Interest from Fixed Deposit taxable as ‘Other Income’: ITAT [Read Order]

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The Income Tax Appellate Tribunal (ITAT) held that income from interest is chargeable to tax as ‘income from other sources’ under Section 56 of the Income Tax Act.

The assessee made fixed deposits with various banks amounting to Rs.15 crore. At the same time, the assessee availed loan amounting to Rs.2.5 crore from State Bank of India and claimed the interest of Rs.25,16,005 to be set off against the interest received from various banks from fixed deposits. The same was denied.

The assessee filed her return of income for the assessment year declaring total income. The Assessing Officer completed the assessment vide order passed under Section 143(3) read with Section 147 of the Income Tax Act, after making disallowance of interest payment claimed by the assessee, and determined the total income. Aggrieved by the order of the Assessing Officer, the assessee went in appeal before the CIT(A), who confirmed the view taken by the Assessing Officer. Therefore, the assessee filed an appeal before the Tribunal.

While relying on the decision of the Supreme Court in the case of  CIT v. V.P. Gopinathan, the tribunal observed that using borrowing for the personal purpose has no relevance for the allowability of interest expenditure out of interest received by the assessee.

The tribunal comprising of an Accountant Member Chandra Poojari held, “there is nothing to show that the expenses claimed as deduction were incurred for earning interest income. Equally, the claim of the appellant that the expenditure incurred by the assessee was allowable under Sections 30 to 37 of the Act is inadmissible for the reason that the business of the assessee was lying closed and income from interest was chargeable to tax as ‘income from other sources’ under Section 56 of the Act. Once that was so, the Tribunal had rightly adjudicated the matter in favor of the revenue.”

To Read the full text of the Order CLICK HERE