TMI Blog2023 (7) TMI 226X X X X Extracts X X X X X X X X Extracts X X X X ..... during the purchase from sellers. There is no such any paper transaction or the transfer of the goods before taken the delivery. AR submitted the chart with documentary evidence which is depicting that the edible oil purchased from Singapore / Malasysia. Thus when the goods are not taken by the delivery the entire issue is treated as speculative transaction. But in assessee s case the entire transaction is going through by proper delivery of the goods during purchase and the documents are provided for evidence of delivery of goods related to high sea sale. We find that the observation of the ld. CIT(A) is not accepted and liable to be dismissed. Interest earned on FDRs - Interest which was treated as business income by the assessee and adjusted in the profit and loss account - We respectfully relied on the order of Shahi Export House [ 2010 (8) TMI 785 - DELHI HIGH COURT] Where the interest was taken as expenses, Not as an income from other sources. The investment in fixed deposit of the assessee were duly utilized for formation of letter of credit in relation to the foreign transaction. In the export and import, the investments are utilised in short term investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the instant case. (iii) The CIT(A) has erred in not recording whether the findings are based on additional evidence produced by the assessee and admitted by the CIT(A), which was in violation of Rule 46A of the Rules as such production of additional evidence was not covered under clause (a) to (d) of Rule 46A and no reasons have been recorded by the CIT(A) for admitting such additional evidence. (iv) The CIT(A) erred in not taking into consideration the findings of Hon'ble Rajasthan High Court in the case of CIT vs Bhaval Synthetics India, 81 taxmann.com 478 wherein, it was held that interest earned on FDRs kept in bank as margin money for obtaining LOC to purchase machinery was taxable as income from other sources. (v) The CIT(A), Bathinda erred in not taking into consideration the findings of Hon'ble Supreme Court in the case of Conventional Fasteners vs CIT, 94 taxmann.com 80 wherein, the finding of the Hon'ble Uttarakhand High Court that interest income earned from FDRs kept as security and as a business pre requisite had nothing to do with carrying on business, were upheld. ITA No. 495/Asr/2019 appeal of Assessee for AY 2013-14 4. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest of Rs. 7.34 crore received from FDRs was related to its business activities. Under the circumstances, the assessee failed to prove that the amount of FDR interest amounting to Rs 7.34 crore and interest of Rs. 32.17 lakh received was in any way related to its business activities and hence, the total amount of Rs 7,67,10,732/- is assessed as Income from other sources. In view of above facts, it is evident that the income earned on the account of interest at Rs. 7,67,10,732/ -is not related to the business activities and required to be treated under the head Income from other source . Assessee company deliberately credited this income in P L account only to get it adjusted against the loss occurred in speculative business to reduce its tax incidence. Therefore, penalty proceedings u/ s 271(l)(c) are initiated simultaneously for furnishing inaccurate particulars of the income. 7. The ld. DR vehemently argued and mentioned that the transaction related to high sea sale is speculative transaction and the loss earned from this transaction would be treated as speculative loss u/s 43(5) of the Act. There is no delivery of the goods from the end of the assessee. Further placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. It is also not known whether the second buyer has also resold it without delivery or he is the ultimate user after taking the delivery. Mere shipment and 'goods in transit' would not, as per the Hon'ble Supreme Court's decision, constitute actual delivery, which is contemplated in section 43 (5) to treat the transaction as non-speculative. Considered in this background, the appellant fails to successfully challenge the action of the AO in treating the appellant's business as speculative. The grounds of appeal as at SI Nos. 2 3 supra are, thus, decided against the appellant. It is ordered accordingly. 13. Adverting now to the grounds of appeal raised at SI Nos. 3 4 supra, it is noted that the appellant's business of import of oil and its resale is not in doubt. It is also not contested that for import of oil, the appellant necessarily needs to open Foreign Letters of Credit [FLCs] and for that FDRs have to be mandatorily pledged as margin with the bank, which holds a lien on the same. Such FDRs also earn interest which comes to the credit of the business of the appellant. It is, thus, apparent that the interest earned on fixed deposits and other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue in para 12 of the order and has held that the assessee has failed to prove that the amount of FDR interest and other interest related to business activities of the assessee and it was income from other sources. 3. The Ld. CIT(A) has discussed this issue in para 13 14 of the order and following are the undisputed facts:- i). The assessee is carrying on one business only, which is apparent from the order of Assessing Officer itself, wherein, he has mentioned in para-8 as under:- The Assessee company is involved in the business of crude palm oil (CPO) trading and, thus, the assessee is carrying on only one business and no other business and it is also an undisputed fact that the FDR had to be mandatorily made and rather required to be pledged with the bank as margin and, thus, the bank holds a lien on the same and on such FDR, the interest is earned on fixed deposit and other interest have also an immediate nexus with the business of the assessee i.e. import of edible oil and its resale. ii) There is also a categorical finding of the Ld. CIT(A) that there are no surplus/ideal funds having been available with the assessee or parked in the FDR and long and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircle-1, Bathinda vs. M/s G.H.Corp Science Pvt Ltd, ITA No. 56 84/Asr/2020 date of pronouncement 23.02,2023 15.3 It is evident from the Assessment Order that during the course of assessment proceeding, it was stated before the AO that the goods imported by it are backed up with LC [letter of credit] and that FDR made by it was not surplus FDR but as per bank s term, it uses to make FDR as cash margin against these LCs opened against the import of goods and that the income arising out from these FDRs is its operative income and business income. [Para Page 3 of the Assessment order]. 15.4 In view of the above factual discussion, and judicial precedent, we hold that the goods imported by the assessee are backed up with LC [letter of credit] and that FDR made by it was not surplus FDR but as per bank s term and hence, the interest from these fixed deposits which were inextricably linked to the business of the assessee would taxed as business income and not as income from other sources. Accordingly, the department ground no. 7 and 8 that interest earned on FDRs kept in bank as margin money for obtaining LOC and bank security for high Sea Business Transaction to be inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r from the conclusion No. 8 in the judgment. 13. We, accordingly, concur with the aforesaid view of the ITAT and thus, answer the question in favour of the assessee and against the revenue, as a result this appeal is dismissed. 10. We heard the rival submission and considered the documents available on the record. First we adjudicate the issue related to treatment of high sea sale which is considered by revenue as speculative transaction as there is no end delivery. The revenue relied on the order of the Davenport Co. Pvt. Ltd. Vs. CIT (1975) 100 ITR 715 (SC) . The Hon ble Supreme Court had considered the order in the case of Nirmal Trading Co. v. Commissioner of Income-tax, [1979] 2 Taxman 420 (SC) 3. It appears the assessee entered into several transactions of sale and purchase with different parties, and the transactions were settled by handing over delivery orders. There is no evidence that actual delivery of the goods was ever effected either to the assessee or to subsequent purchasers from him. All that passed were the delivery orders and payment by cheque. The High Court has taken the view that, in the absence of actual delivery, the transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11.1 In discussion related to interest which was treated as business income by the assessee and adjusted in the profit and loss account. The revenue has relied on the order of the Hon ble Delhi High Court in the case of Mantola Cooperative Thrift and credit society ltd , (supra) and in case of Bhagwati Synthetics (supra) both are factually not similar with the assessee s issues. We respectfully relied on the order of Hon ble Apex Court in the case of Shahi Export House ,(supra) Where the interest was taken as expenses. Not as an income from other sources. The investment in fixed deposit of the assessee were duly utilized for formation of letter of credit in relation to the foreign transaction. In the export and import, the investments are utilised in short term investment and there is no such any fix time of investment related to generation of the interest out of the said investment. We also relied on the order of the ITAT, Amritsar Bench. Accordingly, the order passed by the ld. CIT(A) is not required for any intervention related interest issue. Accordingly, ground taken for the issue of interest by the revenue is dismissed. 11.2 The ld. AR further placed that the revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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