TMI Blog2014 (9) TMI 1195X X X X Extracts X X X X X X X X Extracts X X X X ..... funds idle, then it can be treated as non-business income or income from the other sources. In view of the facts of the present cases, we are of the opinion that the interest earned by the Respondent/Assessee is business income only and we hold that the Income Tax Appellate Tribunal has rightly held that the interest income earned by the Respondent/Assessee is a business income. - Decided against revenue - Tax Appeal Nos. 64,66,69 & 70 Of 2006 - - - Dated:- 30-9-2014 - B. P. Dharmadhikari And A.S. Gadkari, JJ. Ms. Asha Desai and Ms. Priyanka Parab, Advocates for the Appellant. Mihir Naniwadekar and Ms. Vinita Palyekar, Advocates for the Respondent. JUDGMENT A.S. Gadkari, The aforesaid appeals preferred by the Revenue Department under Section 260-A of the Income Tax Act, 1961, involves common question of law and therefore are decided together by this common judgment. The aforesaid appeals came to be admitted by order dated 27/11/2006 on the following substantial questions of law: (A) Whether on the facts and in the circumstances of the case the ITAT was justified in law in holding that interest income earn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome from other sources . The Income Tax Appellate Tribunal upheld the orders of the Commissioner of Income Tax (Appeals ) on that point. 6. The Revenue Department feeling aggrieved and dissatisfied by the said orders precisely dated 21.12.2005 and 30.12.2005 passed by the Income Tax Appellate Tribunal has preferred the present appeals. As stated herein above, the present appeals are admitted on the aforesaid substantial questions of law mentioned in para 1 herein above. 7. Heard Ms. Asha Desai, learned counsel appearing for the appellant Revenue Department and Shri Mihir Naniwadekar, learned counsel appearing for the Respondent/Assessee at length and also perused the records minutely. The learned counsel appearing for the appellant has submitted that the Respondent/Assessee is in the habit of investing surplus funds in bank deposits and inter-corporate deposits. She submitted that there are instances that the Respondent/Assessee has made long term investments and also investing the said funds for last so many years. That makes it clear that it is an excess fund which is not required for business purpose of the Assessee. If it is surplus and excess funds w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . He contended that in pursuance of the object clauses of the Memorandum and Articles of Association, the Assessee carries out money market operations as one of its business activities. He further contended that the money which has been invested by the Assessee in the banks has direct nexus with Letters of Credit taken out by the Assessee. He, therefore, submitted that the interest earned on the said deposits for taking out Letters of Credit is incidental to the main purpose and, therefore, it has to be treated as income from business. He contended that the said interest earned by the Respondent/Assessee does not arise from any other source as has been held by the Assessing Officer. He lastly contended that the interest income earned by the Respondent/Assessee falls within the purview of the expression business income as per the explanation (baa) to Section 80HHC. Shri Naniwadekar submitted that the authorities relied upon by the learned counsel appearing for the appellant have no application in view of the facts of the present cases. He contended that the present cases involve a mixed question of facts and law and, therefore, urged before us that the present appeals may be dism ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessee is income from other sources . In the case of Godavari Sugar Mills Ltd. (supra), the learned Single Judge of Bombay High Court has held that it was for the Assessee to place the material before the departmental authorities or the Tribunal to show that these monies on which the interest in dispute was earned were advanced in the course of the Assessee's business or that the amounts advanced/lent there for short term deposits not for earning interest as such but for not keeping the money idle. (ii) The second judgment relied upon by the learned counsel for the appellant is in the case of Bharti Televentures Ltd. (supra) wherein the Division Bench of the Delhi High Court after relying on the judgment in the case of Krishna Prasad Co. Ltd. v. CIT [1955] 27 ITR 49 (SC) has quoted the following paras : The term business is a word of very wide, though by no means determinate, scope. It has rightly been observed in judicial decisions of high authority that it is neither practicable nor desirable to make any attempt at de-limiting the ambit of its connotation. Each case has to be determined with reference to the particular kind of activity and occup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see and did not arise out of any independent activity. The High Court has further held that in that case, admittedly, the assessee company was engaged in the construction business and had deposited money received in the course of such business with the bank, earning interest thereon and treated the said income as business income and temporarily invested the surplus amounts with banks and other concerns, and that the interest earned thereon is business income and cannot be assessed as income from other sources . (ii) Next judgment relied upon by the learned counsel appearing for the Respondent/Assessee is in the case of Radhasoami Satsang(supra) wherein the Supreme Court has adopted the Rule of Consistency and held that, in the absence of any material change justifying the Department to take a different view from that taken in earlier proceedings, the question of the exemption of the assessee appellant should not have been reopened. The Supreme Court has observed that the assessments are certainly quasi-judicial in nature and strictly speaking, res judicata does not apply to income tax proceedings. It was held that each assessment year being a unit, what is decided is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, interest was earned on these amounts. The assessee was also required to give a guarantee to the State Bank in respect of the land taken on lease for construction work. For this purpose, certain amounts were kept in fixed deposits on which the assessee earned interest. In these circumstances, the Tribunal has given a finding of fact to the effect that the entire interest sprang from the business activity of the assessee and did not arise out of any independent activity. Accordingly, interest income was considered as the business income of the assessee. 14. Thus, after taking into consideration the settled legal position as enumerated from the aforesaid citations and as stated earlier, in the present case also as per the own findings of the Assessing Officer, the Assessee is utilizing deposits for giving security to the banks and opening Letters of Credit etc. As per the records, investing surplus funds in the call money market or short term deposit in favour of the banks for providing security for obtaining short term loans or as a deposit towards LC opening is one of the business activities of the Assessee and this had come for the scrutiny of the Tribunal for the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for making investment in the bank deposits or call money market or inter-corporate deposits with the objective for availing short term loans or for keeping deposits for the purpose of LC's and said money had always retained its character as business assets. In our opinion, the surplus money, unless and until it is pulled out totally from the business and having absolutely no nexus with the amount or ancillary business activity and thereby the same is deposited with the bank only and solely with a view of earning interest by keeping the said funds idle, then it can be treated as non-business income or income from the other sources. 16. In view of the facts of the present cases, we are of the opinion that the interest earned by the Respondent/Assessee is business income only and we hold that the Income Tax Appellate Tribunal has rightly held that the interest income earned by the Respondent/Assessee is a business income. The questions framed hereinabove are answered accordingly. 17. For the reasons stated herein above, in our considered opinion, there are no merits in these appeals and the appeals are hereby dismissed with no order as to costs. - - Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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