Law: Income Tax Act, 1961

Section: 57

Income-tax---Other sources---Deduction---Interest from fixed deposits ---Borrowals for agricultural purposes---Interest paid on borrowals---Not a charge on interest income from fixed deposits---Not deductible---Indian Income Tax Act, 1961, S.57. The assessee derived interest income from fixed deposits with a bank assessable under other sources. Against this income a claim for deduction was made for interest paid on borrowals for agricultural purposes. The Income-tax Officer rejected but the Tribunal accepted and allowed the: claim. On a reference: Held, that any, set off or deduction of any expenditure can only be made in accordance with the provisions of the Act. Hence, the interest paid on borrowals was not an allowable deduction. Tuticorin Alkali Chemicals and Fertilizers Ltd. v. CIT 1998 PTD 900 fol. THIS JUDGMENT DELIVERED BY ARIJIT PASAYAT, C.J.--- Purusant to the direction given by this Court in an application under section 256(2) of the Income Tax Act, 1961 (in short "the Act"), the Income-tax Appellate Tribunal Cochin Bench (in short "the Tribunal"), has referred the following question for opinion of this Court: "Whether on the facts and in the circumstances of the case, interest on the borrowal made by the assessee against the fixed deposit made by the assessee with the bank is an allowable deduction under section 57(iii) of the Income-tax Act?" The factual position as indicated in the statement of case is as follows:-- The assessee is a public limited company engaged in plantation business. In addition to its income from plantation business, it has income from interest on fixed deposits with a bank, which were assessable under the head other sources. Against this interest income, the assessee claimed a sum of Rs.1,40,647 as deduction towards interest paid by it on loans taken from the bank. The Assessing Officer disallowed the claim on the ground that interest payable relates to loads taken for business purposes, which is purely agricultural income in nature and hence no deduction could be given under section 57 of the Act. The assessee went in appeal before the Commissioner of Income-tax (Appeals) (in short CIT (Appeals)"), who allowed the…

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