25 May 2009
Interest will be taxed without any deduction as income from other sources, also as per co. act its other income you can show 15,000/- as preoperative expenses.
25 May 2009
The matter of the taxability of the any interest earned during the construction period in the hands of the assessee has been considered by by Supreme Court Of India in the case of TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LTD vs CIT 227 ITR 172 and has ruled that Any interest earned during the construction period is taxable in the hands of the assessee and it can not be set off against the preoperative expenditure. In this case The assessee deposited part of the borrowed funds on term-deposits and set off this interest against the interest payable. ITAT decided that the principles of accountancy was not always good law. The interest earned was income from other sources. It could not set off against interest payable. Following question of law was raised by for the consideration of the Apex Court "Whether, on the facts and in the circumstances of the case, interest derived by the assessee from the borrowed funds which were invested in short-term deposits with banks would be chargeable to tax under the head 'Income from other sources' or would go to reduce the interest payable by the assessee on the term loans secured by the assessee from financial institutions, which would be capitalised after the commencement of commercial production ?" While deciding on the above matter, the Hon’ble Court has uphold the order of the ITAT considering the decision of various courts on the issue and deceided that such income us taxable as other income and can not be set off agsinst the internst paid or any other expenditure incurred duinrg that period. For further details you may visit my blog by available on my profile.
CAclubindia
