Fixed deposit interest set-off denied where loan interest lacked statutory basis against taxable income

Interest earned on fixed deposits was treated as taxable income in the assessee's hands, and it could be reduced only where a provision of law expressly permitted such reduction. The Kerala HC held that, absent any statutory basis, interest paid on a loan taken against the fixed deposits could not be set off against the interest earned on those deposits. The claimed adjustment was therefore disallowed, and the issue was answered in the negative in favour of the Revenue.

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Issues: Whether the assessee was entitled to set off interest payable on loans taken on the security of fixed deposits against the interest earned on those fixed deposits.

Analysis: The interest received on fixed deposits constituted income in the assessee's hands. Such income could be reduced only if there was a provision in law permitting the reduction. In the absence of any such provision, the interest paid on the loan taken against the fixed deposits could not be deducted from the interest earned on the deposits.

Conclusion: The assessee was not entitled to the claimed set-off. The question was answered in the negative, in favour of the Revenue and against the assessee.

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