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| The Tax Publishers2020 TaxPub(DT) 0771 (Mum-Trib) INCOME TAX ACT, 1961
Section 56
When funds were inextricably linked with project funds, interest earned from time deposits kept in banks out of surplus funds of project had to be reduced from capital work-in-progress. Therefore, additions made towards interest Income under the head 'income from other sources' could not be sustained.
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Income from other sources - Taxability - Interest earned from time deposits kept out of surplus funds -
Assessee engaged in construction of roads on BOT basis, borrowed loans from consortium banks. As per agreement with consortium banks, assessee withdrawn loan funds for the purpose of its project on a periodic basis. However, when funds were not required for its project, it kept those funds in consortium banks in fixed deposits for short period and necessary interest earned from said deposits has been credited to RTA account to be used for project of assessee. AO assessed said interest income as income from other sources. Held : When funds were inextricably linked with project funds interest earned from time deposits kept in banks out of surplus funds of project had to be reduced from capital work-in-progress. Therefore, additions made towards interest income under the head 'Income from other sources' could not be sustained.
Relied :ITAT Jaipur Bench in the case of ITA. No. 628/JP/2014 title as Infrastructure Development Co. of Rajasthan Ltd. v. DCIT, dt. 11-8-2016
REFERRED :
FAVOUR : In assessee's favour
A.Y. : 2012-13
INCOME TAX ACT, 1961
Section 37(1)
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