TaxTMI 
TaxTMI 
2015 (3) TMI 793
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.... for the assessment year 2008-09 and it was submitted that the facts of the other two years are mutatis mutandis similar. Briefly stated, the facts of the case are that the assessee is a company engaged in the business of providing housing loan. A deduction amounting to Rs. 8,14,50,000/- was claimed u/s 36(1)(viii) of the Income-tax Act, 1961 (hereinafter also called `the Act') with the computation as under:- Chart-A Computation of Rebate Allowable u/s 36(1)(viii) of the Income Tax Act, 1961. 1. Business income before deduction u/s 36(1)(viii) of the Income Tax Act 59,68,03,660 Ratio of interest on Long Term Housing Loans to Total interest of Housing Loans 140,69,40,560 : 205,70,94,576 68.39: 100 2. ....
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.... of Expenses percentage at 68.95% in the earlier chart was derived as under : - Chart-C Computation for Apportionment of Expenses 1 Expenses (i) Interest and other charges 145,66,55,679 (ii) Personnel Cost 5,60,16,398 (iii) Establishment Expenses 3,09,35,165 Total 154,36,07,242 2. Income (i) Interest Income 217,32,21,686 (ii) Fees & Other Charges 6,54,88,135 ----------------- Total 223,87,09,821 ------------------ 3. Ratio of Expenses (Rs.1543607242) to Gross Receipts(Rs.2238709821) 68.95% 3. The AO noticed that....
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....s and surplus' was more than the Investments made by the assessee company in these UP Government Bonds, it was held that such investments were made out of interest free funds available at the disposal of the assessee and resultantly, the deduction of interest and other charges amounting to Rs. 145.66 crore from 'Interest on investment', being 'Income from other sources', was not permissible. 4. The AO re-prepared Chart-C and Chart-B as under:- Chart-B 1 Business income after making adjustments 66,21,03,014 2 Less: (i) Depreciation on Fixed Assets as per Income Tax Rules 48,89,252 (ii) Recovery of unrealized interest 70,35,4....
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.... Tax Act, 1961. 20% of Profit from Long term Housing loan ........transferred to special reserve whichever is less 1. Business income before deduction u/s 36(1)(viii) of the Income Tax Act 52,89,39,027 Ratio of interest on Long Term Housing Loans to Total Receipts of the Business. 140,69,40,560 : 2167244624 64.92 : 100 2. Profit from Long Term Housing Loans Therefore, 64.92% of business income is eligible for rebate u/s 36(1)(viii) (A) 34,33,87,216 3. 20% of (A) above allowable as deduction u/s 36(1)(viii) of the Income Tax Act 6,86,77,443 4. Amount transferred to Special Reserve created u/s 36(1)(viii) of the Income-tax Act. 8,14,50,000 5.....
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.... these bonds were made in earlier years out of interest bearing funds and, hence, deduction should be accordingly allowed. 8. Section 57 of the Act deals with deductions in the computation of the income chargeable under the head "Income from other sources". Sub-section (iii) provides that any expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning such income is deductible. The Hon'ble Bombay High Court in CIT VS. Smt. Sushila Devi Khadaria L/h of Late Gopal Khadaria (2009) 319 ITR 413 (Bom) has held that the finance charges and interest paid on loans obtained by the assessee for making investment in shares is deductible u/s 57(iii) in computing `Income....