Direct nexus between fixed deposit interest and bank borrowing cost permits set-off while recomputing section 80HHC deduction.

Interest earned on fixed deposits could be set off against interest paid on bank loans for recomputing the deduction under section 80HHC where the loan facility was obtained subject to furnishing those fixed deposits, establishing a direct nexus between the deposit interest and the borrowing cost. The Tribunal noted that earlier decisions had allowed such adjustment on similar facts and distinguished cases lacking that direct connection. The set-off was held permissible, and the deduction was to be recomputed in favour of the assessee.

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Issues: Whether interest received on fixed deposits could be set off against interest paid on bank loans while recomputing deduction under section 80HHC.

Analysis: The interest earned on the fixed deposits had a direct nexus with the borrowing from the bank, as the loan facility was obtained subject to furnishing the fixed deposits. The issue had been decided by several Tribunal Benches in favour of the assessee, and the facts were distinguishable from cases where no such direct nexus existed.

Conclusion: The set-off was permissible and the deduction under section 80HHC was to be recomputed accordingly in favour of the assessee.

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