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2010 (6) TMI 598 - ITAT MUMBAIInterest earned on deployment of surplus funds assessed under the head 'Income from other sources- assessee reducing such income from capital work in progress- assessee treating such income to be business income & claiming revenue expenditure against it- Held that:-Assessee company was in the process of establishing research and training institute which was under construction and since no allied activities were carried out by the assessee company, the company has not commenced its business and, therefore accordingly, there cannot be any question of assessment of its income as income from business. At the same time, it does not mean that until the company commences its business, income from other sources will not be taxed. See Tuticorin Alkali Chemicals & Fertilizers Ltd vs CIT (1997 - TMI - 5601 - Supreme Court). However, while treating the income as 'income from other sources' the AO should also consider the expenses incurred for the purpose of earning such income and allow the same u/s 57 of the IT Act. Income from other sources could be deductible from the project cost, when these items were directly related to the execution of contract for successful completion of the project. See CIT vs Bokaro Steel Ltd.(1998 - TMI - 5705 - Supreme Court) Further, revenue expenditure cannot be allowed as business expenditure unless the business has commenced. - Decided against the assessee.
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