Income from Interest Received Temporarily Parked in the Banks and given as Unsecured Loan is Business Income: ITAT [Read Order]

Small Saving Schemes

The Kolkata bench of Income Tax Appellate Tribunal recently announced and directed the Assessing Officer to treat the interest income temporarily parked in the banks and given as unsecured loan which yielded income and which has been offered to tax by the assessee should be treated as income from business and not from other sources under the provisions of the Income Tax Act.

The bench comprising of judicial member Shri A. T. Varkey and accountant member Dr. A. L. Saini has held so while allowing the appeal of assesee.

The sole issue involved in the appeal was against the action of CIT (A) confirming the action of AO in assessing the income from interest amounting to Rs.11,84,781/- as income from other sources and not treating the same as business income.

The assessee is an individual engaged in the business of construction and development of residential and commercial building and had received advances from property booking from its customers.

According to the assessee, advance received won’t use in the business instead lying idle with the company was parked for a short duration in fixed deposit or given as unsecured loans which yielded interest income.

The AO treated the interest income as income from other sources, since there was no tax effect because the assessee claimed deduction u/s. 80IB of the Act which was fully allowed so there was no impact even though the treatment was given differently.

The division bench of the Tribunal accepted the contention of the assessee that for different assessment years AO has accepted the treatment made by assessee in respect to the interest income yielded from the advances collected from the customers for the property, and in the process when idle fund is parked for short duration in the fixed deposit, it needs to be treated as income incidental to the activities of business of the assessee and need to be upheld on the principles of consistency as laid by the Hon’ble Supreme Court.

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