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2020 (12) TMI 661 - AT - Income TaxAddition of business interest income u/s. 56 as against declared u/s. 28 and not allowing netting off of interest - whether CIT(A) erred in not treating the interest earned, on fixed deposit out of business funds kept as security/margin money for availing O/D facility, as business income u/s. 28 with failure to appreciate the business nexus vis-a-vis utilization of business funds and further erred in not allowing the netting-off of interest which had all the elements of mutuality towards the common business; therefore, the addition of interest u/s. 56 is uncalled for and the same may resultantly be treated as income u/s. 28 and netting-off may consequently be allowed? - HELD THAT:- The assessee has duly explained that by way of pledging the F.D.’s over draft for the purpose of business was obtained at the rate of interest 2% higher than F.D. rate. What more explanation is required for netting the interest expenditure is also beyond comprehension. If as per the opinion of the authorities below which itself is in fact sitting in the shoes of the businessman, the assessee should have broken the fixed deposit assessee would have been penalized for the premature realisation of interest. The fact that the rate of interest charged upon the pledge of fixed deposit is linked to the rate of interest accruing on the fixed deposit has been totally ignored by the authorities below. Moreover the fact that this interest was being treated as income from business in the earlier years has been ignored by the authorities below. It is settled law that de’horse change in facts or law, the view taken in the earlier years should not be disturbed. This view was expounded by the honourable Supreme Court in the case of Radha Swami Satsang [1991 (11) TMI 2 - SUPREME COURT] and reiterated in the case of Excel Industries [2013 (10) TMI 324 - SUPREME COURT]. Hence, in our considered opinion the view of the authorities below to treat the said interest as income from other sources is not sustainable. Accordingly, we set aside the orders of authorities below and decide the issue in favour of assessee. Treatment of loan - A.O. added the said amount to the income of the assessee, treating the same as ‘Income from other sources’ - HELD THAT:- In view of the divergent stand of the assessee we deem it appropriate to remit the issue to the file of assessing officer. Assessing officer should consider the issue de novo after making appropriate enquiries. The assessing officer is also directed to consider the issue under the sanguine provisions of law which he proposes to invoke. Accordingly, this issue stands remitted to the file of assessing officer.
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