Can interest paid on od be deducted from interest earned

Hi

There is an assessee engaged in Civil Works contracts. As per the terms of agreement with contractee, the assessee makes FDs as Security Deposit. These FDs are funded from the OD limits. Since FDs are directly linked with the business of the assessee, can interest on them be taxed under PGBP rather than IFOS? Otherwise, if interest on FDs is taxed under IFOS, can interest paid on OD be deducted from Interest earned on FDs?

Also kindly refer any case laws in respect of above matters.

Thank you.

Replies (3)

YES ,  interest income will be taxed in PGBP and cannot be taxed u/h IOS as FD is directly linked with the business of the assesse.

Security deposit was the essential for obtaining the contract. if the assesse had not made deposit , he would not have got contract.

as such interest income should be taxed under PGBP.

similar decision was given by delhi HC in case : K and Co (2014)

 

Thank you for the information

you're welcome..

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