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DCIT-2 (2) , Aayakar Bhavan, Mumbai Versus The Indian Hotels Co. Pvt Ltd and Vica-Versa

2015 (12) TMI 1018 - ITAT MUMBAI

Interest income earned on business advances kept with the sister concerns - treated as ‘business income’ OR ‘income from other sources’ - Held that:- On perusal of the said Tribunal’s order in the case of ACIT vs. M/s. Piem Hotels Ltd, assessee’s sister concerns case we have no hesitation to come to a conclusion that the ‘interest income’ earned on business advances kept with the sister concerns should be treated as ‘business income’ instead of ‘income from other sources’. Considering the same, .....

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essee for the assessment year 1998-1999. Since, the issues raised in both these appeals are inter-connected, therefore, for the sake of convenience, they are clubbed, heard together and disposed of in this consolidated order. Appeal wise adjudication is given in the following paragraphs of this order. ITA No.1983/M/2012 (By Revenue) 2. This appeal filed by the Revenue on 10.3.2011 is against the order of the CIT (A)-5, Mumbai dated 22.12.2010. In this appeal, Revenue raised the following grounds .....

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assessee. 3. On the facts and in the circumstances of the case and in law, the Ld CIT (A) failed to appreciate that interest income cannot be taken into consideration while computing deduction under section 80HHD of the Act as the interest was not derived from the services provided to foreign tourist. 4. On the facts and in the circumstances of the case and in law, the Ld CIT (A) failed to appreciate that under the provisions of section 80HHD of the Act, it is only the profit derived from servic .....

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the total income of ₹ 72,93,51,250/-. Subsequently, the said return of income was revised declaring the total income at ₹ 72,88,35,269/-, wherein assessee claimed deduction u/s 80HHD of the Income Tax Act, 1961 (the Act). AO completed the assessment u/s 143(3) of the Act and the assessed income was determined at ₹ 1,05,85,36,899/-, which was subsequently enhanced to ₹ 1,06,27,47,646/- vide order passed u/s 154 of the Act. Meanwhile, notice u/s 148 of the Act was issued a .....

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t appellate authority, after considering the submissions of the assessee, CIT (A) following the orders of his predecessors for the earlier assessment years 1998-99 to 2001-2002, wherein on identical facts the interest income earned on the security deposits kept with the sister concerns are treated as business income and no appeal was filed by the Revenue on such decision of the CIT (A) for the above mentioned earlier AYs, treated the interest income as business income of the assessee. Further, w .....

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of the CIT (A), Revenue is in appeal before the Tribunal by raising the above mentioned grounds. 5. During the proceedings before us, Ld DR for the Revenue relied on the order of the AO and submitted that the decision taken by the AO is in tune with the judgment of the Hon ble Bombay High Court in the case of Ravi Ratna Exports Pvt Ltd (246 ITR 443) wherein it has been held that the interest income is not a business income and the same should be treated as income from other sources . 6. On the o .....

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d Counsel for the assessee mentioned that an identical issue was decided by the Tribunal in favour of the assessee vide para 23 of its order. Before us, it is the prayer of the Ld Counsel that considering the commonality of the issue involved in the present appeal and that of the issue adjudicated by the Tribunal vide its order dated 12.5.2008 (supra), the CIT (A) s order should be upheld. 7. We have heard both the parties and perused the orders of the Revenue Authorities as well as the cited de .....

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ere is no dispute to fact that the assessee has earned interest income of ₹ 5,78,28,972/- on a loan of UD$ 19 million given to Piem H K, which is a 100% subsidiary of the assessee. There is also no dispute to the fact that the assessee has received management fees of ₹ 3,82,03,512/- from Piem (HK). The only dispute is regarding the head under which it is to be taxed. According to the assessee, the same is under the head business whereas according to the AO, the same is under income f .....

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e modern days of advanced technology, business can be conducted through phone, fax or email etc. Further, in our opinion it is not necessary that for considering an income as business, substantial, systematic organised and continuous activity involving application of labour and skill is always required. It is also necessary that there shall always be written agreement, in our opinion, is sufficient for giving a transaction the nature of business. From the various details filed by the assessee du .....

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he CIT (A) s order in general and para 3.3 in particular, we find, while deciding the issue under consideration in favour of the assessee, CIT (A) followed the principle of consistency and relied the decision taken by his predecessors in earlier AYs. Further, CIT (A) also relied on the decision of the ITAT, Mumbai in ITA Nos. 5192 to 5195/Mum/2006 for the AYs 1989-90 to 1993-94. In this regard, we find it relevant to extract the said para 3.3 from the CIT (A) s order which read as under:- 3.3. I .....

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