“Section 37(28)”
The decision most relied on for Section 37(28) is Tuticorin Alkali Chemicals & Fertilizers Ltd. v. CIT (227 ITR 172), cited in 621 judgments on BharatTax.
Leading authorities on Section 37(28)
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 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.
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.
Expenditure incurred for increasing a company's share capital or expanding its capital base, such as expenses related to the issue of shares, constitutes capital expenditure. Such expenses are not deductible as revenue expenditure under Section 37(1) of the Income-tax Act, 1961, even if they incidentally benefit the business.
Interest on enhanced compensation received under Section 28 of the Land Acquisition Act, 1894, is considered part of the compensation, not merely interest income, and is exigible to tax on a receipt basis.
A loss incurred by a businessman, such as money lost or advances written off, if it arises in the ordinary course of business, is a deductible trading loss. Such a loss is allowable as it is inherent or incidental to the business operations.
Interest received as enhanced compensation under Section 28 of the Land Acquisition Act, 1894, for compulsory acquisition of land is taxable as "income from other sources" under Sections 56(2)(viii) and 57(iv) of the Income-tax Act, 1961, and is not exempt under Section 10(37).
The Revenue is bound by the rule of consistency and cannot adopt a divergent position in a subsequent assessment year unless there is a change in facts or law.
