Short Overview:

Although funds generated from business were sourced to FDRs kept in bank interest income earned from FDRs could not be considered as business receipts when assessee’s main activity was not lending money for interest while it was real estate development and construction.

Assessee engaged in real estate development declared interest on bank FDRs as business income. AO taxed the same as income from other sources. Assessee’s case was that interest earned on FDR was a business receipt as it has parked surplus funds generated from business in banks in order to earn interest income and reduce construction expenses.

It is held that although funds generated from business were sourced to FDRs kept in bank interest income earned from FDRs could not be considered as business receipts when assessee’s main activity was not lending money for interest.

Decision: Against the assessee