Law:

Section:

Section 56 of the Income-tax Act, 1961 - Income from other sources - Chargeable as - Assessment year 1988-89 - Assessee-company received loan from financial institutions for setting up its fertilizer plant with stipulation that any interest earned on such amount not utilized temporarily would go to reduce liability of loan - Due to certain unexpected delay, amount of loan received remained lying with bank and interest was received by assessee on those deposits - Besides there were some miscellaneous receipts - Whether such interest earned by assessee as well as miscellaneous receipts were taxable under head 'Income from other sources' - Held, yes FACTS The assessee-company was incorporated with the main object of setting up a fertilizer plant and manufacturing of fertilizers. During the previous year relevant to assessment year 1988-89, the factory was under construction and no manufacturing activity had been undertaken. The assessee-company received certain loans from financial institutions with the stipulation that any interest earned on such amount of loan not utilized temporarily would go to reduce the liability of the loan. Due to certain unexpected delay, the amount of loan received remained lying with the bank and interest was received by the assessee on those deposits. Besides there were certain miscellaneous receipts. The Assessing Officer taxed the interest and miscellaneous receipts as income from other sources. On appeal, the Commissioner (Appeals) set aside the order of the Assessing Officer. On further appeal, the Tribunal confirmed the order of the Commissioner (Appeals). On reference : HELD It was not in dispute that under the terms of the agreement, the assessee was required to keep the amount of loan which had not been utilized in the project in a special current account with a nationalized bank. The assessee had kept the amount in a special current account on which normally no interest was paid by the bank. However, after negotiations, the bank had paid interest. The assessee also had other income as interest on account of deposit in various accounts. The Tribunal had relied upon the letter written by the Industrial Bank of India to the…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492