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| The Tax Publishers2019 TaxPub(DT) 0188 (Pune-Trib) INCOME TAX ACT, 1961
Section 80P(2)(a)
Interest earned on FDR placed with Bank because of commercial binding, was 'Profits and grains from business or profession' and not 'Income from other sources'.
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Deduction under section 80P(2)(a) - Interest received on investment with bank - Allowability -
Assessee, Society claimed deduction under section 80P(2)(a)(i) on interest income from bank, other than cooperative banks. It was submitted that it availed overdraft facilities on basis of Fixed Deposits maintained with Bank and maintenance of account with Bank was necessary for purchases from some suppliers. Since FDRs were kept for obtaining overdraft facility, the interest should be treated as 'Profits and gains from business or profession'. Held: Assessee was commercially bound to maintain overdraft with Bank and for that purpose it had to place FDRs, on which interest income was earned. Interest arising on FDRs, in given circumstances, was in nature of income under head 'Profits and gains from business or profession' and was not 'Income from other sources'. Once the interest income was construed as 'Business income', same was eligible for deduction under section 80P.
Distinguished:M/s. The Totgars´ Cooperative Sale Society Limited v. ITO. Karnataka (2010) 322 ITR 283 (SC) : 2010 TaxPub(DT) 1466 (SC),
REFERRED :
FAVOUR : In assessee's favour
A.Y. :
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