TMI Blog2017 (5) TMI 1154X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the above, we set aside the order of the learned CIT(A) and restore the matter to the file of the A.O. to examine the above and pass an order after giving reasonable opportunity of being heard to the assessee. The assessee is also directed to file the relevant details before the A.O. - ITA No. 801/MUM/2012, And ITA No. 252/MUM/2013 - - - Dated:- 19-5-2017 - SHRI JOGINDER SINGH (JUDICIAL MEMBER.) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER.) For the Assessee : Mr. N.M. Porwal, AR For the Revenue : Mr. Vishwas Mundhe, DR ORDER PER N.K. PRADHAN, AM The captioned appeals are directed against the order of the Commissioner (Appeals) 26, Mumbai and arise out of order u/s 143(3) of the Income Tax Act, 1961 (the Act ). As some common issues are involved, we are proceeding to dispose them off by this consolidated order for the sake of convenience. 2. The grounds raised by the assessee in these appeals are that (i) the learned CIT(A) erred in confirming the interest received by the appellant of ₹ 56,23,221/- (A.Y. 2008-09) and ₹ 64,05,656/- (A.Y. 2009-10) as assessable under the head income from other sources and not under the head income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the construction activity with related concerns, (iii) the business of the assessee firm is not money lending, (iv) since the assessee is following percentage competition method, the entire expenditure on account of the interest payment should become the part of work-in-progress. The details of loan as tabulated by the A.O. are as under: Name of the Associate concern Loan as on 31.03.2006 Loan as on 31.03.2007 Loan as on 31.03.2008 Loan as on 31.03.2009 Remarks Arpit Samani 43,545 15,13,545 34,35,569 31,47,319 Increased Shub Hotel P Ltd. Nil 15,36,003 1,43,83,433 2,08,07,427 Increased Shir Shub Builders P Ltd. Nil 1,72,71,840 2,73,09,016 3,60,26,172 Increased Nisha Enterprise 2,00,000 2,00,000 2,00,000 2,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerns have been increased to Rs . 2 . 08 crore and Rs . 2 . 73 crore ( totalling to Rs . 4 . 81 crore ). Similar is the position in earlier years, meaning thereby, the appellant has given long term advance to these concerns which are parallel to the long term fixed deposits . Such long term loans cannot be held as short term advances of surplus funds . Under these circumstances, interest income generated from such long term deposits with the sister concerns or banks is taxable under the specific head Income from other Sources because such loans have not been advanced as routine short term business loans and the income of interest earned on such loans cannot be held as business income, because neither the business of the assessee is of financing nor the interest income has been earned in routine business activity . Under these circumstances, I do agree with the A . O . that when in its main construction activity, the appellant is following the percentage completion method, the interest expenditure should become part of the WIP alongwith the other expenditure and it should not be netted off with the interest income on long term advances made out of surplus money, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion under the head Income from other Sources . The Hon'ble Bombay High Court has held that the interest earned on deposits of surplus money is business income and cannot be assessed as income from other sources. In Shree Krishana Polyster Ltd. (supra), the assessee was engaged in the business of manufacture of synthetic yarn and money lending was never the business activity of the assessee. The assessee received surplus money in public issue and the said money was invested in bank deposits for a period of 45 days. The Hon'ble High Court has observed that the facts which have been found by the Tribunal lead to the conclusion that the interest which the assessee earned from short term investment of surplus money received in public issue did not spring or emanate from the business activity of the assessee. The Hon'ble High Court has held that the income of interest earned by the assessee by investing surplus money received in public issue in bank deposits for a period of 40 days was assessable as income under the head income from other sources . In Paramount Premises (P) Ltd. (supra), for the A.Y. 1978-79, the assessee was engaged in the construction of three build ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st earned as business income. 7.1 Now we come to the decision relied on by the learned DR. In M/s. The Totgar s Co-op Sale (supra), the assessee-society was assessed to tax as a Co-operative Society. Its business was to provide credit facilities to its members and to market the agricultural produce to its members. The Hon'ble Supreme Court held as under: Interest on such investments, therefore, cannot fall within the meaning of the expression profits and gains of business . Such interest income cannot be said also to be attributable to the activities of the society, namely, carrying on the business of providing credit facilities to its members or marketing of the agricultural produce of its members . When the assessee - society provides credits facilities to its members, it earns interest income . As stated above, in this case, interest held as ineligible for deduction under Section 80P ( 2 )( a )( i ) is not in respect of interest received from members . In this case, we are only concerned with interest which accrues on funds not required immediately by the assessee ( s ) for its business purposes and which have been only invested in specified securities as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in particular by preparing building sites and by constructing, reconstructing, altering, improving, repairing, decorating, furnishing and maintaining offices, flats, houses, factories, warehouses, shops, wharves, buildings, works and convenience of all kinds and by consolidating or connecting or subdividing properties and by leasing and disposing of the same in any manner and / or any other business under the name style of M / s . SHUBH ENTERPRISES or such other name or names as my be mutually decided by and between the partners from time to time . 7.4 We observe that the assessee has not disputed before the learned CIT(A) (i) the details of loan mentioned at page 4 of the assessment order for the A.Y. 2008-09 and at page 6-7 of the assessment order for the A.Y. 2009-10 and (ii) the details of loan given by the assessee where there was no transaction during the F.Y. 2008-09 mentioned by the A.O. at page 6 of the assessment order for the A.Y. 2009-10. 7.5 We find that there is merit in the finding of the A.O. that the loan advanced for more than three/four years to M/s. Vijay Parikh Associates, Arpit Samani, Parikh Granito, M/s. Nisha Enterprise cannot be treated as a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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