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2015 (4) TMI 339 - MADRAS HIGH COURT

2015 (4) TMI 339 - MADRAS HIGH COURT - TMI - Interest received on income - whether would fall under the head 'Business Income' or 'Income from other sources' ? - whether ITAT was right in law in not deciding the issue on merits in respect of the interest income by remitting back the issue to the file of the Assessing Officer? - Held that:- A cursory glance at the order of assessment as also the order of the CIT (Appeals) reveals that the Assessing Officer has taken a view that th .....

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elow, which is factually incorrect.

In such view of the matter, this Court is not inclined to decide the issue at this point of time on the questions of law raised above, since we find that the Tribunal had failed to go into the relevant portion of the orders of the Assessing Officer and CIT (Appeals) and come to a definite finding as to which view, i.e., whether the view of the Assessing Officer or the view of the CIT (Appeals), in regard to bringing the interest income earned from m .....

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For the Appellant : Mr. Philip George For the Respondents : Mr. T.R.Senthil Kumar Judgment (DELIVERED BY R.SUDHAKAR, J.) Mr. T.R.Senthil Kumar, learned standing counsel for the respondent/Department is directed to take notice for the respondent/Department. 2. Aggrieved by the order of the Tribunal in partly allowing the appeal filed by the assessee/appellant, the appellant/assessee is before this Court by filing the present appeal. This Court, vide order dated 17.12.07, while admitting the appea .....

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Officer by basing its decision on wrong presumption and premises, without considering the categorical findings of the Commissioner of Income Tax (Appeals), which was based on materials, reasoning and supportive case law on the issue? 3) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in not holding that the interest income derived by the appellant forms part of its 'Business Income' since the assessee is also engaged in the bu .....

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nd assessment was reopened. The appellant/assessee, by letter dated 4.10.00, requested the respondent/Department to treat the original return of income filed in response to notice under Section 148. The details as to whether the interest received on income would fall under the head 'Business Income' or 'Income from other sources' was considered by the Assessing Officer in the following manner :- 2. The assessee firm showed interest income of ₹ 94,39,517/- in the P&L A/c .....

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of the firm. The firm received interest from various banks on the deposits and also interest from various parties. Therefore he stated that this should be treated as business income. The explanation of the authorised representative is considered. Here the question whether the interest income received by the assessee is profit from the export business or not for the purpose of 80HHC. The explanation of the authorised representative is not acceptable in view of the following decisions :- 1) ITAT & .....

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CIT - Vs - Parekh Brothers (253 ITR 43). 6) Kerala High Court decision dated Nov., 20, 2001 in the case of CIT - Vs - Jose Thomas reported in 253 ITR 553. ii) in the case of CIT - Vs - Pandian Chemicals Limited the expression 'derived from' has been explained to give a narrower meaning than the term 'attributable to'. In the case of 243 ITR 192 it has been held as under :- Under section 80HHC of the Income-tax Act, 1961, the assessee who is engaged in export business is allowed, .....

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a person is business income. The same assessee can have income which may require to be classified under more than one head. It is the manner in which the income is derived that is relevant and not merely the fact that the person is engaged in a business or in a profession. Interest received by the company which carries on business, from bank deposits and loans could only be taxable as 'Income from other sources' and not as 'business income'." 4. To arrive at a substantive f .....

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issue as to whether the appellant is carrying on business of money lending or not and if it is found that he is also engaged in the business of money lending, whether the assessee will be entitled to the deduction as claimed by him. The CIT (Appeals) relied upon the decision of the Supreme Court in Commissioner of Income Tax Vs - Sun Engineering Works (P) Ltd. (1992 (198) ITR 297) and held in favour of the appellant/assessee. The relevant portion of the order of the CIT (Appeals) is quoted here .....

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ee is engaged in the business of advancing money the interest so received will be assessable as "Business Income" only. It is also a fact that in the business of money lending the money is stock in trade and exploitation of stock in trade in any manner, if results in any income will be "Business Income". This view is supported by the decision of the Supreme Court in the case of C.E.P.T. - Vs - Lakshmi Silk Mills Ltd. (20 ITR 451). During the course of the appellate proceeding .....

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st income as 'Business Income'. It will not be proper to treat the income from interest received as 'Other Sources Income'. My predecessor in the case of M/s.P.S.Apparels in ITA No.5/2001-2002 dated 24.1.2002 has held that the interest income earned by the appellant's firm constituted the business income. Under the circumstances the assessing officer is directed to treat the interest income as 'Business Income' and compute and allow the deduction u/s 80HHC accordingly .....

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clarity, the relevant portion of the order of the Tribunal is extracted hereinbelow :- 8. We find that in the orders of the authorities below, no finding has been given as to whether the interest income of the assessee can be construed to be business income on the facts and circumstances of the case. While the Assessing Officer has gone on the premise that interest income cannot be export income, the learned Commissioner of Income Tax (Appeals) has dealt with the premise that interest can be bu .....

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tion 80HHC. The assessee should be given adequate opportunity or being heard. Aggrieved by the order of the Tribunal, the assessee/appellant is before this Court by filing the present appeal. 7. Learned counsel for the appellant/assessee vehemently contended that the Tribunal has grossly erred in holding that no finding has been given by the authorities below as to whether the interest income could be treated as business income or not. It is pointed out by the learned counsel for the appellant/a .....

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fied in this case. Further, the assessee had been carrying on the business of money lending for the past several years, and all along the department has accepted the said income under the head 'Business'. Therefore, for the first time, the Department cannot now take a stand and say that the interest earned from money lending business should be treated under the head 'Income from other sources'. It is therefore submitted that the CIT (Appeals), taking into consideration all the ma .....

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