M/s. k.Satyanarayana Reddy & Co., Secunderabad V. Addl. Commissioner of Income Tax, Hyderabad

ITA 1200/HYD/2013

• Counselvise Citation: 120022514 RSA 2013
• Duration Of Justice: 1 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 12-08-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B RAMA KRISHNA
• Assessee Lawyers: S RAMA RAO
• Keywords: Business income
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.1200/HYD/13 : ASSESSMENT YEAR 2010 - 11 M/S. K.SATYANARAYANA REDDY & CO., SECUNDERABAD (PAN AAFFK 4701 M) V/S. ADDL. COMMISSIONER OF INCOME - TAX RANGE 10, HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : S HRI S.RAMA RAO RESPONDENT BY : SHRI B.RAMAKRISHNA, DR DATE OF HEARING 13 . 1 0.2014 DATE OF PRONOUNCEMENT 15.10.2014 O R D E R PER P.M.JAGTAP, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS) VI HYDERABAD DATED 27 .5. 2013 AND THE SOLITARY ISSUE ARISING OUT OF THE SAME R ELATES TO THE DETERMINATION OF HEAD OF INCOME UNDER WHICH THE INTEREST INCOME RECEIVED BY THE ASS ESSEE ON BANK DEPOSITS IS CHAR GE ABL E TO TAX. 2. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHIP FIRM WHICH IS ENGAGED IN TH E BUSINESS OF EXECUTING CIVIL CONTRACT WORKS. THE RETURN OF IN C OM E FOR THE YEAR UN D ER CONSIDERATION WAS FIL E D BY IT ON 24.9.2010 DECL A RING TOTAL INCOME OF RS .1,46,64,015. DURIN G THE COU R SE OF ASSESSMENT PROCEEDINGS, I T WAS NO T ICED BY TH E ASSESSING OFFICER THAT THE ASSESSEE HAS RECEIVED INTER E ST OF R S .23,39,979 ON ACCOUNT O F DEPOSITS KEPT WITH BANK AND THE S AID INCOME WAS DECL A RED BY TH E ASSESSEE AS ITS BUSINESS INCOME. I TA NO. 1200/H YD/20 13 M/S.K.SATYANARAYANA REDDY & CO., SECUNDERABAD 2 ALTHOUGH IT WAS S OUGHT TO B E CONTENDED ON BEHALF OF THE ASSESSEE T HAT THE SAID IN T ER E ST WAS REC E IV E D BY IT ON THE BANK DEPOSITS MADE DURING TH E COU R SE OF I T S BUSINESS FOR THE PURPOSE OF AVAILING CREDIT FACIL I TIES FR O M THE BANK, THE ASSESSING OFFICER FOUND THAT THERE WAS NO DIRECT LINK BETWEEN T H E INTEREST INCOME RECEIVED BY TH E ASSESSEE ON BANK DEP O SITS AND THE BU S IN E SS CARRIED ON BY IT. AC C OR D INGLY, RELYING ON TH E DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE ON A SIMI L AR ISSUE RENDERED FOR THE IMMEDIATELY P R ECEDING YE A RS 2008 - 09 AND 2009 - 10 IN ITA NO. 1 226 AND 1227/HYD/2012, HE BROUGHT TO TAX THE INCOME RECEIVED BY TH E ASSESSEE ON BANK D E PO S ITS IN ITS HANDS UNDER THE H E AD INCOM E F R OM OTHER SOU R CES. ON APPEAL, THE LEARNED CIT(A) UPH E L D THE ACTION OF THE ASSESSING OFFICER ON THIS I S SUE, REL Y ING INTER - ALIA ON THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CA S E FOR ASSESSMENT YEARS 2008 - 09 AND 2009 - 10. 3. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A) , ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL . 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. ALTHOUGH THE LEARNED CO U N S EL FOR THE ASSESSEE H A S MADE AN ATTEMPT TO SHOW THAT THE FACTS INVO LVE D IN THE YE A R UNDER CONSIDERATION ARE DIFFERENT F R OM THE FACTS INVOLVED IN ASSESSMENT YEARS 2008 - 09 AND 2009 - 10, WE FIND TH A T T HE MATERIAL FACTS RELEVANT TO THE ISSUE UN D ER CON S I D ERATION AS INVOLVED IN THE Y EA R UNDER CONSIDERATION ARE SIMILAR TO THOSE IN ASSESSMENT YEARS 2008 - 09 AND 2009 - 10, AS RIGHTLY POINTED OUT BY THE LEARNED DEPARTMENTAL REPRESENTATIVE . WE TH E R E FORE, FOLLOW TH E DECISION OF THE COORDINATE BENCH OF THE TR I BUNAL IN ASSESSEES OWN CA S E FOR THE ASSESSMENT YEARS 2008 - 09 AND 2009 - 10 AND HOL D THAT THE IN T ER E ST INCOME REC E IVED BY TH E ASSESSEE FROM BANK DEP O SITS IS CHARGEABLE TO TAX UN D ER THE HEAD INCOM E FROM OTHER SOU R CES . WE HOWE V ER, FIND MERIT IN TH E AL T ERNATIVE CONTENTION OF THE LEARNED I TA NO. 1200/H YD/20 13 M/S.K.SATYANARAYANA REDDY & CO., SECUNDERABAD 3 COUNSEL FOR THE ASSESSEE THAT THE TOTAL CAPITAL OF TH E ASSESSEE FIRM AMOUNTIN G TO R S .2.44 CRORES AS ON 31.3..2010 BEIN G LESS THAN THE DEPO S ITS OF RS.3.52 CRORES KEPT WITH THE BANK, SOME PART O F THE SAID DEP O SITS WAS LIKELY TO BE FINANCED F R OM TH E L O ANS AVAILED FROM THE BANKS. TH I S A L TE RNATIVE ARGUM E N T O F THE LEARNED COUN S EL FOR THE ASSESSEE IS ALSO SUPPORTED BY TH E FACT THAT SOM E O F THE DEPOSITS WITH BANKS WERE MADE BY THE ASSESSEE OUT OF ITS OVERDRAFT ACCOUNT WITH THE BANK. I N THESE FACTS AND CIRCUMSTANCES, THE INTEREST EXPENDITURE IN C URRED BY TH E ASSESSEE AS AT TR IBUTABLE TO THE BOR R OWE D FUNDS UTILISE D FOR MAKING THE BANK DEP O SITS , IN OU R OPINION, IS LIABLE TO B E ALLOWED AS EXPENDITURE AGAINST THE INTEREST IN C OM E CHAR GE ABLE TO TAX UNDER THE HEAD INCOM E FROM OTHER SOUR C ES AS PER THE P R OVIS I ON S OF S.57(III). WE , TH E R E FORE, ACCEPT THE ALTERNA T IVE CONTENTION OF THE ASSESSEE AND RESTORE THI S MATTER TO THE FIL E O F THE ASSESSING OFFICER FOR THE LIMITED PURPOSE OF VERIFYING THE CLAIM OF THE ASSESSEE AND QUANTIFYING THE INTEREST EXPENDITURE INCURRED BY THE ASSE SSEE TO TH E EXTE N T IT IS ATTRIBUTABLE TO THE BO R ROWED LOANS UTILI S ED FOR MAKING THE INV E S T M E NT IN BANK DEPO S ITS, FOR THE PU R PO S E OF ALLO W IN G TH E SAME AS DEDUCTION UNDER S.57(III) OF THE ACT. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 15 TH O C TOBER, 2014 SD/ - SD/ - ( SAKTIJIT DEY ) ( P.M.JAGTAP ) JUDICIAL MEMBER ACCOUNTANT MEMBER DT/ - 15 TH OCTOBER, 2014 COPY FORWARDED TO: 1. M/S. K.SATYANARAYANA REDDY & CO., H.NO.8 - 5 - 210/31 TO 37, FLAT NO.2102, SRI SRINIVASA HOMES, VYSYA BANK COLONY, NEAR DUBAI GATE, OLD BOWENPALLY, SECUNDERABAD 500 011 I TA NO. 1200/H YD/20 13 M/S.K.SATYANARAYANA REDDY & CO., SECUNDERABAD 4 2 . ADDL. COMMISSIONER OF INCOME - TAX RANGE 10, HYDERABAD 3. 4. COMMISSIONER OF INCOME - TAX(APPEALS) V I, HYDERABAD COMMISSIONER OF INCOME - TAX V , HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S