“Section 28(1)(iv)”
The decision most relied on for Section 28(1)(iv) is Tuticorin Alkali Chemicals & Fertilizers Ltd. v. CIT (227 ITR 172), cited in 621 judgments on BharatTax.
Leading authorities on Section 28(1)(iv)
Interest income earned on deposits, particularly before the commencement of business operations or as a requirement for business licensing, is taxable as "income from other sources" under Section 56, and cannot be treated as business income or set off against interest on borrowed funds.
Interest received under Section 28 of the Land Acquisition Act, 1894, is considered part of the enhanced compensation on compulsory acquisition of land. It is taxable as 'capital gains' and not separately as 'interest income' under the head Income from Other Sources.
Unclaimed deposits received in the course of trading transactions and sundry credit balances written back are taxable as business income under Section 41(1) of the Income-tax Act, 1961, as they constitute a cessation of trading liability.
The waiver of a loan taken for acquiring capital assets is considered a capital receipt and is not taxable as income under Section 28(iv) of the Income Tax Act. The ruling distinguishes between the waiver of trading liabilities and capital liabilities for tax purposes.
Section 41(1) of the Income-tax Act cannot be invoked if the assessee has not been granted a deduction for the relevant liability in earlier years.
Interest received under Section 28 of the Land Acquisition Act, 1894, on enhanced compensation does not form part of the compensation itself but is taxable as 'income from other sources', analogous to interest under Section 34 of the Act.
Interest received under Section 28 of the Land Acquisition Act, 1894, forms an integral part of enhanced compensation and is not taxable as "Income from Other Sources" under Section 56(2)(viii) of the Income-tax Act, 1961. The Finance Act, 2009 amendments do not alter the compensatory nature of such interest.
The write-back or waiver of a loan obtained for business purposes constitutes taxable business income under Section 28. This applies even if no prior deduction was claimed, thereby not attracting Section 41(1).
