April 2009
Interest : Head of income : S. 28 and S. 56 of Income-tax Act, 1961 : A.Y. 1992-93 : Construction business : Development of properties : Interest on deposit of surplus money received from customers : Interest income is assessable as business income and no
By K. B. Bhujle, Advocate
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10 Interest : Head of income : S. 28 and S. 56 of
Income-tax Act, 1961 : A.Y. 1992-93 : Construction business : Development of
properties : Interest on deposit of surplus money received from customers :
Interest income is assessable as business income and not as income from other
sources.
[CIT v. Lok Holdings, 308 ITR 356 (Bom.)]
The assesee firm was in the construction business. It
received monies from the purchasers of flat as advance. Interest received from
the deposit of the surplus amount was treated by the assessee as business
income. For the A.Y. the Assessing Officer assessed the interest income as
‘income from other sources’. On a finding that the entire interest sprang from
the business activity of the assessee and not out of any independent activity,
the Tribunal allowed the assessee’s claim and held that the interest income
was business income.
On appeal by the Revenue, the Bombay High Court upheld the
decision of the Tribunal and held :
“The Tribunal was justified in holding that the interest
income received by the assessee was assess able as business income.”
