TMI Blog1999 (5) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... ty and business. 1a. While allowing relief at 1 above, CIT (A) ignored the fact that the Assessing Officer has assessed rental income under the head 'Income from house property' and interest income under the head 'Income from the other sources.' " 2. Stated briefly, the relevant and material facts for the disposal of this appeal are that the Assessing Officer noticed that rent of Rs. 32,400 and interest of Rs. 1,88,807 have been credited to the P L A/c. The deduction under section 80HHC of the Income-tax Act had been claimed with reference to profits of business determined including these two amounts. According to the Assessing Officer the said deduction was not admissible as rental income but was in the nature of income from 'house pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e restored. 5. We have heard the learned authorised representatives of the parties, considered their rival submissions, perused the records and carefully gone through the orders of the lower authorities. 6. The main controversy relates to the deduction claimed by the assessee under section 80HHC on rental income and interest income. The assessee is earning interest income from M/s. Swami Motors, Jalandhar and from I.D.B.I. on deposits made with them and interest from FDRS. The first issue required to be resolved is whether the interest income is income from business income or the same is income from 'other sources'. If the Assessing Officer was going to deny the benefit of this income, then he should have given the finding regarding the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erent heads only for the purpose of computation of the total income : by that break up the income does not cease to be the income of the business, the different heads of income being only the classification prescribed by the Indian Income-tax Act for computation of income." This landmark judgment was followed by the various Courts as and when this issue came before them for adjudication. 8. The Hon'ble Madras High Court in the case of B. NagiReddy v. CIT [1993] 199 ITR 451 has dealt with the issue of computing income earned from letting out of the business property and observed that particular act of letting out property has to be decided in the circumstances of each case and in the setting and background of facts prevailing around each ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealing in the business of money lending. In the case of money-lender, this income will not be from other sources, the same will be the income from business because the user is using the income as a business activity. The second interpretation is to be given to a person, who will invest his earning as a deposit with the third party for earning interest income. The intention of such person is to earn interest income and such interest is safely classified as income from other sources. The third aspect of the issue is that when the assessee under contract will charge interest on outside trade debit balances from the customers. The purpose of such interest income is to adjust the interest income incurred on overdraft facility. Such type of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the sole purpose of depositing the amount with the bank was to claim the benefit of deduction under section 32AB. The assessee has relied on 131 ITR 27 (All.). I have gone through the contention of the assessee. The decision quoted at 131 ITR 27 deals with the deduction under section 80L on interest income and, therefore, is not of any relevance to the case under consideration. The amount of Rs. 49,000 has clearly been received as interest from the IDBI and cannot be treated as income under the head 'Profit and gains of business or profession' by any means. Hence, the plea of the assessee is rejected. (iii) Interest on FDRs -- The assessee has received further interest of Rs. 1,36,469-90 on FDRS. The assessee has contended that it had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee whenever has an extra money, he converts the extra funds available into FDRs with the intention to pledge his FDRs for receiving credit facilities from the bank. The assessee explained this fact to the Assessing Officer that the purpose and need of making FDRs is just to pledge his FDRs to the bank and by pledging these FDRs, the assessee has received overdraft facilities for running of the business. The interest became incidental to the normal activity of the business in case FDRs are pledged with the bank. Apart from these facts, one has to look into section 80HHC, sub-section (4) and clause (baa) to the explanation which is reproduced as under :--- "(baa) 'Profits of the business' means the profits of the business as computed un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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