Law: Income Tax Act, 1961

Section: 14,56,57,37,43,43A

(a) Income-tax--Heads of income---Manner in which income derived determinative of head under which income falls ---Indian Income Tax Act, 1961, S.14. Under the Income Tax Act, 1961, the distinct heads under which the income of an assessee are to be classified are set out in section 14 of the Income Tax Act, 1961. The income received by an assessee has to be fitted under one or other head having regard to the source from which that income is derived. The fact that a person carries on business does not lead to the inference that all income received by such a person is business income. The same assessee can have income which may require to be classified under more than one head. It is the manner in which the income is derived that is relevant and not merely the fact that the person is engaged in a business or in a profession. Interest received by a company which carries on business from bank deposits and loans could only be taxable as "income from other sources" and not as "business income". Tuticorin Alkali Chemicals and Fertilizers Ltd. v. CIT (1997) 227 ITR 172 (SC) fol. (b) Income-tax--- ---Interest---Income from other sources or business income ---Assessee carrying on business---Earning interest from short term Bank deposits--­Interest not business income but income from other sources---Indian Income Tax Act, 1961, Ss. 14 & 56. ' Interest paid on overdraft obtained for the purpose of business cannot be deducted from the interest earned on monies kept in fixed deposits as such income derived by way of interest on fixed deposits has to be taxed under the head "Income from other sources". , Tuticorin Alkali Chemicals and Fertilizers Ltd. v. CIT (1997) 227 ITR 172 (SC) fol. (c) Income-tax--- ----Income from other sources---Deductions---Interest paid on overdraft taken for business---Not to be deducted from interest on Bank deposits---Indian Income Tax Act, 1961, S.57. However, though the assessee may not be entitled to have interest paid by it on the overdraft to the bank, deducted from the interest received by it on the short term fixed deposits, the assessee is entitled to deduction of the same from its business income. (d) Income-tax--- ----Capital or…

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