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TMI Blog2015 (2) TMI 1283X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner of Income Tax (Appeals)has further erred in upholding that the interest income earned by the assessee is "Income from other Sources" and not "business income" in utter disregard of the explanation rendered which is arbitrary and unjustified. 3. That the Ld. Commissioner of Income Tax (Appeals) has further erred in upholding the factually incorrect finding of the assessing officer that the business of the assessee company had not commented and as such the company was not eligible for any relief u/s 70 or 71 which is arbitrary and unjustified. 4. That the Ld. Commissioner of Income Tax (Appeals) has further erred in not considering the written submissions filed before her during the course of appellate proceedings which is arbitrary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e interest income was subjected to tax as 'income from other sources'. 5. On appeal, it was mainly contended that Assessing Officer is not correct in observing that assessee has not commenced its business because assessee company had performed 'Bhumi Puja' and thereafter started construction of flats. Advertisements for sale of such flats were given in the newspapers. It was further pointed out taht certain advances were received from customers and such advances had direct link to the business. The money received from such advances was partly used and was partly kept in bank on which interest was earned which was credited to the work in progress account because construction was complete. 6. The Ld. CIT(A) after considering the submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er reducing such payment from the interest received, the net amount has been credited to the profit and loss account. He contended that reduced work in progress would mean that whatever interest element is there would become taxable in the next year when the flats are actually sold because cost would be lower because of this credit of interest. He further contended that in the identical circumstances, the Hon'ble Bombay High Court in the case of Commissioner of Income Tax vs Lok Holdings 308 ITR 356 (Bom.) has held that interest income would constitute as business income. In that case also interest was reduced from the work in progress. The Assessing Officer held interest to be taxable as 'income from other sources' and the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce sheet which is available at page 4 of the paper book. The total work in progress is Rs. 9,50,10,025/-, therefore, the decision of Hon'ble Supreme Court in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd v CIT (supra) is not applicable because in that case assessee had not commenced any business. The above situation further becomes clear from the decision of Hon'ble Bombay High Court in the case of CIT v Lok Holdings (supra). In that case the following questions were raised:- "4(a) Question is whether, on the facts and circumstances of the case and in law the Tribunal is right in deleting the addition on the ground that in the case of East Coast Enterprises, the Tribunal had upheld the deletion without discussing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd v CIT (supra) was not applicable. Ultimately, the Court referred to another decision of Hon'ble Supreme Court in the case of CIT v Bokaro Steel Ltd. 236 ITR 315 (SC) and held that interest income is to be assessed as business income because the assessee had already commenced business. In this background the interest income was held to be not taxable. In our opinion, the facts of the assessee's case are identical to this case and, therefore, following this decision, we hold that interest income cannot be treated as 'income from other sources' as since he same has been reduced from the work in progress, the same is not taxable. Therefore, we set aside the order of Ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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