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| The Tax Publishers2019 TaxPub(DT) 6157 (Chen-Trib) INCOME TAX ACT, 1961
section 36(1)(viii)
Where interest earned and interest expenditure incurred pro rata basis in respect of eligible business were available, the same was to be reduced from the said interest expenditure earned and that would give the profits derived from the eligible business, out of which 20% deduction would be the eligible deduction under section 36(1)(viii), subject to conditions precedent.
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Business deduction under section 36(1)(viii) - Interest income - Computation - Condition precedent
The issue was against the action of CIT(A) in upholding the computation of deduction under section 36(1)(viii) as made by the AO. It was submitted that the assessee had been following the method of computing 20% book profit of the eligible business of development of infrastructure facilities by applying the formula business income multiplied by the interest from eligible business and divided by total interest income. It was submitted by the AR that the method had been followed right from the beginning. It was however agreed by both the sides, the issue may be restored to the file of AO for applying correct principle of computing the 20% of the profit derived from the eligible business.Held: A perusal of the provisions of section 36(1)(viii) shows that the words used therein are “an amount not exceeding twenty per cent of the profits derived from eligible business computed under the head 'Profits and Gains of Business or Profession' subject to other conditions specified therein. The interest earned in respect of the said eligible business is specifically available. Once this was available, the total expenditure incurred by the assessee wass also available, and obviously, the total income of assessee was also available. When these figures were very much available, then expenditure incurred on pro-rata basis for the purpose of earning the said interest income in respect of the eligible business can easily be quantified. The same is to be reduced from the said interest expenditure earned and that would give the profits derived from the eligible business, out of which 20% deduction would be the eligible deduction under section 36(1)(viii). Subject to the compliance of the other conditions mentioned therein being the creation of special reserve and carrying of the same to the Reserve Account. In this circumstance, the issue raised in ground was restored to the file of AO to re-compute the deduction under section 36(1)(viii) as per the directions given above.
REFERRED :
FAVOUR : Matter remanded.
A.Y. : 2012-13 to 2014-15
INCOME TAX ACT, 1961
Section 28(i)
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