Assistant Director of Incometax v. Credit Agricole Indosuez

Case Laws Analysis
Relied on Industrial Development Bank of India v. Jt. CIT 2019 TaxPub(DT) 4618 (Mum-Trib)
Relied on Lal Nathirmal Moolchandani v. ITO 2019 TaxPub(DT) 1816 (Mum-Trib)
Followed CIT v. Reliance Utilities & Power Ltd. 2009 TaxPub(DT) 1275 (Bom-HC)
Followed Dresdiver Bank AG v. Addl. CIT 2007 TaxPub(DT) 0671 (Mum-Trib)
Followed East India Pharmaceutical Works Ltd. v. CIT 1997 TaxPub(DT) 1152 (SC)
Followed Indian National Tannery, In Re v. 1941 TaxPub(DT) 0016 (All-HC)

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The Tax PublishersI. T. A. Nos, 6615/Mum/2003, 6400/Mum/2003 & C. O. No. 283/Mum/2003 2013 TaxPub(DT) 0311 (Mum-Trib) : (2013) 058 SOT 0097 : (2013) 021 ITR (Trib) 0345 INCOME TAX ACT, 1961 --Business expenditure--Disallowance under section 14AInterest on nostro account--Assessee earned interest on nostro account which was credited to P&L a/c. However, while computing total income, the said amount was reduced. Assessing officer held that interest income on nostro account was liable to be included in the total income. Commissioner (Appeals) reversed the order of assessing officer. However, considering the provisions of section 14A Commissioner (Appeals) held that since interest earned on nostro account was not taxable, interest expenditure was also not allowable. *Held:* Not rightly so. Commissioner (Appeals) was not justified in his conclusion and the interest on nostro account was chargeable to tax. Once income itself is chargeable to tax, there can be no question of computing any disallowance under section 14A, mandate of which operates to disallow deduction for expenses incurred in relation to income which does not form part of the total income under the Act. Income Tax Act, 1961 Section 14A INCOME TAX ACT, 1961 --Business expenditureAllowability Treatment of broken period interest--Interest paid in respect of broken period would be set-off against the interest received in respect of broken period. Income Tax Act, 1961 Section 37(1) Income Tax Act, 1961 Section 4 INCOME TAX ACT, 1961 --Exemption under section 10(15)--Interest income on tax-free bonds Gross income or net income--Exemption under section 10(15)(iv)(h) would be allowed on gross interest and not on net interest earned on tax-free securities. Income Tax Act, 1961 Section 10(15) INCOME TAX ACT, 1961 --Business expenditure--Disallowance under section 14A Investment of own funds in tax free securities--Where assessee had his own fund available to invest in tax-free securities, there can be no disallowance under section 14A. Income Tax Act, 1961 Section 14A Income Tax Act, 1961 Section 10(15) INCOME TAX ACT, 1961 --Income --Tax rate Higher rate of tax --Assessee's income was taxable at the rate of 55 per cent as chargeable from non-resident. Income Tax Act, 1961 Section 115D INCOME TAX ACT, 1961 --Refund--Interest on refund Relevant assessable assessment year--Assessee was granted interest of Rs. 80,26,069 under section 244A on intimation issued under section 143(1)(a) for assessment year 1996-97. It was argued before Commissioner (Appeals) that on completion of assessment for the assessment year 1996-97, interest of Rs. 23,48,027 was determined as against Rs. 80,26,069 determined in intimation under section 143(1)(a). Commissioner (Appeals) rejected assessee's contention that interest should not be charged to tax in the year until assessment under section 143(3) was finalised. He, however concurred with alternate contention of assessee that only that much interest received under section 244A could be brought to tax which is finally determined on assessment. *Held:* Interest on refund under section 244A(1) granted to assessee in proceedings under section 143(1)(a) would be assessable in the year in which it is granted. If interest is reduced by virtue of section 244A(3), on account of assessment under section 143(3), then interest granted in earlier years gets substituted and it was reduced amount of Interest, that would form part of income of that year, as it would amount to mistake rectifiable under section 154. SUBSCRIBE FOR FULL CONTENT

The Tax PublishersI. T. A. Nos, 6615/Mum/2003, 6400/Mum/2003 & C. O. No. 283/Mum/2003
2013 TaxPub(DT) 0311 (Mum-Trib) : (2013) 058 SOT 0097 : (2013) 021 ITR (Trib) 0345

INCOME TAX ACT, 1961

--Business expenditure--Disallowance under section 14AInterest on nostro account--Assessee earned interest on nostro account which was credited to P&L a/c. However, while computing total income, the said amount was reduced. Assessing officer held that interest income on nostro account was liable to be included in the total income. Commissioner (Appeals) reversed the order of assessing officer. However, considering the provisions of section 14A Commissioner (Appeals) held that since interest earned on nostro account was not taxable, interest expenditure was also not allowable. Held: Not rightly so. Commissioner (Appeals) was not justified in his conclusion and the interest on nostro account was chargeable to tax. Once income itself is chargeable to tax, there can be no question of computing any disallowance under section 14A, mandate of which operates to disallow deduction for expenses incurred in relation to income which does not form part of the total income under the Act.

Income Tax Act, 1961 Section 14A

INCOME TAX ACT, 1961

--Business expenditureAllowability Treatment of broken period interest--Interest paid in respect of broken period would be set-off against the interest received in respect of broken period.

Income Tax Act, 1961 Section 37(1)

Income Tax Act, 1961 Section 4

INCOME TAX ACT, 1961

--Exemption under section 10(15)--Interest income on tax-free bonds Gross income or net income--Exemption under section 10(15)(iv)(h) would be allowed on gross interest and not on net interest earned on tax-free securities.

Income Tax Act, 1961 Section 10(15)

INCOME TAX ACT, 1961

--Business expenditure--Disallowance under section 14A Investment of own funds in tax free securities--Where assessee had his own fund available to invest in tax-free securities, there can be no disallowance under section 14A.

Income Tax Act, 1961 Section 14A

Income Tax Act, 1961 Section 10(15)

INCOME TAX ACT, 1961

--Income --Tax rate Higher rate of tax --Assessee's income was taxable at the rate of 55 per cent as chargeable from non-resident.

Income Tax Act, 1961 Section 115D

INCOME TAX ACT, 1961

--Refund--Interest on refund Relevant assessable assessment year--Assessee was granted interest of Rs. 80,26,069 under section 244A on intimation issued under section 143(1)(a) for assessment year 1996-97. It was argued before Commissioner (Appeals) that on completion of assessment for the assessment year 1996-97, interest of Rs. 23,48,027 was determined as against Rs. 80,26,069 determined in intimation under section 143(1)(a). Commissioner (Appeals) rejected assessee's contention that interest should not be charged to tax in the year until assessment under section 143(3) was finalised. He, however concurred with alternate contention of assessee that only that much interest received under section 244A could be brought to tax which is finally determined on assessment. Held: Interest on refund under section 244A(1) granted to assessee in proceedings under section 143(1)(a) would be assessable in the year in which it is granted. If interest is reduced by virtue of section 244A(3), on account of assessment under section 143(3), then interest granted in earlier years gets substituted and it was reduced amount of Interest, that would form part of income of that year, as it would amount to mistake rectifiable under section 154.