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Interest income earned from funds received from Government for setting up a company is a capital receipt, not revenue receipt, as the funds and income must be utilized only for the specified purpose. The funds kept in short-term deposits cannot be termed surplus amounts to be utilized as per the company's wish. The interest income is inextricably linked to the setting up of the project and must be used exclusively for that purpose. Therefore, the interest income on short-term deposits of government funds is a capital receipt, not taxable as income from other sources.
Interest income earned from funds received from Government for setting up a company is a capital receipt, not revenue receipt, as the funds and income must be utilized only for the specified purpose. The funds kept in short-term deposits cannot be termed surplus amounts to be utilized as per the company's wish. The interest income is inextricably linked to the setting up of the project and must be used exclusively for that purpose. Therefore, the interest income on short-term deposits of government funds is a capital receipt, not taxable as income from other sources.
Note: It is a system-generated summary and is for quick reference only.
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