TMI Blog2018 (1) TMI 233X X X X Extracts X X X X X X X X Extracts X X X X ..... al), resulting into dismissal of appeal of the Revenue. - ITA No.821/Mum/2016 - - - Dated:- 7-12-2017 - Shri Joginder Singh, Judicial Member And Shri Manoj Kumar Aggarwal, Accountant Member For The Revenue : Shri H.N.Singh CIT-DR For The Assessee : Shri Milin Dattani ORDER Per Joginder Singh(Judicial Member) The Revenue is aggrieved by the impugned order dated 31/11/2015 of the Ld. First Appellate Authority, Mumbai, to issue direction to the Assessing Officer by following the order of the Tribunal, without appreciating the fact that the order of the Tribunal is bound to contested on the issue of treating interest income under the head business income and setting of losses of earlier years. 2. During hearing, Shri H. N. Singh, Ld. CIT-DR, advanced arguments which are identical to the ground raised by defending the addition made by the Ld. Assessing Officer. On the other hand, Shri Millin Dattani, ld. counsel for the assessee, defended the impugned order by contending that for Assessment Year 2008-09 (ITA No.2637/Mum/2013), vide order dated 28/10/2015, the Tribunal allowed the appeal of the assessee on identical issue though u/s 263of the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d income is included in the business income of ₹ 18,85,06,203/- and was set off against the brought forward business losses. The CIT observed that since interest income of ₹ 15,18,20,478/- was earned by the assessee company on bank fixed deposits by investing surplus funds, the same should have been assessed under the head Income from Other Sources u/s 56 of the Act and brought forward losses cannot be set off against the income assessed under the head Income from Other Sources . The CIT held that the AO by treating the interest income of ₹ 15,18,20,478/- from FDR s as business income has allowed excess set off of brought forward business losses amounting to ₹ 15,18,20,478/- and hence in view of these facts , the assessment order passed by the AO u/s 143(3) of the Act on 08th October 2010 was considered to be erroneous and prejudicial to the interest of Revenue and hence show cause notice dated 26th February 2013 was issued u/s 263 of the Act to the assessee company asking it to explain as to why the assessment order u/s 143(3) of the Act dated 08th October 2010 passed by the AO should not be set aside. 5. The assessee company in reply to afore-sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rroneous view. The assessee company contended that requirements of Section 263 of the Act is that the order of AO should be erroneous as well prejudicial to the interest of Revenue which in this case is not cumulatively met and proceedings u/s 263 of the Act are vitiated. The assessee company relied upon the following decisions to support its contentions : ( i) Malabar Industrial Co. Ltd. v. CIT 243 ITR 83(SC) ( ii) CIT v. Greenworld Corporation 314 ITR 81(SC) ( iii) CIT v. Gabriel India Limited (1993) 203 ITR 0108 (Bom.) 6. The CIT held that interest on short term deposit with bank received from investment of surplus funds is to be assessed under the head Income from other sources . The CIT relied upon the following decisions: ( i) Krishna Polyester Ltd. v. DCIT, 274 ITR 21 (Bom.) ( ii) Ferro Concrete Construction (India) Pvt. Ltd. v. CIT, 290 ITR 713(MP) ( iii)South India Shipping Corporation Ltd. v. CIT, 240 ITR 24 (Mad.) ( iv) CIT v. Monarch Tools Pvt. Ltd. , 260 ITR 258(Mad.) The CIT held that in view of these above stated decisions, the issue is not free from doubt that the income earned by the assessee company fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de orders dated 19th March 2013 passed u/s 263 of the Act that the assessment completed in this case is without application of mind by AO and hence , the order of AO is held to be erroneous and prejudicial to the interest of revenue and same is set aside to the file of the AO to re-decide the issue as to whether the interest income earned from fixed deposit with bank is to be assessed under the head income from other sources or as business income . Thus, the assessee company submitted that it is not permissible for the CIT to issue notice u/s 263 of the Act on one ground and to pass the orders u/s 263 of the Act on other ground. The assessee company relied upon the following decisions to support its above-stated proposition as under: ( i) Star India Ltd. v. Addl. CIT, 143 TTJ 307(Mum. Trib.) ( ii) B S Sangwan v. ITO ,67 SOT 447 (Del. Trib.) ( iii) Vesuvius India Limited v. CIT , 54 SOT 172(Kol. Trib.) ( iv) CIT v. Contimeters Electricals Pvt. Ltd. , 317 ITR 249(Del.) ( v) CIT v. G K Kabra , 211 ITR 336 (AP) ( vi) CIT v. Ashish Rajpal , 320 ITR 674. The assessee company submitted that if two views are possible and the AO has taken o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that the assessment orders dated 08th October 2010 passed u/s 143(3) of the Act by the AO is erroneous and prejudicial to the interest of the Revenue. The assessee company relied upon the following decisions to advance and support its contentions: ( i) CIT v. Gabriel India Limited 203 ITR 108(Bom.) ( ii) Jewels of India v. ACIT 325 ITR 92(Bom.) ( iii) Globus Infocom Limited v. CIT 369 ITR 1 (Del.) ( iv) Star India Limited v. Addl. CIT 143 TTJ 307(Mum. Trib.) 9. The Ld DR relied upon the orders dated 19th March 2013 u/s 263 of the Act passed by the CIT. The Ld. DR stated that there is no discussion in the assessment order dated 08th October 2010 u/s 143(3) of the Act passed by the AO about the treatment of this income from interest on FDR with bank by deploying surplus funds by the assessee company to be treated as Income from Business or Income from other sources which shows that the AO has not made detailed enquiry in respect of this matter and hence has not applied his mind before accepting the interest income earned from FDR with Bank on deployment of surplus funds. Thus, the Ld. DR submitted that the orders dated 08th October 2010 u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... milar dealers in Government Securities floated by other Public Sector Banks suffered heavy losses and it did not made sense to continue as standalone entity burdened with such heavy losses. The Reserve Bank of India allowed parent companies of all such subsidiaries companies to take over the business of Primary Dealership(PD). In the case of the assessee company, the Parent Bank i.e. Canara Bank took over the business of Primary Dealership from the assessee company w.e.f. 20.02.2007 and thereafter the assessee company delved into stock broking business . The assessee company on cessation of business of PD started liquidating its stock-in-trade of securities and treasury bills which generated heavy liquid money. The assessee company also liquidated stock-intrade of equity shares and booked profit . These securities were continuously liquidated over a period of one year i.e. financial year 2007-08 which created generation of liquid money, which was temporarily parked into Fixed Deposit with banks for short periods, mainly up to 6 months till they are deployed in stock broking business ventured by the assessee company . The assessee company after cessation of PD Business diversified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f funds/money in FDR s with Banks , arising from liquidating of government securities and treasury bills which were stock-in-trade of the assessee company being circulating capital of the assessee company , is intraxiably linked to circulating capital of the company being arisen from the business of the assessee company and as brought to tax by the AO under the head income from business is one of the possible views adopted by the AO in the assessment proceedings u/s 143(3) of the Act culminating into an order dated 08th October 2010 and the same view as adopted by the AO cannot be held to be an erroneous view. The AO has taken this view in bringing to tax this income from interest from FDR with banks as Business Income which is one of the possible view and it is established principle of taxing statute that if two views are possible, then the view which favours tax payer shall prevail and hence it could not be said that the view adopted by the AO is an erroneous view . It is impressible for the CIT to substitute his view in such a situation and that too in the proceedings u/s 263 of the Act even if the view of the CIT is a better view than the view adopted by the AO unless it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PD business which was held as stock-in-trade of PD business and are to be deployed in the stock broking business and in the interim are placed in FDR with the banks and hence cannot be termed as surplus funds rather the said funds are circulating capital of the assessee company being arisen from the business activity of the assessee company. ( v) CIT v. Monarch Tools Private Limited, 260 ITR 258(Mad.)- In the instant case, the tax payer was engaged in the business of design, fabrication, erection and commissioning of Plant and Machinery having received advance from customers which was not immediately required for business purposes was deployed in the FDR, the interest was held to be income from other sources but in the instant case the assessee company is in business of deployment of funds/money in government securities and treasury bills which has just ceased and is now contemplating starting share broking business. The facts are clearly distinguishable. The assessing company during the assessment proceedings has duly replied to all the queries raised by the AO , the assessee company referred to notice dated 09th July 2010 issued u/s 142(1) of the Act by the AO alo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income from other sources or as Business income clearly reveals that the CIT instead of giving final finding on this issue observed that the income earned by the assessee company from the fixed deposit with bank could be assessed as Income from other sources as matter is not free from doubt itself shows that there is no finding or adjudication by the CIT and his observations are based on mere suspicion and are uncertain . Yet , a direction was issued to the AO to carry out fresh inquiries to do the exercise once again and decipher whether income earned from fixed deposit with bank by the assessee company could be assessed under the head Income from other sources , thus CIT was unsure whether the treatment meted out by the assessee company in treating the said income from interest on FDR with bank as Income from Business is right or wrong which does not show that the finding as arrived at by the AO is erroneous and hence the order of CIT does not meet the requirement of Section 263 of the Act. Our view is fortified by the judgment of Hon ble Delhi High Court of Globus Infocom Ltd. v. CIT (2014) 369 ITR 14 (Delhi) and also Hon ble jurisdictional High Court of Bombay in CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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