TMI Blog2022 (1) TMI 891X X X X Extracts X X X X X X X X Extracts X X X X ..... extricably linked with the business of the assessee. Therefore, in our view, the interest income earned on fixed deposits has to be treated as business income of the assessee. That being the case, it has to be set off against the revenue expenses. However this is only to the extent of interest income earned on fixed deposits. As far as income earned from mutual fund and interest from income tax refund, they have to be taxed under the head income from other sources. Thus allow assessee s claim of assessment of interest income under the head business - Whereas, the balance amount is to be taxed under the head income from other sources. In so far as the issue of set off of income from other sources against the revenue expenses in terms o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that interest earned on Fixed Deposit amounting to ₹ 11,94,395/- was credited to the profit and loss account and has been netted off against the revenue expenses. From the break up of interest income, he found that an amount of ₹ 11,74,070/- was received from Fixed Deposits with Canara Bank, amount of ₹ 18,745/- from mutual fund and ₹ 1580/- towards interest on income tax refund. The Assessing Officer observed, the assessee is following project completion method of accounting to recognise revenue from its business, whereas, no income was shown from sales/operations of the business. Since, the entire business expense was capitalised, the Assessing Officer held that the interest income cannot be netted off against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking payment for the business. Thus, he submitted, since the fixed deposits are made out of business fund, the interest income is directly connected to the business of the assessee. Hence, assessable as business income. In support of such contention Ld. Counsel relied upon the following decisions : 1) S A Builders vs CIT 288 ITR 1 (SC) 2) CIT vs Lok Holdings 308 ITR 356 (BOM) 5. Without prejudice to the aforesaid contention, learned Counsel drew my attention to the additional grounds and submitted that even if the interest income is assessed under the head income from other sources however, it has to be set off against the revenue expenses in terms of section 71 of the Act. 6. Learned Departmental Representative while objecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted the aforesaid factual position. However, he rejected assessee s claim of business income on the reasoning that the assessee invested in fixed deposits only for the purpose of earning interest income. 8. When it is a fact on record that the business fund lying idle with the assessee was invested in fixed deposit for earning some income which can be utilised in the business at the time of need, it has to be held that the interest income is inextricably linked with the business of the assessee. The decision to invest the idle fund lying with the assessee in fixed deposit has to be accepted as a decision taken by a prudent businessman keeping in view the commercial expediency. It is not disputed that the assessee has temporarily pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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