Section 2(28A)

Section 2(28A) — the law in short

What the courts have decided on section 2(28A), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• L.K. Trust v CIT Supreme CourtHelps taxpayer
  I borrowed from a bank to buy shares, but the money passed through a group company before the shares were bought. The department says the borrowing was not for my business. Can it disallow my interest under s.36(1)(iii)?
  No, not on the reasoning the High Court gave. The Supreme Court set aside a Karnataka High Court order that had disallowed interest because the borrowed money was ultimately used for the benefit of the assessee's subsidiary rather than for the assessee's own business, and held that the borrowed funds must be looked at from the point of view of commercial expediency. It declared the assessee entitled to deduct the interest paid on the capital of Rs 3,80,00,000 borrowed from the Corporation Bank, and agreed with the Tribunal's interpretation of s.36(1)(iii).
• Anvar Ali Poolakkodan v ITO — interest on delayed compensation is an accrual to compensation, taxable as capital gains and covered by s.10(37) High CourtHelps taxpayerHigh Courts differ
  The Tribunal split my client's land acquisition interest into 9 per cent as capital gains and 15 per cent as income from other sources. Is that right?
  The Kerala High Court says no. It held that interest amounts received in respect of delayed payment of compensation under the Land Acquisition Act are treated as accruals to the principal compensation amount and are classified as capital gains, so that where the land compulsorily acquired is agricultural land the interest also gets the benefit of s.10(37). Because such interest is not interest as defined in s.2(28A), s.56 is not attracted at all.
• Aditya Balkrishna Shroff v ITO ITATHelps taxpayerValidity unconfirmed
  I lent a relative dollars and the rupee moved. Is the extra rupee amount I got back taxable?
  No, on these facts. The Tribunal held the rupee surplus on repayment of an interest-free loan advanced in foreign currency was a capital receipt: the loan was a transaction in the capital field, exactly the same number of dollars came back, the accretion was on account of exchange fluctuation and not interest, and a capital receipt is outside the charge unless a provision brings it in. It also held that whether the loan was permissible under the exchange control law is not for the income-tax authorities to adjudicate. The addition of Rs 22,04,568 made under income from other sources was deleted.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.