Interest on Bank FDRs to maintain the Minimum Interest Reserve Account is taxable as Business-Income

Brief Facts of the case

• The assessee company engaged in business as builders and the developer. During the relevant period in the assessment year, it earned interest to the extent of Rs. 77,25,153/- on FDRs which was not offered for taxation; instead it was set-off with projects in progress.
• Holding that interest income was unrelated to the business activity of the assesse the A.O. treated this income to be income from other sources.
• On appeal, the CIT (A) accepted the contention of the assesseethat the interest was earned from the mandatory deposit required for raising finances for the purpose of its business and accordingly treated the same as business income. The CIT(A) further rejected applicability of Tuticorn Alkali Chemicals & Fertilizers Ltd. CIT (997) 227 ITR 172 (SC) in the assessee’s case, being different on facts.

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