The Kolkata Bench of Income Tax Appellate Tribunal (ITAT) held that disallowance of deduction under section 80IB(10) of the Income Tax Act, 1961 in respect of interest income should be restricted to net interest and not gross interest.
The assessee, M/s. Saturn Griha Nirman Pvt. Limited is a Company, which is engaged in the business of Builders and Property Developers. The return of income for the year under consideration was filed declaring total income at ‘NIL’. During the year under consideration, the assessee-company had developed a housing project namely “Salarpuria Symphony” in Bangalore, Karnataka, and the entire profit of the said project was claimed to be exempt under section 80IB(10) of the Act.
During the course of assessment proceedings, it was noticed by the Assessing Officer that interest income received on Bank deposits, etc. as well as other income earned during the year under consideration was also included by the assessee in the profit earned from developing of a housing project, which was claimed to be eligible for deduction under section 80IB(10).
According to the Assessing Officer, the said income was not derived by the assessee from the business of development of housing projects, and the same, therefore, was not eligible for deduction under section 80IB(10). He accordingly disallowed the claim of the assessee for deduction under section 80IB(10) in respect of interest income of Rs.11,10,810 and other income amounting to Rs.6,86,476/-. On appeal, the ld. CIT(Appeals) confirmed the said disallowance made by the Assessing Officer.
The tribunal consists of a Vice-President, P.M. Jagtap, relying on the decision of the Apex Court held that disallowance of deduction under section 80IB(10) of the Income Tax Act, 1961 in respect of interest income should be restricted to net interest and not gross interest.
“I direct the assessing officer to verify the amount of net interest keeping in view the direct nexus theory and allow appropriate relief to the assessee on this issue,” the tribunal said.Subscribe Taxscan AdFree to view the Judgment