COMMISSIONER OF INCOME TAX Vs. KRAFT LAND INDIA
HIGH COURT OF DELHI
COMMISSIONER OF INCOME TAX
KRAFT LAND INDIA
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(1.) ON going through the orders of the AO, the CIT(A) and the impugned order of the Tribunal, we admit this appeal and frame the following questions of law for consideration :
"(a) Whether Tribunal was correct in law in holding that assessee is entitled to reduce interest paid by it from the
interest received by it while calculating deduction under s. 80HHC r/w Expln. (baa) of the IT Act ?
(b) Whether interest earned by the assessee on fixed deposits with the bank is income from business or income from
other sources ?
(c) Whether Tribunal was correct in law in holding that in the present case there is a net debit balance of interest and,
therefore, nothing could be deducted from the profits of the business as per the provisions of Expln. (baa) to s.
(2.) IN the present case, we find that the Tribunal erred in not first determining whether interest income was business income. The Tribunal proceeded to straightway examine the question of nexus between the interest paid and the interest
hold that the interest received on FDRs, pledged for obtaining shipping loan/depository loan was not business income.
Question (b) is answered accordingly. Consequently, questions (a) and (c) are answered in the negative, i.e., in favour
of the Revenue and against the assessee.
(3.) THE impugned order of the Tribunal is set aside. The matter be sent to the concerned AO for recomputing the deductions in the event that the appeal effect has already been given to the impugned order of the Tribunal. The appeal
is accordingly allowed in the above terms.;
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