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August 2010

Head of income — Business income or income from other sources — Interest on short-term deposits with bank — In the absence of factual matrix, matter remanded to the Tribunal for fresh adjudication.

By Kishor Karia | Chartered Accountant
Atul Jasani | Advocate
Reading Time 2 mins

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21 Head of income — Business income or income from other
sources — Interest on short-term deposits with bank — In the absence of factual
matrix, matter remanded to the Tribunal for fresh adjudication.


The assessee was an exporter. The Tribunal held that the
interest income was generated by way of keeping the ‘advances’ received by the
assessee in the course of its regular business activity. According to the
Department, it was the case of surplus being invested in FDR, whereas according
to the assessee it was the case of advance having been received from the
exporter which was in FDR for short duration.

The Supreme Court observed that in the present case there was
no factual data to decide the aforesaid issue. The nature of the receipt was not
discussed. The High Court while disposing of the matter had also not examined
the factual basis. In view of the absence of factual matrix the Supreme Court
was of the view that to decide the question as to whether the receipt fell
u/s.28 or u/s.56, the matter was required to be remitted to the Tribunal for
fresh consideration in accordance with law.

[CIT v. Producin Pvt. Ltd., (2010) 322 ITR 270 (SC)]

 

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