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2022 (11) TMI 1078 - ITAT DELHIRefund of the tax deducted at source (TDS) - income earned on the fixed deposits - mismatch between the return of income and Form 26AS - as submitted by the assessee that since the interest income has arisen in the assessment year under dispute, the assesees are entitled to claim refund of the TDS amount - HELD THAT:- As assessees have entered into concession agreements with FCI for construction, operation and maintenance of Silo Complex. In terms of the concession agreements, the assessees are required to furnish bank guarantees for which the concerned banks have kept securities by way of fixed deposits. Thus, it cannot be denied that the fixed deposits kept with banks are in connection with the business activity of the assessee. That being the factual position emerging on record, the interest income earned has a direct nexus with the business activity of the assessee. In that view of the matter, the interest income earned by the assessee has to be treated as income from business and can be set off against the cost of construction. There is no doubt that the interest income pertained to the impugned assessment year and the concerned banks have deducted tax at source while crediting the interest income to the account of the assessee. The only reason on which the departmental authorities have rejected to grant refund of the TDS amount is, the interest income has been adjusted against the construction expenses. This, as unacceptable. In case of CIT vs. Jaypee DSC Ventures Ltd [2011 (3) TMI 309 - DELHI HIGH COURT] while considering identical nature of dispute has held that the interest income earned on fixed deposits kept as security for performance guarantee is taxable as business income and can be set off against project expenses. AO directed to refund the TDS amount to the assessees. Appeals are allowed.
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