Case Law Details
DCIT Vs Universal Industrial Fund Ltd. (ITAT Kolkata)
Interest expense incurred in the business of money lending was Rs.2,0276,317/-. In the course of its business of financing, the assessee borrows and lends monies. The assessee pays interest on the borrowed funds and earns interest on the loans advanced. Therefore, both the interest income and the interest payment are intrinsically linked. There is complete inter lacing of funds and therefore, for ascertaining the tax effect, netting off of interest paid with interest received is necessary. It is for this reason that the net interest is reflected in the profit and loss account. In the circumstances, the Assessing Officer should also have considered the interest on net basis. After setting off interest expense against the interest income, the assessee was let with negative figure of Rs.6,08,163/-which had been suo moto disallowed by the assessee in its entirety. Therefore, we are of the view that in these circumstances no further interest disallowance should be made. Respectfully following the judgment of coordinate Bench Kolkata in the case of DCIT Vs Trade Apartments Limited (ITA No.1277/Kol/2011) for Assessment Year 2008-09 wherein on exactly similar facts and circumstances the coordinate Bench held that the ‘net’ interest expenditure is to be considered for the purposes of disallowance under Section 14A and where after setting off interest earned against the interest expenditure no further interest expense remains then disallowance cannot be made u/s 14A of the Income-tax Act, 1961.
FULL TEXT OF THE ITAT JUDGMENT
The captioned appeal filed by the Revenue, pertaining to Assessment Year 2009-1 0,is directed against the order passed by the ld Commissioner of Income Tax (Appeals)-2,Kolkata in Appeal No.393/CIT(A)-2/6(4)/14-15 dated, 17.12.2015,which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3)of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’), dated 13.12.2011.
2. The Revenue has raised the following grounds of appeal:
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