Business disallowance under section 40(b)–Book profit–Interest income on FDR

Business disallowance under section 40(b)--Book profit--Interest income on FDR

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under section 40(b)

CIT v. Allen Career Institute

Business disallowance under section 40(b)–Book profit–Interest income on FDR

Facts:

Assessee-Institute made FDR out of surplus fund available with it. Assessee had shown interest income from FDRs as business income and not income from other sources and taken into account such interest income while computing book profit for calculating remuneration payable to partners. AO did not accept that the income earned from FDR as being business income. Tribunal, held that such interest income be held and directed to be treated as eligible income being a part of book profit for the purpose of section 40(b).

Held:

The FDR, which was invested by the assessee, was never the part of business. Therefore, the income which has been earned on the FDR cannot be considered as part of the income of the business. In that view of the matter such interest cannot be treated as part of book profits

under section 40(b)


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