The division bench of the Bombay High Court in CIT v. M/s Green Infra Ltd held that the interest amount received by the assessee-Company out of Bank Fixed Deposits before the commencement of business is ‘business income‘ under the provisions of the Income Tax Act.
The Revenue challenged the order of the Appellate Tribunal wherein it was held that the interest on bank fixed deposit earned by the assessee-company before the commencement of business would be taxable as business income. The Revenue urged that the same is taxable under the head income from other sources since the assessee had not commenced its business nor was in the business of money lending.
The bench noted that the decision of the Tribunal was on the basis of the ration laid down in CIT v/s. Indo Swiss Jewels Ltd. & another wherein it was held that the interest earned on short term deposits on the money kept apart for the purposes of business had to be treated as income earned from business and could not be treated as income from other sources.
The bench comprising of Justice M.S Sanklecha and Justice A.K Menon further noted that the AO has also disallowed the assesses claim towards depreciation and expenditure in the subject assessment year on ground of non-commencement of business which was subsequently reversed by the Tribunal.
“It has taken a view that the business of the respondent-assessee was of financing, investing, sourcing, operating, green or clean technological products and services had commenced. Therefore, consequently, allowed the claim made for depreciation and expenses to determine business profits. The above finding of the Tribunal that the business of the respondent had commenced is not challenged before us by the Revenue. It needs no emphasis that setting up a business or commencement of business cannot vary dependent upon the claim being made i.e. for expenses it has commenced and for income it has not commenced. Therefore it is not open to the Revenue to contend that the business was not set up/commenced for the purposes of holding that the income earned is not income from business.”
Read the full text of the order below.
