ITAT rulings on interest, referral fees, and deduction computations for financial institutions.

The ITAT partially allowed the assessee's appeal regarding disallowance of interest on mortgaged back security and loans to deposit holders, stating only net interest income should be considered. The Tribunal upheld the disallowance of referral fee income from insurance companies, citing lack of nexus to long-term housing finance. The ITAT directed the AO to compute deduction for income earned on land loans similar to a previous assessment year. Regarding interest income on SLR investment, the Tribunal dismissed the Revenue's appeal, holding it had a direct nexus to long-term finance business.

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Issues involved:
1. Disallowance u/s.36(1)(viii) of the Act for interest on mortgaged back security and loans advanced to deposit holders.
2. Disallowance u/s.36(1)(viii) for referral fee from insurance companies.
3. Admission of additional grounds by Ld. CIT(A) regarding exclusion of income earned on land loans and interest income for deduction u/s.36(1)(viii).
4. Eligibility of interest income on SLR investment for deduction u/s.36(1)(viii).

Issue 1: Disallowance u/s.36(1)(viii) - Interest on mortgaged back security and loans advanced to deposit holders:
The assessee claimed deduction u/s.36(1)(viii) for interest on mortgaged back security and loans to deposit holders. The AO disallowed the claim stating it lacked statutory requirement for business activities. The Ld.CIT(A) upheld the AO's decision. The ITAT partially allowed the appeal, stating only net interest income from these activities should be considered for disallowance.

Issue 2: Disallowance u/s.36(1)(viii) - Referral fee from insurance companies:
The Tribunal referred to a previous case where it was held that income from referral fees lacked a direct nexus to long-term housing finance. Following this precedent, the Tribunal upheld the Ld. CIT(A)'s decision to disallow the income. The assessee's appeal on this issue was dismissed.

Issue 3: Admission of additional grounds by Ld. CIT(A) - Exclusion of income earned on land loans and interest income for deduction u/s.36(1)(viii):
The assessee contended that income from land loans should be eligible for deduction u/s.36(1)(viii). The AO disallowed this claim, stating loans for land purchase differ from house purchase loans. The ITAT directed the AO to compute the deduction similar to the assessment year 2006-07, segregating profits based on various activities.

Issue 4: Eligibility of interest income on SLR investment for deduction u/s.36(1)(viii):
The Revenue disputed the allowance of interest income on SLR investment for deduction u/s.36(1)(viii). The Tribunal referred to a previous case where it was held that such income, earned in compliance with statutory requirements, has a direct nexus to the business of long-term finance. Relying on this precedent, the Tribunal dismissed the Revenue's appeal.

In conclusion, the ITAT partially allowed the assessee's appeal for statistical purposes and dismissed the Revenue's appeal. The judgments were based on the interpretation of statutory requirements and the direct nexus of income to business activities as per relevant provisions of the Income Tax Act.

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