A public limited company is doing floriculture business of growing rose flowers and selling domestically and also exporting. The company is not doing any other business and claiming the entire income as agricultural income U/s.10.
The auditors are insisting to show the following incomes under the head "other Income":
1. Interest earned on Fixed deposits created for obtaining the Bank Guarantees for importing raw materials and capital goods.
2. Some Air freight subsidy received from Govt. of India after the exports made.
3. Foreign exchange fluctuation gains on exports and imports.
4.Discount given by the freight forwards on full and final settlement of dispute with them relating to the freight payment made to them.
4. Interest received from the State Electricity Board on the caution deposit kept with them for obtaining the electricity connection for operating activities.
As the above income are shown in the "Other Income" tax authorities are demanding to pay income tax on the above amount treating them as "Income from other Sources".
Request experts to give the opinion on the demand of the tax authorities.
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