In the case M/s. Emta Steel & Energy Limited v. Deputy Commissioner of Income Tax, the Kolkata bench of the ITAT held that the interest received by the assessee-company on FDRs kept with Bank before the commencement of business are taxable under the Income Tax act under the head “income from other sources.”
Earlier, the Assessing Officer and the first appellate authority, relying upon the Apex Court decision in Tuticorin Alkali Chemicals and Fertilizers Limited vs. CIT, observed that the interest amount on FDRs kept with the ICICI Bank by the assessee-company before the commencement of business are taxable under the head “income from other sources.”
The division bench held that the assessee had also invested the amount borrowed for the construction work, which was not immediately required, in short -term deposit and earned interest thereon. The said interest was brought to tax in the hands of the assessee as income under the head “income from other sources”on the basis of the ration laid down by the Supreme Court.
Confirming the above orders, the bench said “after taking note of the same, it was observed by the Hon’ble Supreme Court in its judgment passed in the case of Bokaro Steel Limited (supra) that this issue, in any case, stood concluded by a decision of the Court in the case of Tuticorin Alkali Chemicals & Fertilizers Limited (supra). It is thus clear that the issue relating to the treatment to be given to the interest income earned by the assessee on FDRs kept with Bank before the commencement of business is squarely covered against the assessee by the decision of the Hon’ble Supreme Court in the case of Tuticorin Alkali Chemicals & Fertilizers Limited (supra) and respectful lyfol lowing the same, we uphold the impugned order of the ld. CIT(Appeals) confirming the action of the Assessing Officer in bringing to tax interest income in question in the hands of the assessee under the head “income from other sources”.
Read the full text of the order below.