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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether interest earned on fixed deposits created in compliance with subsidy conditions, together with related interest on savings account and income-tax refund, was taxable as income from other sources or eligible as business income for deduction under section 80-IB(11).
Analysis: The fixed deposits were found to have been mandated by the subsidy sanction conditions and were not made as a voluntary investment or savings deployment. The interest on such deposits was treated as having the requisite business nexus and, therefore, chargeable under the head profits and gains of business or profession rather than income from other sources. The small interest entry in a savings account was deleted because the assessee company did not maintain such an account, and the interest on income-tax refund was also deleted as no deduction had been claimed against it. On these facts, the interest on fixed deposits was held to be part of the eligible business profits for deduction under section 80-IB(11).
Conclusion: The issue was decided in favour of the assessee, and deduction under section 80-IB(11) was allowed on the fixed-deposit interest while the other minor additions were deleted.
Ratio Decidendi: Interest earned on deposits compulsorily parked pursuant to subsidy conditions retains its business character where the deposit has a direct nexus with the business and is not a voluntary investment.
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