Case Law Details
DCIT Vs Cairn Energy Hydrocarbon Ltd (ITAT Delhi)
ITAT Delhi held that investment done from the surplus funds in FDs has nothing to do with the business connection. Accordingly, interest received from the same is to be treated under separate head i.e. Income from other sources and not as business income.
Facts- The issue is that the assessee deposited their surplus funds in the bank on which an interest amounting to Rs.36,19,348/- was earned and the same offered to tax under the head ‘income from business and profession’. AO erred in treated the interest earned from fixed deposits under the head income from other sources. CIT(A) confirmed treated income from FDs as income from other sources and interest income from temporary investments as business income
Conclusion- With regard to earning of interest of Rs. 3619348/-from FDs wherein the assessee has invested the surplus funds in the FDs has nothing to do with the business connection. In the instant FDs, we find that there was no compulsion on the part of the assessee to invest in bank FDs as a part of an agreement. No business contingency was brought out whether in this case the surplus funds have been kept as fixed term deposits in the bank which yielded interest. It is a passive income which is not directly relatable to the main functions of the business or the venture of oil exploration. This interest would be received even in the absence of lull/cessation of exploration activity. The interest was received is to be treated under a separate head for the purpose of tax as per the provisions of Section 14 of the Income Tax Act, 1961.
FULL TEXT OF THE ORDER OF ITAT DELHI
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