The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) ruled that the taxability of interest income depends on the person who made the investment, not on whose name the deposit is held.
Kamalbhai Babulal Kahar,appellant-assessee,challenged the addition of Rs. 6,04,915/- on account of interest income. The assessee argued that the Commissioner of Income Tax (Appeals) [CIT(A)] had wrongly upheld the addition made by the assessing officer. He claimed that since the Fixed Deposit Receipts (FDRs) were in joint names with his wife, only 50% of the interest income should be attributed to him.
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The facts of the case, as outlined in the orders of the authorities, showed that the assessee had reported only 50% of the interest earned on term deposits. While the total interest income was Rs. 6,04,915/-, the assessee declared only Rs. 3,01,958/-. Because no explanation was provided for the difference, the Assessing Officer (AO) added Rs. 3,01,958/- to the assessee’s income.
The CIT(A) upheld this addition, as mentioned in his order. The assessee argued that, since the FDRs were in joint names with his wife, only 50% of the interest income should be treated as his. However, the CIT(A) observed that the assessee did not present any documentary evidence to support this claim, nor did he show that his wife had reported the remaining 50% of the interest income. Therefore, the explanation was rejected, and the addition of Rs. 3,01,958/- was confirmed.
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The assessee’s counsel was unable to provide a reasonable explanation for why only 50% of the interest earned on term deposits should be considered his. He simply reiterated his earlier submission that, since the Fixed Deposits(FDs) were in joint names, only 50% of the interest income should be taxable in his hands.
The two member bench comprising T.R. Senthil Kumar (Judicial Member) and Annapurna Gupta (Accountant Member)found no merit in the arguments of the counsel for the assessee. It noted that the CIT(A) had correctly rejected the assessee’s explanation. The taxability of interest income depends on the person who made the investment, not on whose name the deposit is held. As a result, the tribunal upheld the order of the CIT(A).
In short,the appeal filed by the assessee was dismissed.
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