No deduction: Interest paid against the interest received on the FDR
ITAT MUMBAI
SHRI CHANDRAKANT R. AGRAWAL VERSUS PR. COMMISSIONER OF INCOME-TAX (CENTRAL) – MUMBAI
ITA No.380/Mum/2020
Short Overview of the Case:
Revision u/s 263
Deduction of interest expenditure against the interest income was not in accord with the provisions of Sec. 57
PCIT was of the view that allowing of the same by the A.O without verifying the records had rendered the order passed as erroneous in so far it was prejudicial to the interest of the revenue
ITAT held as under:
At the first blush the claim of the assessee for setting off the interest paid on the loan raised (on security of the FDR’s) against the interest received on FDR’s appeared to be very convincing.
However, we find that the issue is no more res integra and had been settled by the Hon’ble Supreme Court in CIT Vs. Dr. V.P Gopinathan [2001 (2) TMI 10 – SUPREME COURT] wherein had held, that 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.
In our considered opinion, the view taken by the PCIT in the case before us is absolutely in conformity with the aforesaid judgment of the Hon’ble Apex Court.
– Accordingly, finding ourselves in agreement with the view taken by the PCIT that the A.O had wrongly allowed the assessee’s claim for deduction of the interest paid on the loans against the interest received on the FDR’s, we uphold the order passed by him under Sec. 263 of the Act.
Decided against assessee.
Conclusions :
Deduction of interest expenditure against the interest income
PCIT has rightly taken the view that the A.O had wrongly allowed the assessee’s claim for deduction of the interest paid on the loans against the interest received on the FDR’s.