currency borrowings was directed to be reapportioned based on income characterization into eligible and ineligible business activities. Disallowance of expenses towards earning exempt dividend income u/s 10(33) was partly allowed, with directions to reallocate other expenses based on the ratio of investments yielding exempt income. Disallowance u/s 14A for income-tax free bonds and section 10(23) bonds was deleted, relying on a coordinate bench decision. Non-compete fees received were held as capital receipts, not exigible to tax for the relevant year, prior to the amendment by the Finance Act, 2002.

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