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2016 (3) TMI 924 - ITAT LUCKNOWInterest accruing on FDRs treated as income from other sources - commencement of business - Held that:- In the facts of the present case, where the entire funds available with the assessee company is in respect of the business undertaking being set up by the assessee company, previous year will start only after the setting up of the business undertaking and not before that and the interest income from the FD is not an independent source of income de horse the business undertaking because the earning of interest income is not the object of the assessee company and the funds were not arranged by the assessee company for earning interest income and therefore, the previous year in the facts of the present case will start on setting up of the business and thereafter, if the assessee is having any interest income then the same will be taxable under the head income from other sources and after the commencement of the business, the income from operation will be taxable under the head income from business but it cannot be said that interest income is a separate and new source of income de horse the business undertaking and therefore, the previous year in respect of interest income starts on the date of purchase of FD. In our considered opinion, on the date of purchase of FD, no new source of income has come into existence because in our considered opinion, the source of income is business undertaking and therefore, the requirement of starting of previous year in the facts of the present case is setting up of business which has not happened till 31/03/2011 in the present case and therefore, any income from this source cannot be brought to tax before the setting up of business is completed resulting into start of the previous year. in the facts of the present case, the previous year has not yet started in respect of the business undertaking of the assessee for generation of power and since the assessee is not having any other source of income de horse this business undertaking which was not set up, interest income earned by the assessee till 31/03/2011 cannot be brought to tax till the assessment year 2011-12 because the business was not set up and therefore, previous year has not commenced. We, therefore, delete the addition made by the Assessing Officer and confirmed by CIT(A) and hold that such interest income should be reduced from the cost of project instead of taxing it as an income from other sources. - Decided in favour of assessee
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