Law:

Section:

Section 28(i), read with section 56, of the Income-tax Act, 1961 - Business income - Chargeable as - Assessment year 1992-93- Assessee-firm was involved in business of development of properties - In course of its business, it received money in advance from its customers intending to purchase flats in properties developed by it - As said moneys could not be utilized immediately for purpose of business, assessee temporarily invested surplus amounts from such moneys in banks and other concerns and earned interest thereon - Whether, on facts, interest income in question would be assessable as income from business as claimed by assessee and not as income from other sources - Held, yes FACTS The assessee-firm was involved in the business of development of properties. In the course of its business it received monies in advance from its customers intending to purchase flats in the properties developed by it. Since those monies could not be utilized immediately for the business of the firm, the assessee invested the surplus amount temporarily in the banks and other concerns and earned interest on such deposits. For the relevant assessment year, the assessee had returned the income from such interest under the head 'Income from business'. The Assessing Officer, however, assessed that interest income as 'income from other sources'. On appeal, the Commissioner (Appeals) upheld the assessee's claim. The Tribunal upheld the order of the Commissioner (Appeals). On the revenue's appeal to the High Court : HELD In the instant case, income from interest, admittedly, arose out of running business of the assessee. Interest was earned out of monies accruing from the business of the assessee and the same was also utilized for the purpose of its business. [Para 6] In view of the of the Bombay High Court in the case of CITv. Paramount Premium (P.) Ltd. [1991] 190 ITR 259 in which an identical issue was decided in favour of the assessee and which was squarely applicable to the facts of the instant appeal, the interest income earned by the assessee would be assessable as income from business and not as income from other sources. [Para 7] Therefore, there was no merit in the instant…

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