TaxTMI 
TaxTMI 
2021 (2) TMI 1328
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.... 2. The assessee has raised the following substantive grounds in appeal No.141/Hyd/2017 for AY.2012-13: "1. The order of the learned Commissioner of Income-Tax (Appeals) is erroneous both on facts and in law. 2. The learned Commissioner of Income-Tax (Appeals) erred in holding that the appellant did not commence business activity and that the interest on fixed deposits of Rs.9,26,440/- is taxable under the head "Other sources". 3. The learned Commissioner of Income-Tax (Appeals) ought to have seen that the interest of derived in the process of the business activity of the appellant and that the expenditure incurred during the course of business is an allowable deduction. 4. In the alternate, the learned Commissioner of Income-Ta....
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....action assessing the impugned interest income as 'income from other sources' vide following detailed discussion: "7. Regarding the second Issue of treating the Interest Income from Fixed Deposits as Income from other sources by the Assessing Officer, the details are as under: The appellant had to deposit the following amounts as a pre-requisite to obtain loan from IDBI Particulars Loan Amount Received (Rs.) FD made as a Pre-requisite (Rs.) 1st disbursement in AY.2012-13 17,27,00,000 4,50,00000 2nd disbursement in AY.2013-14 49,94,23,308 16,10,00,0 On these FDs the appellant received interest as under: A.Y.2012-13 Rs. 9,26,440/- A.Y.2013-14 Rs. 1,92,76,530/- The appellant reduced the above interest from capital work....
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....orn Alkali Chemicals and Fertilisers Ltd cited supra the facts were different. In that case the interest was earned on surplus funds deposited with the bank. Whereas in the present case the appellant is compelled to deposit certain amounts with IDBI Bank as pre-requisite to obtain loans, therefore the case of Tuticorn Alkali Chemicals and Fertilisers Ltd cannot be applied. c) In the case of Autokast Ltd, the facts were, the assessee borrowed amounts from IDBI and deposited the same with State Bank of Travancore as he did not require the funds immediately. The interest earned was considered as taxable under the head other sources by the Hon'ble Supreme Court. However in the present case the appellant made FDs as a pre-requisite to obt....
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....pat Power Consortium Ltd (cited supra ) and various other precedents on this issue held that Interest paid on borrowed funds has no connection with receipt of interest and held that interest payable cannot be allowed as deduction U/s 57(iii). Further in appellants case as verified from IDBI loan sanction letter dated 28.6.2010, the appellant made deposits with the bank as his equity being promoter. Therefore it practically amounts to that the appellant kept his share of capital with the bank on which he received interest. Therefore it is dearly taxable under the head other sources. Therefore the action of Assessing Officer in treating interest earned on FDs as income from other sources is upheld. 10. It is to be mentioned here that th....
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....now 40(a)(ia) 2,24,720 8,06,272 Total taxable income (10,32,360) 6. We have given our thoughtful consideration to the foregoing rival contentions. We find no substance in the assessee's foregoing grievance. Case records indicate in Pg.47 of the paper book that the assessee had to commence its commercial operations for the project(s) in issue from December 31st, 2013 relevant to AY.2014-15 whereas we are in AYs.2012-13 & 2013-14 only. The clinching fact as emerges therefore is that the assessee has sought the assessment of its interest income as 'business income' without having commenced its corresponding actual business activity at all in these two assessment years. We therefore find no reason to interfere with detai....