Interest Income from FD is Eligible for Deduction u/s 10AA: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, has recently in an appeal filed before it, held that interest income from FD is eligible for deduction under Section 10AA of the Income Tax Act, 1961.

The aforesaid observation was made by the Mumbai ITAT, when an appeal was preferred before it by the assessee, as directed against the final order of assessment passed by the Assistant Commissioner of Income-tax, Mumbai, for the AY 2013-14 passed under Section.143(3) r.w.s. 144C(13) of the Income Tax Act.

The assessee was engaged in the business of rendering administrative and back-office support services in India to its associated enterprise. And, the assessee had filed the return of income for A.Y. 2013-14, declaring total income of Rs.10,87,09,850/-.

The ground of the assessee’s appeal was the transfer pricing adjustment as well as the treatment of interest income as not eligible for deduction under section.10A of the Income Tax Act.

Subsequently, the assessee filed a revised return, where the assessee revised the claim of credit for taxes paid in UK. And as a result, the case was selected for scrutiny and notice under Section 143(2) of the Income Tax Act was duly served on the assessee.

Since the assessee had international transactions with its associated enterprise, a reference was made to the Transfer Pricing Officer (TPO), who passed an order wherein an adjustment of Rs.6,70,16,931/- was proposed. The Assessing Officer also passed a draft assessment order incorporating the transfer pricing adjustment.

Besides, the Assessing Officer also treated the interest income as not eligible for deduction claimed under Section 10AA of the Income Tax Act and accordingly made the addition to the income. Being aggrieved, the assessee raised its objections before the Dispute Resolution Panel (DRP).

The DRP sustained the TP adjustments as well as the additions made by the Assessing Officer. And it is in this situation, that the assessee is currently in appeal before the Mumbai ITAT.

Hearing the opposing contentions of both sides as submitted by Shri Nishant Thakkar and Jasmin Amalsadvala, on behalf of the assessee, and by Dr.Yogesh Kamat, the CIT DR along with  Ashish Kumar, the Sr AR, on behalf of the Revenue, the Mumbai ITAT Coram of  Amit Shukla, the Judicial Member and Padmavathy S, the Accountant Member thus held:

“In assessee’s case, we notice that the assessee has placed the surplus funds in FDs and has earned interest from the same. The facts of assessee’s case being identical to the case of Hewlett Packard Global Soft Ltd, respectfully following the above full bench decision of the Hon’ble Karnataka High Court, we hold that the interest income earned by the assessee is eligible for deduction under section 10AA. Accordingly, we delete the disallowance made by the Assessing Officer in this regard.”

To Read the full text of the Order CLICK HERE

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