FDR Interest is not Business Income

The Hon'ble Rajasthan High Court had held in the of Murli Investment Co v. CIT 167 ITR 368 (Raj.) that merely investing surplus funds instead of keeping them idle and obtaining interest thereon would not constitute business and therefore, the interest by the assessee would not be assessable as business income but assessable as income under other sources. The Hon'ble Kerala High Court in the case of CIT v. Venad Conductors (P) Ltd. 326 ITR 513 (Ker.) had held that income from short term deposit cannot be treated as income from business but it is income from other sources. Likewise, in the case of T.O. Abraham & Company v. Dy. CIT 325 ITR 201 (Ker.) It was held that interest income from bank deposits is assessable under the head "income from other sources" where the assessee is not engaged in money lending business. The Himachal Pradesh High Court in the case of Shanta Lal Chopra v. CIT 2008 214 CTR 420 (HP) had held that the interest on FOR pledged with bank for obtaining loan was assessable as income from other sources and not business income. Similar view was taken by the Hon'ble M.P High Court and Hon'ble Madras High Court respectively in the cases of Ferro Concrete Construction (lndia)(P) Ltd. v. CIT 290 ITR 713 (MP) and CIT v. Monark Tools (P) Ltd. 260 ITR 258 (Mad.). The Hon'ble Delhi High Court in their later on decisions had also taken the view that, interest income is assessable as income from other sources. In the case of CIT v. Shri Ram Honda Power Equip. (Delhi) 289 ITR 475 (Delhi), the Hon'ble Delhi High Court had held that where surplus funds are parked with the bank and interest is earned there on it can only be categorized as income from other sources. The other category is where the exporter is required to mandatorily keep monies in fixed deposits in order to avail of credit facility for the export business. Interest earned on fixed deposits for the purpose of availing of credit facility from the bank, does not have an immediate nexus with the export business and therefore has to necessarily be treated as income from other sources and not business income.
(Para 2.3 and Para 2.4 in Almac Corporation [60 taxmann.com 34][Ahd Trib]