|The Tax Publishers2021 TaxPub(DT) 0521 (Mum-Trib)
INCOME TAX ACT, 1961
Interest on loan taken by the assessee from the bank on security of fixed deposit could not be reduced from his income by way of interest on the fixed deposit placed by him in the bank. and since AO failed to bring the entire amount of interest received on FDRs to tax in the hands of assessee, the Pr. CIT was justified in passing order under section 263 setting aside assessment and directing AO to frame de novo assessment.
Revision under section 263 - Set off of Interest on Fixed deposits - Against interest paid on loans taken on security of those fixed deposits -
Assessee had certain fixed deposits which he pledged and took some loans for investing in certain business requirements. He claimed the interest paid on the loans under section 57(ii) against the interest on the fixed deposit receipts that they were inextricably connected to the earning of interest, thus, on real income only the net income ought to have been taxed. This plea was accepted by AO in favour of the assessee in a scrutiny assessment under section 143(3). Subsequently the case was reopened by the PCIT under section 263 on ground that allowing such interest expense was erroneous and prejudicial to the interests of the revenue. This reopening under section 263 was questioned by assessee before ITAT. Held: To not to consider a confirmed decision on the same topic of Supreme Court the AO's order was definitely erroneous and prejudicial to the interests of the revenue so, the reopening was held to be correct. Interest on loan taken by the assessee from the bank on security of fixed deposit could not be reduced from his income by way of interest on the fixed deposit placed by him in the bank. Principal Commissioner was justified in holding that the AO had wrongly allowed the assessee's claim for deduction of the interest paid on the loans against the interest received on the FDR's.
REFERRED : CIT v. Dr. V.P. Gopinathan (2001) 248 ITR 449 (SC) : 2001 TaxPub(DT) 1197 (SC).
FAVOUR : Against the assessee.
A.Y. : 2015-16
IN THE ITAT MUMBAI 'C' BENCH
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