Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2018 (11) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (11) TMI 1643 - ITAT CHENNAIInterest Income receipts - Characterization of income - Income from Other Sources or business income - business had not started - HELD THAT:- CIT(A) applying the Apex Court decision in Tuticorin Chemicals [1997 (7) TMI 4 - SUPREME COURT] has held that the assessee had untrammelled freedom to utilize the funds the way it wanted. The fact that it chose to park its surplus funds during the commencement period in short term deposits to earn interest income was a voluntary decision, and not a forced one. If a company has not commenced business, there cannot be any question of assessment of its profits and gains of business. That does not mean that until and unless the company commences its business, its income from any other source will not be taxed. If the company, even before it commences business, keeps the surplus funds in shortterm deposits in order to earn interest, as in this case, such interest will be chargeable under section 56 of the Act. Section 57 of the Act sets out in its clauses (i) to (iii) the expenditures which are allowable as deduction from income assessable under section 56. Thus, the assessee cannot claim adjustment of the impugned expenditures against interest assessable under section 56. There are specific provisions in the Income-tax Act for setting off loss from one source against income from another source under the same head of income (section 70), as well as setting off loss from one head against income from another (section 71). In the facts of this case, the company cannot claim any relief under either of these two sections, since its business had not started and there could not be any computation of business income or loss incurred by the assessee in the relevant accounting year. In such a situation, the expenditure incurred by the assessee for the purpose of setting up its business cannot be allowed as deduction, nor can it be adjusted against any other income under any other head etc. The assessee could not challenge any of these findings and the corresponding application of law. Apex court very clearly confirmed that the interest earned by an assessee on the investment of share capital in call deposits before the commencement of its production could be assessed separately under the head “Other sources” - Decided against assessee.
|