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2023 (7) TMI 650 - ITAT CHENNAICharacterization of income - Determine the nature of interest income earned - business has already been set-up though it may not have commenced - assessee has reduced proportionate interest from cost of project on the basis of ratio of debt and equity whereas Ld. AO has assessed the same as ‘Income from other sources’ - HELD THAT:- There is a difference in set-up of business and commencement of business. Once the business is set up though it may not have yet commenced, the assessee would be eligible to claim the business expenditure as revenue expenditure. On the same very reasoning, any income arising after set-up of the business would be revenue in nature and assessable to tax. The assessee has generated business income and claimed revenue expenditure including finance cost. However, mere fact that the deposits were linked with projects would not alter the character of the income after the business has been set-up. As rightly held by Ld. CIT(A), the said bifurcation is only an artificial bifurcation. The terms of the project may require the assessee to make fixed deposits but the same could not alter the Tax treatment of the interest income so earned by the assessee. The interest arises to the assessee only because of creation of fixed deposits which is nothing but assessable as ‘income from other sources’. CIT-A was correct to concluded that it was pure and simple interest on deposits which had to be considered as ‘income from other sources’ only. - Decided against assessee.
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