Major source of income

926 views 5 replies

If a Company is a construction company and raised fund for construction of a plant, but due to under construction of plant comapny invested idle fund available and earned huge amount of interest and other business income is nil or less than interest income, whether company, in this case will be treated as financial institution (interest treated as business income) or interest taxable under IFOS ? 

Replies (5)

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.

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register  

Company
29 May 2026
Finance Head

Bhawar Sales Corporation

Chennai

Graduate (Any)

View Details
Company
20 June 2026
Chartered Accountant

ANV & Company

New Delhi

CA

View Details
Company
ARTICLESHIP 08 June 2026
Internal & Taxation Article

O P Bagla & Co LLP

New Delhi

CA Inter

View Details
Company
01 June 2026
Audit, Taxation & Compliance Executive

R P S K & Associates

Nashik

CA Inter

View Details
Company
ARTICLESHIP 28 May 2026
Accounts, Audit & Compliance Executive

Shyam Joshi & Associates

Pune

B.Com

View Details
Company
ARTICLESHIP 09 June 2026
Article Trainee

Numbertree LLP

Mumbai

CA Inter

View Details
Company
04 June 2026
Semi Qualified CA

Goyal Puneet & Associates

New Delhi

CA Final

View Details
Company
12 June 2026
Accounts & Taxation Executive

Winshine Financial Services

Mumbai

CA Inter

View Details