Major source of income

as the company principal business is construction, so such interest would be IFOS, and taxable also

Sharmaji is correct technically, but if it can be proved that the funds were invested only for  a short period due to business reasons like non availability of plant components etc., then the interest can be treated as part of business income - provided the company is already doing the business - i.e it is not a start up company.

Please refer SC decision in Tuticorin case where it has been held that interest earned from idle money whether before or after the commencement of business shall be treated as income from other sources.

Also refer a decision in bokaro steel limited case.

https://taxbykk.blogspot.com/

Originally posted by : kaushal (taxbykk)
	Please refer SC decision in Tuticorin case where it has been held that interest earned from idle money whether before or after the commencement of business shall be treated as income from other sources. Also refer a decision in bokaro steel limited case. https://taxbykk.blogspot.com/

 Thanks..

Please calrify one more thing. if company is under construction and earned interest income from idle sources and want to set off its business expenditure (pre operative unalloacted) or interest paid on loans and then capitalised the expenditures, is this possible? as some one (CIT) says after Tuticorin Case, number of cases support set off interets income.

Business loss can arise only after commencment of business. In your case business has not yet started therefore no question of set off.

Interest paid before commencement of business can be capitalised and added to the cost of asset. In this case depreciation can be claimed.

Interest paid before commencement of business can be set off from interest earned only when loan agreement provides such. For this pls refer Bokaro steel case.