Cit vs Taj International Jewellers
2012 Latest Caselaw 1163 Del

$~1
*   IN THE HIGH COURT OF DELHI AT NEW DELHI

+      ITA 113/2012
                                    Date of decision: 21st February, 2012

       CIT                                           ..... Appellant
                         Through:    Ms. Anshul Sharma, Adv.
                   versus

       TAJ INTERNATIONAL JEWELLERS            ..... Respondent

Through: Mr. S. Krishnan, Adv.

CORAM:

HON'BLE MR. JUSTICE SANJIV KHANNA HON'BLE MR. JUSTICE R.V.EASWAR

SANJIV KHANNA, J.: (ORAL)

1. Ms. Suruchi Aggarwal, Standing Counsel who appears on behalf

of Mr. Abhishek Maratha is granted permission to place on

record the correct assessment order (Annexure-A1 to this appeal).

2. This appeal which pertains to assessment year 2007-08 relates to

issue of netting of interest paid of Rs.1,85,62,489/- from the gross

interest on Fixed Deposit Receipts of Rs.2,64,79,712/-.

3. The assessee had availed of loan from a Bank and accordingly

had paid the aforesaid interest. The loan amount was deposited

and converted into Fixed Deposit Receipts as the respondent-

assessee required them for opening letters of credit etc. The

assessee had earned interest of Rs.2,64,79,712/- on the said

deposits and the same was shown under the head "income from

other sources". As the assessee had also paid interest on the loan

of Rs.1,85,62,489/-, the same was reduced while calculating the

taxable income under the head "income from other sources".

4. There is no dispute that the money obtained on loan and was

converted and made into FDRs. The assessee had followed the

same practice or method of account/treatment for the assessment

year 2005-06 and 2006-07. The Assessing Officer had made

similar additions in the said years and did not allow netting of the

interest paid on the loan from the interest received on deposits.

On appeal, the assessee succeeded before the tribunal. A

Division Bench of this Court vide decision dated 13.12.2010,

reported in (2011) 335 ITR 144 has dismissed the appeal of the

Revenue and held that the interest paid should be allowed under

Section 57(iii) of the Act as the amount was borrowed from the

bank taking advantage of the Exim Policy as well as lower

LIBOR rate of interest. The interest paid was expenditure laid

out and expended wholly and exclusively for the purpose of

making or earning the interest income. Following the aforesaid

decision and the reasoning therein, the present appeal is

dismissed. No costs.

SANJIV KHANNA, J

R.V.EASWAR, J FEBRUARY 21, 2012 hs