“section 194A interest”
The decision most relied on for section 194A interest is CIT v. Bokaro Steel Ltd. (236 ITR 315), cited in 370 judgments on BharatTax.
Leading authorities on section 194A interest
Interest earned during the pre-commencement period of a project, on advances made to contractors or on unutilized borrowed funds, if inextricably linked to the setting up of the plant, constitutes a capital receipt. Such interest is not taxable as income but can be reduced from the capital work-in-progress.
Section 80P(4) is not applicable to a cooperative bank unless it is classified as a 'bank' under the provisions of the Banking Regulation Act, 1949. For cooperative banks not meeting this definition, the deduction for interest earned from investments in cooperative societies is available under Section 80P(2)(d) of the Income-tax Act.
Interest paid by banks is allowable as a deduction in computing total income. The decision distinguished the Supreme Court's ruling in Vijaya Bank regarding the deductibility of such interest.
An Assessing Officer's order is considered erroneous and prejudicial to the interest of revenue, warranting revision under Section 263, if there is a lack of proper inquiry or non-application of mind to crucial aspects of the assessment, even where some information has been furnished by the assessee.
A multi-state cooperative bank is obligated to deduct tax at source on interest paid on fixed deposits placed by cooperative societies, as Section 194A(3)(viia) of the Income Tax Act, 1961, rather than Section 194A(3)(v), applies to cooperative banks in this context.
Interest received as income on delayed payment of compensation under Sections 28 or 31 of the Land Acquisition Act is a taxable revenue receipt, chargeable to income tax under the head 'income from other sources'.
A co-operative society, not being a primary agricultural credit society, is not eligible for deduction under Section 80P(2)(a)(i) or Section 80P(2)(d) on interest income earned from deposits or investments made with other co-operative or scheduled banks, as Section 80P(4) restricts such claims.
A cooperative bank is not required to deduct tax at source on interest paid on time deposits to a cooperative society.
