2004 (10) TMI 42

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....eived by the assessee on the surplus money in public issue of shares invested in bank deposits for a period of 45 days was assessable under the head 'Income from other sources'?" Mr. F. Irani, learned counsel for the appellant-assessee, strenuously urged before us that the interest earned by the assessee in investing the surplus funds received in public issue for a short period of 45 days was assessable under the head "Profits and gains of business" and not "Income from other sources". In support of his submission, learned counsel relied upon the following judgments: (i) CIT v. Tamil Nadu Dairy Development Corporation Ltd. [1995] 216 ITR 535 (Mad); (ii) Snam Progetti S. P. A. v. Addl. CIT [1981] 132 ITR 70 (Delhi) and the judgment of thi....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....fore the commencement of the business is income from other sources. (ii) income from interest on deposits of surplus money during the construction period is also to be considered/treated as income from other sources. (iii) interest income in respect of surplus money, not required for business and deposited in bank or person, as idle money, for safe keeping, would be assessable as income from other sources. If the income from interest is from a fund which has been brought as surplus capital, it would be assessable as income from other sources. (iv) in respect of investment of surplus funds there is divergence of opinion between different High Courts and this court in the case of Murali Investment Co. held that if the surplus funds a....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....t has not commenced business will be chargeable under section 56. In other words, such income cannot be charged under the head "Profits and gains of business". In Tamil Nadu Dairy Development Corporation Ltd. [1995] 216 ITR 535, the facts before the Madras High Court related to the funds which were acquired from the business activity and in that backdrop it was held that the interest accrued on short-term deposit was business income. Similarly, in the case of Snam Progetti S. P. A. [1981] 132 ITR 70, before the Delhi High Court, the interest income was earned from the funds received from business activity and it was held that the income from interest from bank deposits is business income for the purpose of set-off. Tamil Nadu Dairy De....