2022 (1) TMI 891

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....additional grounds for not allowing set off of Revenue expenses against the interest income. 3. Briefly, the facts are, the assessee is a resident Company. As stated by the Assessing Officer, assessee is engaged in the business of construction, builder and developers etc. of residential houses, commercial building etc. For the assessment year under dispute, the assessee had filed its return of income on 10.10.2015 declaring loss of Rs. 73,04,323/-. On perusal of the profit and loss account, the Assessing Officer noticed that interest earned on Fixed Deposit amounting to Rs. 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 a....

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....struction of projects. Thus, he submitted, the fixed deposits on which the assessee earned interest are from assessee's business income, hence the interest income earned thereon is inextricably linked with assessee's business. He submitted, for commercial expediency assessee has invested the idle money lying with it in short term deposits for earning better rate of interest, which in turn, goes to reduce the cost of the construction as the money invested in the fixed deposit is ultimately utilised for making 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 co....

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....that the advances received from the customers are deposited in current account and the surplus fund lying idle, which is not immediately required for the purpose of business, is kept in short term deposits to earn some amount of interest income which could ultimately go to reduce the cost of the project. The fact that the assessee has made the fixed deposits out of surplus fund generated from the construction business has not been disputed by the departmental authorities. In fact, learned Commissioner (Appeals) has 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 f....