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TMI Blog2009 (5) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Rs.79,29,191/-, respectively was claimed and interest receipt of Rs.7,82,506/- on deposit with bank was included under Head business. The return was accepted and later a notice under Section 148 of the I.T. Act was issued and reassessment was made and interest was assessed under the head 'other sources' and the total income was determined at Rs.7,82,510/- and charged income-tax for Rs.4,04,950/- and interest under Section 234B for Rs.7,95,629/- The petitioner paid the income-tax demand and obtained stay for Section 234B interest payment until disposal of waiver petition. (b) For the Assessment year 1994-95, nil return was filed. The gross total income was at Rs.1,50,30,267/- and deduction under Section 80 HHC and 80IA for Rs.1,22,59,192 and Rs.27,71,071/-, respectively were claimed and interest receipt of Rs.27,12,415/- on deposit with bank and others included under Head business. The nil income return was accepted vide Order under Section 143(3) dated 14.08.1996 and later a Notice under Section 263 was issued and reassessment was made and interest was assessed under the head 'other sources' and the total income was determined at Rs.27,12,415/- and charged income-tax for at Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein and the respondent dismissed the waiver petition on 10.11.2004. According to the petitioner, the impugned orders dated 10.11.2004 with respect to the above said assessment years is wrong, illegal and without basis. Hence, the petitioner is before this court praying to quash the same. 3. The respondent has filed counter affidavit and has stated that the assessment for the assessment year 1993-94 was re-opened on 15.05.1995 itself and the order of the CCIT was not passed merely relying on the 'nature of the Additional CIT order', but on the ground that Clause 2(d) of the Notification in F.No.400/234/95/IT(B) dated 23.05.1996 (225 ITR ST 101) was not applicable to the facts of the case for the purpose of waiver. According to the respondent, if there is no obligation to pay advance tax, the petitioner should challenge the levy of interest in other forums. He has stated that waiver in respect of interest arises only when the levy is according to law, and the conditions specified by the Central Board of Direct Taxes are fulfilled. 3a. The respondent has further stated in the counter affidavit that levy of interest is mandatory and the Act does not grant any power to the Chief Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee will pay the costs to the Revenue. ..." (ii) 216 ITR 535 (Commissioner of Income Tax vs. Tamil Nadu Dairy Development Corporation Ltd.) "Following the above ruling of the Supreme Court (1959) 37 ITR 171 (CIT vs. Calcutt a National Bank Ltd., we are of the view that the term "business" is a word of very wide connotation and by no means determinate in its scope and has to be considered with reference to each particular kind of activity and occupation of the person concerned. Upon the peculiar facts of this case, we are of the opinion that the interest accrued on short-term deposits of the assessee-company which were made out of the business funds available with the assessee-company before the same were utilised for actual business and, as such, the same is incidental to the business activity of the assessee-company and as such, the interest on the short-term deposits should be treated as business income. ..." (iii) 228 ITR 354 (Commissioner of Income-Tax vs. Madras Refineries Ltd.) "Thus, a careful reading of the decisions cited supra of the various High Courts, would go to show that the High Courts are not uniform in coming to the conclusion whether the interest e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion, there is a close nexus between the interest on delayed payments and the receipts from the job works carried on by the assessee and to that extent, the assessee is entitled to claim deduction under sections 80E and 80-I of the Act. ..." (v) (1999) 240 ITR 24 (South India Shipping Corporation Ltd. vs. CIT) "13. The decisions of this court and other courts relied upon by the learned counsel for the petitioner may now be briefly adverted to. In the case of CIT vs. Tamil Nadu Dairy Development Corporation (1995) 216 ITR 535 (Mad) : TC S13.1385 a Division Bench of this court dealt with a case that the assessee had derived income from short-term deposit and had claimed that such income be treated as business income. The court relying upon the judgment of the Apex Court in the case of Calcutta National Bank Ltd. (supra) held that the income so derived constitutes business income. In a case concerning this very assessee, at the instance of the Revenue, this Court considered the question as to whether the interest received by the assessee from its brokers in London who had retained the freight collected on behalf of the assessee for meeting the various expenditure required to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re and export of garments and is entitled to the relief under Sections 80HHC and 80IA of the Income Tax Act. In the case on hand, the amounts of interest levied under Section 234-B of the Act for shortfall or deficiency in the payment of advance tax on the basis of the assessments made are Rs.7,95,629/-, Rs.15,73,463/-, Rs.22,03,165/- and Rs.4,82,372/- for the assessment years, 1993-94, 1994-95, 1995-96 and 1996-97, respectively. However, in the assessments so made, the Assessing Officer did not accept the claim of the assessee that the interest income from bank deposits should be assessed under the head 'business' and assessed the same as income from 'other sources'; thereby, the Assessing Officer disallowed the deduction under Sections 80HHC and 80IA in respect of the interest income assessed under the head 'other sources'. Therefore, the petitioner/assessee sought for waiver of the interest levied under Section 234-B of the Act, but the same was rejected by the respondent by its order dated 10.11.2004. 9. The petitioner/assessee urged before the respondent in the petitions filed for waiver of interest under Section 234-B that for the purpose of advance tax, they did not t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Supreme Court decision was delivered much after the dates of filing of returns. 12a. It is further seen in the impugned order that whatever money that was available with the assessee as surplus and not required by the business was kept in the form of bank deposits. Money kept in deposits was not utilised for the purpose of its business for the period of three years. In the third assessment year, 1995-96, the assessee had deployed part of its surplus fund for making investments in equity shares of other companies. As such, the decision of this court in Madras Refineries case does not apply to the facts of the case. In spite of the decision of this court, the assessee tried to take a chance to treat the interest received on bank deposits as part of its business income so that it could claim higher deductions under Sections 80HHC and 80IA than what it was entitled to. As the assessee has taken a chance in claiming higher deductions than what it was entitled to, it has to face the consequences that follow for making the inflated claims of deductions including charging of interest under Section 234-B. Therefore, the respondent has rejected the claim of the petitioner for waiver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the principles laid down in these decisions, the interest income was not chargeable to tax. 15. This court has already held that the interest received on short-term bank deposits by an assessee carrying on business and having the business income are not to be treated as 'income from other sources' but as 'business income'. Such ruling of this court has been impliedly overruled by a decision of the Supreme Court in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd. reported in 227 ITR 172. The said decision can rightly be applicable to the assessment years 1993-94, 1994-95 and 1995-96. However, in respect of the assessment year 1996-97, the ruling of the Supreme Court that the interest income on bank deposits has to be assessed under the head 'business income' has to be applied. 16. At this stage, it would be useful to refer to Clause 2(d) of the Notification, dated 23.05.1996 : "2(d) Where any income which was not chargeable in Income Tax on the basis of any order passed in the case of an assessee by the High Court within whose jurisdiction he is assessable to income tax and as a result, he did not pay income tax in relation to such income in any previous year and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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