INCOME TAX ACT, 1961

Section 14

Heads of income - Income from Other sources or Business income - Broken period interest -

Assessments of assessee were initially completed under section 143(3) and assessee, apart from deriving income from other sources, also derived interest from sale of securities. The Government securities were purchased by assessee either directly through public auction or in open market. In the event of purchase of security from open or secondary market, the bank paid interest to sellers of securities for the period upto date of transaction or purchase of last open date which is known as broken period interest. Assessee claimed such income as business income, however, AO treated the same as 'Income from other sources'. Held: In the instant case, the assessee-bank ever since, its inception was offering the Broken Period Interest income earned from the sale of securities as business income under section 28, and not as income under the head 'Income from other sources'. Therefore, the Broken Period Interest paid to sellers of securities was claimed as allowable deduction from its business income. Tribunal while recording the finding in favour of assessee had relied upon the decision of Supreme Court in CIT v. Citibank, NA [Civil Appeal No. 1549/2006 dt. 12-8-2008].

Relied:CIT v. Citibank NA [Civil Appeal No. 1549/2006 dt. 12-8-2008] Brooke Bond India Ltd. v. CIT (1997) 91 TAXMAN 26 (SC) : 1998 TaxPub(DT) 0969 (SC) Vijaya Bank v. CIT (Addl.) (1991) 187 ITR 541 (SC) : 1991 TaxPub(DT) 0555 (SC) CIT v. Bank Of Rajasthan Ltd. (2009) 178 Taxman 304 (Raj.) : 2009 TaxPub(DT) 0412 (Raj-HC) American Express International Banking Corporation v. CIT (2002) 125 Taxman 488 (Bombay) : 2002 TaxPub(DT) 1663 (Bom-HC)

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 1999-2000 to 2000-01

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