M/s Atria Power Corporation Ltd , Bangalore V. Income Tax Officer Ward-1(1)(2), Bangalore

CO 75/BANG/2018

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 3917 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 16 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 06-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 21-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: V SRINIVASAN
• Keywords: Business income
• Section: 80HHC; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ , ACCOUNTANT MEMBER I TA NO. 533/BANG/2018 ASSESSMENT YEAR : 2011 - 12 THE INCOME TAX OFFICER, WARD 1(1)(2), BANGALORE. VS. M/S. ATRIA POWER CORPORATION LTD., # 11, COMMISERATE ROAD, BANGALORE 560 025. PAN: AABCA 1880E APPELLANT RESPONDENT CO NO.75/BANG/2018 [IN I TA NO. 533/BANG/2018 ] ASSESSMENT YEAR : 2011 - 12 M/S. ATRIA POWER CORPORATION LTD., # 11, COMMISERATE ROAD, BANGALORE 560 025. PAN: AABCA 1880E VS. THE INCOME TAX OFFICER, WARD 1(1)(2), BANGALORE. CROSS OBJECTOR RESPONDENT REVENUE BY : SHRI C.H. SUNDAR RAO, CIT(DR - I )(ITAT), BENGALURU. ASSESSEE BY : SHRI V. SRINIVASAN, ADVOCATE DATE OF HEARING : 11 .06 .201 8 DATE OF PRONOUNCEMENT : 06.07.201 8 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER ITA NO.533/BANG/2018 IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 31.10.2017 OF THE CIT(APPEALS)-I, BENGA LURU RELATING TO ITA NO. 533/BANG/2018 PAGE 2 OF 11 ASSESSMENT YEAR 2011-12. THE ASSESSEE HAS FILED CR OSS OBJECTION AGAINST THE VERY SAME ORDER OF THE CIT(APPEALS). 2. THE ONLY ISSUE THAT ARISES FOR CONSIDERATION IN THE REVENUES APPEAL IS AS TO, WHETHER THE CIT(APPEALS) WAS CORRECT IN C OMING TO THE CONCLUSION THAT THE PROVISIONS OF SECTION 115JB OF THE INCOME- TAX ACT, 1961 [THE ACT] ARE NOT APPLICABLE TO THE ASSESSEE, WHICH IS A COMP ANY ENGAGED IN THE GENERATION AND SUPPLY OF ELECTRICITY POWER. THE GR IEVANCE OF THE REVENUE IN THIS REGARD IS PROJECTED IN THE FOLLOWING GROUNDS O F APPEAL :- 1. THE ORDER OF THE LEARNED CIT (APPEALS), IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE, IS OPPOSED TO LAW AND THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LD. CIT (A) ERRED IN FACTS AND IN THE CIRCU MSTANCES AND IN LAW IN HOLDING THAT THE PROVISIONS OF SEC.115JB OF THE ACT ARE NOT APPLICABLE TO THE ASSESSEE COMPANY WHICH IS A C OMPANY ENGAGED IN GENERATION AND SUPPLY OF ELECTRICITY POW ER WITHOUT APPRECIATING THAT THE PRE-AMENDED SEC. 155JB(2) APP LIES TO ALL COMPANIES IRRESPECTIVE OR WHETHER THE PROVISIONS OF SEC.211(2) OF THE COMPANIES ACT APPLIES TO IT OR NOT AND THE A MENDMENT IS ONLY APPLICABLE FROM THE AY 2013-14 ONWARDS. 3. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE UR GED AT THE TIME OF HEARING, IT IS HUMBLY PRAYED THAT THE ORDER OF T HE LD. CIT (A) BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RE STORED. 4. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, TO AMEND OR DELETE ANY OF THE GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF APPEAL. 3. WHEN THIS APPEAL WAS TAKEN UP FOR HEARING, IT WAS BROUGHT TO OUR NOTICE THAT IDENTICAL ISSUE HAD COME UP FOR CONSIDE RATION IN THE ASSESSEES OWN CASE FOR HE AY 2010-11 IN ITA NO.1349/BANG/2013 AND THIS TRIBUNAL BY ITS ORDER DATED 23.10.2017 UPHELD THE ORDER OF C IT(APPEALS) IN COMING TO THE CONCLUSION THAT THE PROVISIONS OF SECTION 11 5JB OF THE ACT ARE NOT APPLICABLE TO ASSESSEE COMPANY BECAUSE IT WAS A COM PANY ENGAGED IN GENERATION AND SUPPLY OF ELECTRICITY POWER. A COPY OF THE ORDER IS PLACED ON ITA NO. 533/BANG/2018 PAGE 3 OF 11 RECORD. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL I N PARAS 15 TO 17 ARE AS FOLLOWS:- 15. HAVING CAREFULLY EXAMINED THE ORDERS OF AUT HORITIES BELOW IN THE LIGHT OF RIVAL SUBMISSIONS AND DOCUMENTS PLA CED ON RECORD, WE FIND THAT THERE WAS AN AMENDMENT TO SUB-SECTION (2) OF SECTION 115JB BY THE FINANCE ACT, 2012 W.E.F. 1.4.2013. PR IOR TO THIS AMENDMENT, AS PER SUB-SECTION (2), EVERY ASSESSEE B EING A COMPANY, SHALL FOR THE PURPOSE OF THIS SECTION (S. 115JB) PREPARE ITS PROFIT & LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR IN ACCORDANCE WITH THE PROVISIONS OF PART II & III OF SCHEDULE VI TO THE COMPANIES ACT, 1956. BEFORE THIS AMENDMENT IT WAS NOT REALIZED BY THE LEGISLATURE THAT THERE ARE CERTAIN COMPANIES WHO ARE NOT OBLIGED TO PREPARE ITS PROFIT & LOSS ACCOUN T FOR THE RELEVANT PREVIOUS YEAR IN ACCORDANCE WITH THE PROVI SIONS OF PART II & III OF THE SCHEDULE VI TO THE COMPANIES ACT, 1 956, AS THEY WERE GOVERNED BY DIFFERENT ACTS/STATUTE. IT WAS NO T CLEAR AS TO WHEN THESE COMPANIES ARE NOT REQUIRED TO PREPARE TH EIR PROFIT & LOSS ACCOUNT IN ACCORDANCE WITH THE PROVISIONS OF P ART II & III OF SCHEDULE VI TO THE COMPANIES ACT, 1956, WHETHER THE PROVISIONS OF SECTION 115JB ARE APPLICABLE TO THESE COMPANIES. HAVING REALIZED THIS OBLIGATION, SUB-SECTION (2) WAS AMEND ED AND ACCORDING TO THE AMENDMENT, IT WAS CATEGORIZED IN T WO CLAUSES AND FOR THE SAKE OF REFERENCE, WE EXTRACT THE PROVI SIONS OF SECTION 115 JB (1) & (2) HEREUNDER:- 115JB. (1) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, WHERE IN THE CASE OF AN ASSESSEE, BEING A COMPANY, THE INCOME-TAX, PAYABLE ON THE TOTAL INCOME AS COMPUTED UNDER THIS ACT IN RESPECT O F ANY PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 2012, I S LESS THAN EIGHTEEN AND ONE-HALF PER CENT OF ITS BOOK PRO FIT, SUCH BOOK PROFIT SHALL BE DEEMED TO BE THE TOTAL INCOME OF THE ASSESSEE AND THE TAX PAYABLE BY THE ASSESSEE ON SUC H TOTAL INCOME SHALL BE THE AMOUNT OF INCOME-TAX AT THE RAT E OF EIGHTEEN AND ONE-HALF PER CENT. (2) EVERY ASSESSEE, ( A ) BEING A COMPANY, OTHER THAN A COMPANY REFERRED TO IN CLAUSE ( B ), SHALL, FOR THE PURPOSES OF THIS SECTION, ITA NO. 533/BANG/2018 PAGE 4 OF 11 PREPARE ITS PROFIT AND LOSS ACCOUNT FOR THE RELEVAN T PREVIOUS YEAR IN ACCORDANCE WITH THE PROVISIONS OF PART II OF SCHEDULE VI TO THE COMPANIES ACT, 1956 (1 OF 1 956); OR ( B ) BEING A COMPANY, TO WHICH THE PROVISO TO SUB-SECT ION (2) OF SECTION 211 OF THE COMPANIES ACT, 1956 (1 OF 1956) IS APPLICABLE, SHALL, FOR THE PURPOSES OF THIS SECTION , PREPARE ITS PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIO US YEAR IN ACCORDANCE WITH THE PROVISIONS OF THE ACT GOVERNI NG SUCH COMPANY: 16. BY VIRTUE OF THIS AMENDMENT, THE LEGISLATURE HA S BROUGHT THOSE COMPANIES TO WHICH PROVISO TO SUB-SECTION (2) OF SECTION 211 OF THE COMPANIES ACT APPLIES WITHIN THE NETWORK OF PROVISIONS OF SECTION 115JB OF THE ACT. AS PER THE PROVISIONS OF SECTION 211(1), EVERY BALANCE SHEET OF A COMPANY SH ALL BE PREPARED IN ACCORDANCE WITH PART I & II OF SCHEDULE VI OF THE COMPANIES ACT, BUT AS PER PROVISO TO SUB-SECTION (1 ), INSURANCE OR BANKING COMPANY OR ANY COMPANY ENGAGED IN THE GE NERATION OR SUPPLY OF ELECTRICITY OR TO ANY OTHER CLASS OF C OMPANY FOR WHICH A FORM OF BALANCE SHEET HAS BEEN SPECIFIED IN OR UNDER THE ACT GOVERNING SUCH CLASS OF COMPANY, ARE NOT REQUIR ED TO PREPARE ITS PROFIT & LOSS ACCOUNT IN ACCORDANCE WITH PART I OF SCHEDULE VI TO THE COMPANIES ACT. AS PER SUB-SECTION (3), THE CENTRAL GOVERNMENT MAY, BY NOTIFICATION IN THE OFFICIAL GAZ ETTE, EXEMPT ANY CLASS OF COMPANIES FROM COMPLIANCE WITH ANY OF THE REQUIREMENTS IN SCHEDULE VI IF, IN ITS OPINION, IT IS NECESSARY TO GRANT THE EXEMPTION IN THE PUBLIC INTEREST. FOR TH E SAKE OF REFERENCE, WE EXTRACT THE PROVISIONS OF SECTION 211 (1) TO (3) HEREUNDER:- FORM AND CONTENTS OF BALANCE SHEET AND PROFIT AND LOSS ACCOUNT. 211. (1) EVERY BALANCE SHEET OF A COMPANY SHALL GI VE A TRUE AND FAIR VIEW OF THE STATE OF AFFAIRS OF THE COMPAN Y AS AT THE END OF THE FINANCIAL YEAR AND SHALL, SUBJECT TO THE PROVISIONS OF THIS SECTION, BE IN THE FORM SET OUT IN PART I O F SCHEDULE VI, OR AS NEAR THERETO AS CIRCUMSTANCES ADMIT OR IN SUC H OTHER FORM AS MAY BE APPROVED BY THE CENTRAL GOVERNMENT E ITHER GENERALLY OR IN ANY PARTICULAR CASE; AND IN PREPARI NG THE ITA NO. 533/BANG/2018 PAGE 5 OF 11 BALANCE SHEET DUE REGARD SHALL BE HAD, AS FAR AS MA Y BE, TO THE GENERAL INSTRUCTIONS FOR PREPARATION OF BALANCE SHEET UNDER THE HEADING 'NOTES' AT THE END OF THAT PART: PROVIDED THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL APPLY TO ANY INSURANCE OR BANKING COMPANY OR ANY CO MPANY ENGAGED IN THE GENERATION OR SUPPLY OF ELECTRICITY OR TO ANY OTHER CLASS OF COMPANY FOR WHICH A FORM OF BALANCE SHEET HAS BEEN SPECIFIED IN OR UNDER THE ACT GOVERNING SUCH C LASS OF COMPANY. (2) EVERY PROFIT AND LOSS ACCOUNT OF A COMPANY SHA LL GIVE A TRUE AND FAIR VIEW OF THE PROFIT OR LOSS OF THE COM PANY FOR THE FINANCIAL YEAR AND SHALL, SUBJECT AS AFORESAID, COM PLY WITH THE REQUIREMENTS OF PART II OF SCHEDULE VI, SO FAR AS T HEY ARE APPLICABLE THERETO: PROVIDED THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL APPLY TO ANY INSURANCE OR BANKING COMPANY OR ANY CO MPANY ENGAGED IN THE GENERATION OR SUPPLY OF ELECTRICITY, OR TO ANY OTHER CLASS OF COMPANY FOR WHICH A FORM OF PROFIT A ND LOSS ACCOUNT HAS BEEN SPECIFIED IN OR UNDER THE ACT GOVE RNING SUCH CLASS OF COMPANY. (3) THE CENTRAL GOVERNMENT MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, EXEMPT ANY CLASS OF COMPANIES FRO M COMPLIANCE WITH ANY OF THE REQUIREMENTS IN SCHEDULE VI IF, IN ITS OPINION, IT IS NECESSARY TO GRANT THE EXEMPTION IN THE PUBLIC INTEREST. ANY SUCH EXEMPTION MAY BE GRANTED EITHER UNCONDITIO NALLY OR SUBJECT TO SUCH CONDITIONS AS MAY BE SPECIFIED I N THE NOTIFICATION. 17. UNDISPUTEDLY, THE ASSESSEE IS ENGAGED IN THE GENERATION OF POWER, THEREFORE AS PER PROVISO TO SECTION 211(1), THE ASSESSEE WAS NOT REQUIRED TO PREPARE ITS BALANCE SHEET AND P ROFIT & LOSS ACCOUNT IN THE FORM SET OUT IN PART-I & III OF SCHE DULE VI TO THE COMPANIES ACT, AS THE ASSESSEE WAS REQUIRED TO PREP ARE ITS BALANCE SHEET AND PROFIT & LOSS ACCOUNT AS PER THE ACT NOTIFIED BY THE GOVERNMENT. NOW THE QUESTION ARISES UNDER SUCH CIRCUMSTANCES, WHETHER THE PROVISIONS OF SECTION 11 5JB WOULD ITA NO. 533/BANG/2018 PAGE 6 OF 11 APPLY TO THE ASSESSEES CASE, WHERE HE WAS NOT REQU IRED TO PREPARE THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT AS PER PART I & III OF SCHEDULE VI TO THE COMPANIES ACT. THIS ASPECT WAS EXAMINED BY THIS TRIBUNAL IN THE CASE OF KARNATAKA POWER CORPORATION LTD. V. ACIT, ITA NO.711/BANG/2011 IN WHICH IT WAS HELD THAT THE ASSESSEE IS ENGAGED IN THE GENERATION OF POWER AND IN AN ELECTRIC COMPANY, IT IS GOVERNED BY AND BOUND TO FOLLOW THE RELEVANT ELECTRICITY ACT AND RULES THERETO IN PREPARATION OF ITS FINANCIAL STATEMENTS. THEREFORE, THE PROVISIONS OF SECTION 115JB OF THE ACT ARE NOT APPLICABLE TO THE ASSESSEES CASE. 4. THE TRIBUNAL ALSO CONSIDERED THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF BSES RAJDHANI POWER LTD. IN ITA NO.3688/DEL/2011 AND SEVERAL OTHER DECISIONS AND FINALLY CONCLUDED IN PA RA 21 OF ITS ORDER AS FOLLOWS:- 21. SINCE IT HAS BEEN REPEATEDLY HELD BY THE DIFF ERENT BENCHES OF THE TRIBUNAL AND HONBLE HIGH COURT OF KERALA TH AT ASSESSEE IS GOVERNED BY DIFFERENT ACTS AND RULES, WHO IS NOT RE QUIRED TO PREPARE ITS PROFIT & LOSS ACCOUNT AND BALANCE SHEET AS PER PART II & III OF SCHEDULE VI TO THE COMPANIES ACT, THE PROVISIONS OF SECTION 115JB CANNOT BE INVOKED. IN THE LIGHT OF THIS LEGAL POSI TION, WE ARE OF THE VIEW THAT THE REVENUE AUTHORITIES WRONGLY INVOKED T HE PROVISIONS OF SECTION 115JB OF THE ACT, THEREFORE THE ORDER OF TH E CIT(APPEALS) IS NOT SUSTAINABLE IN THE EYES OF LAW. ACCORDINGLY, W E SET ASIDE THE ORDER OF CIT(APPEALS) IN THIS REGARD. 5. AS FAR AS AMENDMENT TO PROVISIONS OF SECTION 115 JB(2) OF THE ACT W.E.F. 01.04.2013 IS CONCERNED, THIS ISSUE HAS ALSO BEEN DEALT WITH BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2010-11 BY P LACING RELIANCE ON A SIMILAR DECISION RENDERED ON THE VERY SAME AMENDMEN T TO LAW IN THE CASE OF KARNATAKA POWER CORPORATION LTD. V. ACIT (SUPRA) , WHEREIN THE TRIBUNAL TOOK THE VIEW THAT AMENDMENT TO LAW W.E.F. 01.04.20 13 WAS ONLY PROSPECTIVE. IN VIEW OF THE ORDER OF TRIBUNAL ON A N IDENTICAL ISSUE IN ASSESSEES OWN CASE, WE ARE OF THE VIEW THAT THERE IS NO MERIT IN THIS APPEAL BY THE REVENUE AND THE SAME IS DISMISSED. ITA NO. 533/BANG/2018 PAGE 7 OF 11 CO NO.75/BANG/2018 6. AS FAR AS THE CO FILED BY THE ASSESSEE IS CONCER NED, THE ISSUE THAT NEEDS ADJUDICATION IS ONLY GROUND NOS. 2 & 3 RAISED IN THE CO WHICH READS AS FOLLOWS:- 2. THE LEARNED CIT[A] IS NOT JUSTIFIED IN UPHOLDING THE ASSESSMENT OF THE INTEREST INCOME FROM FIXED DEPOSI T APPERTAINING TO THE BUSINESS OF GENERATION OF POWER AS INCOME LIABLE TO TAX UNDER THE HEAD 'OTHER SOURCES' INSTEA D OF UNDER THE HEAD 'BUSINESS'. HE FAILED TO APPRECIATE THAT INTER EST INCOME FROM FD IS IN RESPECT OF DEPOSITS WHICH ARE OBLIGED TO BE MADE FOR CARRYING ON THE BUSINESS OF GENERATION OF POWER TO FULFILL CERTAIN OBLIGATIONS FROM OUT OF THE BUSINESS FUNDS AND THESE MONIES HAVE NOT BEEN DEPOSITED SOLELY WITH A VIEW T O EARN ANY INTEREST INCOME AND ARE LIABLE TO BE TAXED ONLY UND ER THE HEAD 'BUSINESS' AND NOT UNDER THE HEAD 'OTHER SOURCES' I N THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CROSS-OBJECTOR'S CASE. 3. THE LEARNED CIT[A] IS NOT JUSTIFIED IN UPHOLDING THE RESTRICTION OF THE CLAIM U/S.80IA[4][IV] OF THE ACT , IN RESPECT OF THE INCOME COMPUTED UNDER THE HEAD 'BUSINESS' ONLY AND NOT IN RESPECT OF INTEREST INCOME ASSESSED UNDER THE HEAD 'OTHER SOURCES' APPERTAINING TO THE UNDERTAKING CARRYING O N THE BUSINESS-OF GENERATION OF POWER, TO WHICH IT IS LEG ITIMATELY ENTITLED TO DEDUCTION U/S.801A[4][IV] OF THE ACT UN DER THE FACTS AND IN THE CIRCUMSTANCES OF THE CROSS-OBJECTOR'S CA SE. 7. ALL OTHER GROUNDS WERE NOT PRESSED FOR ADJUDICAT ION BY THE LD. COUNSEL FOR THE ASSESSEE. 8. AS FAR AS GROUND NOS.2 & 3 RAISED BY THE ASSESSE E IN ITS CO ARE CONCERNED, THE ISSUE REVOLVES AROUND THE QUESTION, WHETHER INTEREST EARNED FROM FIXED DEPOSITS HAS TO BE REGARDED AS BUSINESS INCOME ON WHICH DEDUCTION U/S. U/S.80IA[4][IV] OF THE ACT SHOULD BE ALLOWED; OR THE SAME SHOULD BE TREATED AS INCOME FROM OTHER SOURCES. THIS ASPECT WAS ALSO ITA NO. 533/BANG/2018 PAGE 8 OF 11 CONSIDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE I N AY 2010-11 IN ITA NO.1394/BANG/2013 IN ITS ORDER DATED 22.12.2017. T HE TRIBUNAL SET ASIDE THE ORDER OF THE CIT(APPEALS) AND REMANDED THE ISSU E FOR FRESH CONSIDERATION BY THE AO WITH THE FOLLOWING OBSERVAT IONS:- 7. HAVING CAREFULLY EXAMINED THE ORDERS OF AUTHOR ITIES BELOW, WE FIND THAT THOUGH ASSESSEE HAS CLAIMED THAT FDRS WERE PURCHASED ON ACCOUNT OF BUSINESS EXIGENCIES, BUT IT IS NOT SPECIFICALLY BORNE OUT FROM THE ORDERS OF THE LOWER AUTHORITIES. WE HAVE, HOWEVER, EXAMINED THE JUDGMENTS OF JURISDI CTIONAL HIGH COURT IN THE CASE OF CHINNA NACHIMUTHU CONSTRUCTIONS (SUPRA), M/S. HAJEE JAFFAR SHARIFF (SUPRA) AND THE DELHI HIGH COURT JUDGMENT IN THE CASE OF JAYPEE DSC VENTURES LTD. (SUPRA) . IN ALL THESE CASES, THE HONBLE HIGH COURTS HAVE EX AMINED THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF CIT V. STERLING FOODS, 237 ITR 579 (SC) AND PANDIAN CHEMICALS LTD. V. CIT, 262 ITR 268 (SC) . IN THE LATER JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF PANDIAN CHEMICALS LTD. (SUPRA) , IT WAS HELD THAT INTEREST ON DEPOSITS OF ELECTRICITY BOARD S CANNOT BE SAID TO BE DERIVED FROM INDUSTRIAL UNDERTAKING BEING A S TEP REMOVED FROM BUSINESS OF INDUSTRIAL UNDERTAKING. THEREFORE , IT WAS INCOME FROM OTHER SOURCES. THESE JUDGMENTS WERE EX AMINED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF CHINNA NACHIMUTHU CONSTRUCTIONS (SUPRA) WHICH WAS DELIVERED ON 12.11.2007 IN WHICH IT WAS HELD THAT INVESTMENT OF AMOUNT IN FIXE D DEPOSITS BY THE ASSESSEE WAS ONLY TO SECURE A BANK GUARANTEE TO BE OFFERED TO M/S. KPTCL IN ORDER TO ACQUIRE A CONTRACT WORK. TH EREFORE, IT CANNOT BE TREATED AS INCOME FROM OTHER SOURCES AND INTEREST ACCRUED ON SUCH FIXED DEPOSITS HAS TO BE TREATED AS BUSINESS INCOME ONLY. EXPRESSING A SIMILAR VIEW, THE JURISD ICTIONAL HIGH COURT IN THE CASE OF M/S. HAJEE JAFFAR SHARIFF (SUPRA) VIDE ITS JUDGMENT DATED 02.03.2010 AGAIN HELD THAT FIXED DEPOSITS WERE GIVEN AS SECURITY IN ORDER TO AVAIL CREDIT FACILITI ES, THEREFORE INCOME EARNED IS NOT INCOME FROM OTHER SOURCES. FO R THE SAKE OF REFERENCE, WE EXTRACT THE OBSERVATIONS OF THE HONB LE HIGH COURT AS UNDER:- ITA NO. 533/BANG/2018 PAGE 9 OF 11 9. HOWEVER, THE LEARNED COUNSEL FOR THE APPELLA NTS RELIED UPON ANOTHER DECISION OF APEX COURT IN PANDIAN CHEMICALS L'ID.VS. COMMISSIONER OF INCOME TAX, TO CONTEND THAT WITH REGARD TO DEPOSITS MADE WIT H THE ELECTRICITY BOARD, THE INTEREST ON THE SAID DEP OSIT WOULD NOT BE SAID TO BE DERIVED FROM THE INDUSTRIAL UNDERTAKING AS IT IS A STEP REMOVED FROM THE INDUST RIAL UNDERTAKING AND THEREFORE NOT LIABLE FOR DEDUCTION UNDER SECTION 80HHC OF THE ACT. 10. WE ARE OF THE VIEW THAT ON THE FACTS OF THE PRESENT CASE AND TAKING INTO CONSIDERATION THE DECI SIONS REFERRED TO SUPRA, THE DECISION IN PANDIAN CHEMICALS LTD VS, COMMISSIONER OF INCOME TAX WOULD NOT BE APPLICABLE TO THE PRESENT CASE. IN THE INSTANT C ASE AS ALREADY STATED FOR THE PURPOSE OF ITS BUSINESS THAT IS EXPORT BUSINESS, THE FIXED DEPOSITS WERE GIVEN AS SECURITY IN ORDER TO AVAIL CREDIT FACILITIES AND CONSEQUENTLY O N FACTS WE ARE OF THE CONSIDERED VIEW THAT THE DECISION IN GON VIDA CHOUDHURY & SONS AND CHIINNA NACHIMUTHU CONSTRUCTIONS ARE APPLICABLE AND THE DECISION OF TH E APEX COURT IN PANDIAN CHEMICALS LTD. VS. COMMISSIONER OF INCOME TAX CAN BE DISTINGUISHED. ACCORDINGLY WE ANSWER THE SUBSTANTIAL QUESTIONS OF L AW RAISED IN THIS APPEAL AGAINST THE REVENUE AND DISMI SS THE APPEAL. 8. THE HONBLE DELHI HIGH COURT WHILE DELIVERING T HE JUDGMENT ON 11.03.2011 IN THE CASE OF JAYPEE DSC VENTURES LTD. (SUPRA) HAS CONFIRMED THE VIEW TAKEN BY THE HONBLE KARNAT AKA HIGH COURT WHILE HOLDING THAT THE AMOUNT OF INVESTM ENT IN FIXED DEPOSITS WHICH WERE KEPT IN BANK FOR FURNISHING OF BANK GUARANTEE IS BUSINESS INCOME, NOT INCOME FROM OTHER SOURCES. THE RELEVANT OBSERVATIONS OF THE HONBLE DELHI HIGH COURT ARE EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE:- 21. KEEPING IN VIEW THE AFORESAID PRONOUNCEMENTS IN THE FIELD, THE PRESENT CONTROVERSY IS TO BE ADJU DGED. AS IS NOTICEABLE FROM THE STIPULATIONS IN THE AGREEMEN T, THE PERFORMANCE GUARANTEE BY WAY OF BANK GUARANTEE WAS REQUIRED FOR FAITHFUL PERFORMANCE OF ITS OBLIGATION S. THE NON-SUBMISSION OF THE GUARANTEE WOULD HAVE ENTAILED IN TERMINATION OF THE AGREEMENT AND NHAI WOULD HAVE BEE N AT LIBERTY TO APPROPRIATE BID SECURITY. THAT APART, THE ITA NO. 533/BANG/2018 PAGE 10 OF 11 RELEASE OF SUCH PERFORMANCE SECURITY DEPENDED UPON CERTAIN CONDITIONS. THUS, IT IS CLEARLY EVINCIBLE T HAT THE BANK GUARANTEE WAS FURNISHED AS A CONDITION PRECEDE NT TO ENTERING THE CONTRACT AND FURTHER IT WAS TO BE KEPT ALIVE TO FULFILL THE OBLIGATIONS. QUITE APART FROM THE ABOVE , THE RELEASE OF THE SAME WAS DEPENDENT ON THE SATISFACTI ON OF CERTAIN CONDITIONS. THUS, THE PRESENT CASE IS NOT O NE WHERE THE ASSESSEE HAD MADE THE DEPOSIT OF SURPLUS MONEY LYING IDLE WITH IT IN ORDER TO EARN INTEREST; ON THE CONT RARY, THE AMOUNT OF INTEREST WAS EARNED FROM FIXED DEPOSITS W HICH WAS KEPT IN THE BANK FOR FURNISHING THE BANK GUARAN TEE. IT HAD AN INEXTRICABLE NEXUS WITH SECURING THE CONTRAC T. THEREFORE, WE ARE DISPOSED TO THINK THAT THE FACTUA L MATRIX IS COVERED BY THE DECISIONS RENDERED IN BOKARO STEE L LTD. (SUPRA), KARNAL CO-OPERATIVE SUGAR MILLS LTD. (SUPR A) AND KOSHIKA TELECOM LTD. (SUPRA) AND, ACCORDINGLY, WE H OLD THAT THE VIEW EXPRESSED BY THE TRIBUNAL CANNOT BE F OUND FAULT WITH. 9. IN THE LIGHT OF THE AFORESAID JUDGMENTS OF DIF FERENT HIGH COURTS, IT IS CLEAR THAT WHEREVER THE FDRS ARE PUR CHASED ON ACCOUNT OF BUSINESS EXIGENCIES, THE INTEREST GENERA TED THEREON WOULD BE BUSINESS INCOME AND NOT INCOME FROM OTHER SOURCES. BUT IN THE INSTANT CASE, IT IS NOT BORNE OUT FROM T HE ORDERS OF LOWER AUTHORITIES WHETHER ALL FDRS ARE PURCHASED FOR BUSI NESS EXIGENCIES OR NOT. THEREFORE, WE RESTORE THE MATTE R TO THE FILE OF THE AO TO EXAMINE THE NATURE OF FDRS AND ITS PURPOS E AND TO GIVE A SPECIFIC FINDING WHETHER THE FDRS WERE PURCH ASED FOR BUSINESS PURPOSES OR NOT. IF IT IS PURCHASED FOR B USINESS PURPOSES, THE INTEREST INCOME EARNED THEREON SHALL BE TREATED AS BUSINESS INCOME, NOT INCOME FROM OTHER SOURCES IN THE LIGHT OF AFORESAID JUDGMENTS OF JURISDICTIONAL HIGH COURT. 9. WE ARE OF THE VIEW THAT THE FACTS AND CIRCUMSTAN CES BEING IDENTICAL IN THE PRESENT ASSESSMENT YEAR, THE ORDER OF CIT(AP PEALS) ON THIS ISSUE SHOULD BE SET ASIDE AND THE ISSUE REMANDED TO THE A O FOR CONSIDERATION AFRESH IN THE LIGHT OF DIRECTIONS GIVEN BY THE TRIB UNAL IN THE ORDER FOR AY 2010-11. WE THEREFORE ALLOW THE CROSS OBJECTION OF THE ASSESSEE IN PART FOR STATISTICAL PURPOSES. ITA NO. 533/BANG/2018 PAGE 11 OF 11 10. IN THE RESULT, THE ITA NO.533/B/18 IS DISMISSED , WHILE THE CO NO.75/BANG/2018 IS PARTLY ALLOWED FOR STATISTICAL P URPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 06 TH DAY OF JULY, 2018. SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 06 TH JULY, 2018. / D ESAI S MURTHY / COPY TO: 1. REVENUE 2. ASSESSEE 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.