K.P. POWER P. LTD, MUMBAI V. ITO 9(2)(2), MUMBAI

ITA 1257/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55686 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 17-10-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 24-02-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: DR P DANIEL
• Keywords: Business income; Business expenditure
• Section: 80HHC

Judgement Text

1 K P POWER PVT LTD IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI H BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI J SUDHAKAR REDDY, AM & SHRI VIJAY PAL RAO, JM ITA NO. 3272/MUM/2008 (AY 2004-05) & ITA NO. 1257/MUM/2009 (AY 2005-06) K P POWER PVT LTD 229/230 ARUN CHAMBERS 2 ND FLOOR ,TARDEO, MKUMBAI 34 VS THE INCOME TAX OFFICER WARD 9(2)(2), MUMBAI (APPELLANT) (RESPONDENT) PAN NO. AABCK9495M ASSESSEE BY DR P DANIEL REVENUE BY SHRI V V SHASTRI DT.OF HEARING 17.10.2011 DT OF PRONOUNCEMENT 21 OCT 2011 PER VIJAY PAL RAO, JM THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDERS DATED 1.2.2008 AND 15.2.2008 FOR THE AYS 2004-05 & 2005-06 RESPECTIVELY. 2 THE ASSESSEE HAS COMMON GROUNDS IN THESE APPEALS EXCEPT THE QUANTUM OF DISALLOWANCE. THE GROUND RAISED FOR AY 2004-05 ARE REPRODUCED HEREUNDER: I) THE LD CIT(A) ERRED IN LAW AND ON FACTS IN OVERLO OKING THE VERY FACT THAT THE APPELLANT COMPANY WAS IN THE BUSINESS OF INFRASTRUCT URE DEVELOPMENT. II) THE LD CIT(A) ERRED IN LAW AND ON FACTS IN STATI NG THAT THE APPELLANT COMPANY HAS EARNED LEASE RENT BY SUB LEASING T HE PL OT BEFORE THE COMMENCEMENT OF ITS BUSINESS ACTIVITIES. III) THE LD CIT(A) ERRED IN LAW AND ON FACTS INN HOL DING THAT SUB-LEASING OF THE PLOTS TAKEN FROM MIDC WAS NOT AN INTEGRAL ACTIVITY OF THE APPELLANT COMPANYS MAIN BUSINESS ACTIVITY OF INFRASTRUCTURE DE VELOPMENT FOR SETTING UP OF WIND MILLS AND LAYING OF NETWORK OF TRANSMISSION L INES FOR EVACUATION OF POWER GENERATED BY THE WIND MILLS, IN FACT THE LAND IS MAIN COMPO0NENT OF THE WHOLE OF INFRASTRUCTURE PROJECT. 2 K P POWER PVT LTD IV) THE LD CIT(A) ERRED IN LAW AND ON FACTS IN UPH OLDING THE ASSESSING OFFICERS CONTENTION THAT THE LEASE RENT EARNED BY TH E APPELLANT COMPANY WAS TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES AND NOT INCOME FROM BUSINESS. 5. THE LD CIT(A) ERRED IN LAW AND ON FACTS IN UPHOLD ING THAT ASSESSING OFFICERS CONTENTION OF TREATING TOTAL SUM OF RS. 14,56,005/- WRITTEN BACK OUT OF EARLIER YEARS CREDITS AS TAXABLE UNDER THE HEAD INCOME FRO M OTHER SOURCES AND NOT AS INCOME FROM BUSINESS U/S 41(2) OF THE ACT. VI) THE LD CIT(A) ERRED IN LAW AND ON FACTS IN UPHO LDING THE DISALLOWANCE OF ENTIRE EXPENDITURE OF RS. 18,51,657/- AS BUSINESS EXP ENDITURE. 3 GROUND NOS 1 TO 4 ARE REGARDING TREATING THE LEAS E RENT AS INCOME FROM OTHER SOURCES INSTEAD OF INCOME FROM BUSINESS AS CLAIMED BY THE ASSESSEE. 3.1 THE ASSESSEE IS IN THE BUSINESS OF DEVELOPMENT AND SETTING UP OF INFRASTRUCTURE FACILITIES OF WIND WILLS AND LAYING OF NEW LINES/NE TWORK FOR TRANSMISSION OF ELECTRICITY. THE ASSESSEE COMPANY OBTAINED LAND ON LEASE FROM MI DC AND DEVELOP THEM INTO SUITABLE SUB PLOTS FOR SETTING UP OF WIND MILLS THE REON. AFTER THE DIVISION OF THE PLOTS, THE ASSESSEE SUB LEASED THE SAME TO VARIOUS PARTIES FOR SETTING UP WIND MILLS THEREON. THE ASSESSEE CLAIMED TO HAVE CARRIED OUT VARIOUS AC TIVITIES LIKE LAYING OF FOUNDATION FOR SETTING UP OF WIND MILLS, LAYING OF NEW LINES/N ETWORK FOR TRANSMISSION OF ELECTRICITY GENERATED BY THE WIND MILLS SET UP ON THE WIND MILL FARM. THUS, THE ASSESSEE CLAIMED TO HAVE BEEN IN THE BUSINESS ACTIVITY OF INFRASTRUC TURE DEVELOPMENT AND IN CONNECTION WITH THE SAID ACTIVITY, THE ASSESSEE ACQ UIRED A PLOT OF LAND ADMEASURING 980 ACRES AT VILLAGE BRAHMAVEL, TALUKA SAKRI, DIST DHULE ON 99 YEARS LEASE FROM MIDC. 3.2 THE ASSESSEE ENTERED INTO A MEMORANDUM OF UNDER STANDING (MOU) WITH M/S NEG MICON (INDIA) P LTD (NEG MICON) FOR DEVELOPMEN T/SETTING UP OF A WIND MILLS FARM AT VILLAGE BRAHMANVEL. IN PURSUANT TO THE SAI D MOU, THE ASSESSEE HAD TO CARRY OUT VARIOUS ACTIVITIES LIKE OBTAINING ALL NECESSARY LICENSEES/PERMISSIONS FOR SETTING UP WIND POWER PROJECTS FROM VARIOUS GOVERNMENT AND NON GOVERNMENT AGENCIES LIKE 3 K P POWER PVT LTD MEDA/MSEB ETC. APART FROM THIS, THE ASSESSEE WAS UN DER OBLIGATION FOR ALL CIVIL AND ELECTRICAL WORKS FOR WIND POWER PROJECT AND COORDIN ATION WITH ALL THE AGENCIES FOR GETTING THE WORK DONE. THE ASSESSEE SUB-LEASED TH E LAND TO THE NOMINEES OF THE NEG MICON FOR A MINIMUM PERIOD OF 25 YEARS AS PER T HE PROVISIONS OF MIDC. 3.3 DURING THE YEAR THE ASSESSEE SHOWN THE INCOME F ROM OPERATIONS AT RS. 6,60,000/- AND OTHER INCOME OF RS. 22,12,406/-. AGAINST THE SAID INCOME, THE ASSESSEE HAS ALSO CLAIMED EXPENSES OF RS. 29,88,053 /-. THUS, THE INCOME WAS COMPUTED AT NET LOSS OF RS. 1,15,647/-. SINCE THE ASSESSEE EXCLUDED THE LOSS ON REDEMPTION OF INVESTMENTS FROM THE EXPENSES, THE BUSINESS INCOME OF RS. 91,764/- WAS COMPUTED AFTER CLAIMING THE DEPRECATION AS PER LAW. THE ASSESSING OFFICER NOTICED THAT THE INCOME FROM OPERATIONS CONSISTS OF LEASE RENT OF RS. 6,00,000/- AND MAINTENANCE CHARGES OF RS. 60,000/-. THE ASSESSING OFFICER WAS OF THE VIEW THAT SINCE THE ASSESSEE IS NOT THE OWNER OF THE SAID PLO TS AND THE BUSINESS OF THE ASSESSEE IS NOT THAT OF SUBLEASING OF PLOTS OF LANDS THEN TH E SAID INCOME FROM SUBLEASING OF LANDS HAS TO BE TREATED AS INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. ACCORDINGLY, THE EXPENSES ALLOWABLE HAVE BEEN RESTR ICTED TO THE PROVISIONS OF SEC. 57. THE OTHER INCOME SHOWN BY THE ASSESSEE INCLUDES THE FOLLOWING: I) INTEREST ON INCOME TAX REFUND RS. 94,059/- II) UNCLAIMED CREDIT BALANCES RS. 20,440/- III) CREDIT BALANCES WRITTEN BACK RS. 14,56,005/- R S. 15,70,504/- 3.4 SINCE THE ASSESSEE HAS NOT ADMITTED ANY INCOME FROM THE BUSINESS OF INFRASTRUCTURE ACTIVITY, THE ASSESSING OFFICER TREA TED THE ABOVE INCOME AS INCOME FROM OTHER SOURCES. ACCORDINGLY, THE ASSESSING OF FICER DISALLOWED THE CLAIM OF EXPENDITURE AND ONLY 10% OF THE LEASE INCOME AND MA INTENANCE HAS BEEN ALLOWED 4 K P POWER PVT LTD AS EXPENSES TO COVER ANY AMBIGUITY OR LAPSE. HENCE , THE ASSESSING OFFICER ALLOWED THE EXPENSES OF RS. 66,000/- IN TOTAL. 4 ON APPEAL, THE CIT(A) CONCURRED WITH THE VIEW OF THE ASSESSING OFFICER. 5 BEFORE US, THE LD AR OF THE ASSESSEE HAS SUBMITTE D THAT THE ASSESSEE IS IN THE BUSINESS OF SETTING UP OF WIND MILLS AND ERRECTION OF TRANSMISSION LINES. IN THIS PROCESS, THE ASSESSEE TAKES THE LAND FROM MIDC ON LEASE AND SUB LEASES TO THE OTHER PARTIES FOR WIND MILLS. THE ASSESSEE IS PROVIDING INFRASTRU CTURE FACILITY FOR SETTING UP AND ERRECTION OF WIND MILLS AS WELL AS TRANSMISSION LIN ES. HE HAS FURTHER SUBMITTED THAT DUE TO GOVERNMENT POLICY, THE GOVERNMENT DID NOT ALLOW CONCESSION ON WIND MILLS DURING THESE TWO YEARS; THEREFORE, NOBODY CAME FORWARD TO SET UP NEW WIND MILLS IN THESE YEARS. THUS, THERE WAS A LULL IN THE BUSINESS OF TH E ASSESSEE. HOWEVER, IN THE SUBSEQUENT YEAR, THE ASSESSEE HAS SHOWN ABOUT RS. 4 CRORES OF TURN-OVER FROM THE INFRASTRUCTURE ACTIVITY OF SETTING UP AND ERRECTION OF WIND MILLS. HE HAS FURTHER SUBMITTED THAT IN THE EARLIER YEARS ALSO THE ASSESS EE HAS OFFERED INCOME FROM BUSINESS OF SET UP OF WIND MILLS AS WELL AS TRANSMI SSION LINES. THEREFORE, THE ASSESSEE IS ALREADY IN THE BUSINESS OF SETTING UP OF WIND MILLS . HE HAS FURTHER CONTENDED THAT TAKING THE LAND ON LEASE FROM MIDC AND SUB-LEASE TO THE CLIENTS FOR DEVELOPMENT OF WIND MILL FARMS IS PART AND PARCEL OF THE BUSINESS ACTIVITY OF THE ASSESSEE. THEREFORE, THE LEASE RENT RECEIVED BY THE ASSESSEE BY SUBLEASI NG OUT OF THE PLOTS CANNOT BE ASSESSED AS INCOME FROM OTHER SOURCES; BUT IS PART AND PARCEL OF THE BUSINESS OF THE ASSESSEE. HE HAS FURTHER SUBMITTED THAT IN THE EAR LIER YEARS, THE LEASE RENT INCOME WAS ASSESSED AS BUSINESS INCOME ALONG WITH INCOME F ROM SETTING UP OF WIND MILLS. HE HAS RELIED UPON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF L VE VAIRAVAN CHETTIAR VS CIT REPORTED IN 72 ITR 114 AS WELL AS THE DECISION OF THE HON BE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX V. NORTHERN INDIA IRON 5 K P POWER PVT LTD AND STEEL CO. LTD. REPORTED IN 226 ITR 342 AND SUBM ITTED WHEN THE ASSESSEE IS CONTINUE ITS BUSINESS THEN, DURING THE PERIOD OF LU LL AND INACTIVITY, IT IS DEEMED TO CARRY ON ITS BUSINESS. 5.1 THE LD DR, ON THE OTHER HAND, HAS HEAVILY RELIE D UPON THE ORDERS OF THE LOWER AUTHORITIES AND SUBMITTED THAT WHEN THE ASSESSEE HA S NOT DONE ANY ACTIVITY OF DEVELOPMENT OF SETTING UP OF WIND MILLS OR PROVIDIN G ANY INFRASTRUCTURE FACILITY DURING THE YEAR THEN, THE INCOME RECEIVED BY WAY OF LEASE RENT IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. 6 WE HAVE CONSIDERED THE RIVAL CONTENTION AND CAREF ULLY PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS NOT DISPUTED THAT THE AS SESSEE IS IN THE BUSINESS OF DEVELOPMENT AND SETTING UP OF WIND MILLS AND LAYING OF NEW LINES FOR TRANSMISSION OF ELECTRICITY GENERATED BY WIND MILLS. THE LAND OBTA INED BY THE ASSESSEE ON LEASE FROM MIDC AND SUBLEASED TO THE OTHER PARITIES FOR THE PU RPOSE OF SETTING UP OF WIND MILLS AS THE FACILITY OF INFRASTRUCTURE AND DEVELOPMENT PROVIDED BY THE ASSESSEE. THEREFORE, THE SAID ACTIVITY OF OBTAINING LAND ON L EASE AND FURTHER DEVELOPMENT OF SUITABLE SUB- PLOTS FOR SETTING UP OF WIND MILLS TH EREON IS PART AND PARCEL OF THE BUSINESS ACTIVITY OF THE ASSESSEE. FURTHER, THE LE ASE RENT OFFERED BY THE ASSESSEE IN THE EARLIER YEARS HAS BEEN ACCEPTED BY THE REVENUE AS BUSINESS INCOME ALONG WITH THE INCOME FROM THE ACTIVITY OF DEVELOPMENT AND SET TING UP OF INFRASTRUCTURE FACILITY FOR WIND MILLS AND TRANSMISSION OF LINES. THEREFO RE, THE SAID LEASE RENT CANNOT BE TREATED DIFFERENTLY OR WOULD CHANGE ITS CHARACTER FROM THE BUSINESS INCOME TO INCOME FROM OTHER SOURCES MERELY BECAUSE THE ASSESS EE HAS NOT OFFERED ANY INCOME FROM THE ACTIVITY OF PROVIDING DEVELOPMENT AND INFRASTRUCTURE FACILITY FOR WIND MILLS AND LAYING OF NEW LINES FOR TRANSMISSION OF ELECTRICITY DURING THE YEAR UNDER CONSIDERATION. 6 K P POWER PVT LTD 6.1 IT IS NOT THE CASE OF THE REVENUE THAT THE ASSE SSEE HAS CLOSED DOWN ITS BUSINESS ACTIVITY OR OTHERWISE THE ASSESSEE HAS NO INTENTION TO CONTINUE THE SAID BUSINESS ACTIVITY. THIS TEMPORARY BREAK IN THE ACT IVITY OF INFRASTRUCTURE DEVELOPMENTS IS ONLY A LULL IN THE CONTINUOUS/EXISTING BUSINESS OF THE ASSESSEE AND NOT BECAUSE OF THE PERMANENT CLOSURE OF BUSINESS. THE ASSESSEE, PRIOR TO THESE ASSESSMENT YEARS AND SUBSEQUENT TO THESE ASSESSMENT YEARS HAS CARRIE D OUT THE BUSINESS OF DEVELOPMENT AND INFRASTRUCTURE FACILITY OF SETTING UP OF WIND MILLS AND LAYING OF NEW LINES FOR TRANSMISSION OF ELECTRICITY. THEREFORE, IT CANNOT BE SAID THAT THE ASSESSEE HAS DISCONTINUED ITS BUSINESS OR PERMANENTLY CLOSED DOW N ITS BUSINESS. THE LEASE RENT INCOME HAS DIRECT NEXUS WITH THE BUSINESS ACTIVIT IES OF THE ASSESSEE; THEREFORE, ONCE THE ASSESSING OFFICER HAS ACCEPTED THE LEASE RENT A S BUSINESS INCOME OF THE ASSESSEE THEN, IT CANNOT BE TREATED DIFFERENTLY ON THE GROUND THAT THE ASSESSEE HAS NOT CARRIED OUT ANY BUSINESS ACTIVITY DURING THE YE AR UNDER CONSIDERATION. THE ASSESSING OFFICER HAS RECORDED IN THE ASSESSMENT OR DER THAT LEASE RENT OF RS. 6 LACS IS THE SAME, WHICH WAS IN THE EARLIER YEAR; THEREFORE, WHEN SOURCE OF INCOME IS THE SAME AS IN THE EARLIER YEAR THEN THE CLAIM OF THE A SSESSEE CANNOT BE DENIED DUE TO THE TEMPORARY LULL IN THE BUSINESS ACTIVITY WHICH I S BEYOND THE CONTROL OF THE ASSESSEE BUT BECAUSE OF THE POLICY OF THE GOVERNMENT IN PROV IDING REBATE OR CONCESSION FOR SETTING UP OF NEW WIND MILLS. 7 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF T HE CASE THE NON CARRY OUT OF THE BUSINESS ACTIVITY DURING THE YEAR IS IN THE NATURE OF LULL IN THE BUSINESS AND NOT A PERMANENT CLOSURE, WE ALLOW THE CLAIM OF THE ASSESS EE REGARDING LEASE RENTAL INCOME AS BUSINESS INCOME. 7 K P POWER PVT LTD 8 GROUND NO.5 IS REGARDING THE AMOUNT WRITTEN BACK OUT OF THE EARLIER YEARS CREDITS HAS BEEN TREATED AS INCOME FROM OTHER SOUR CES AS AGAINST INCOME FROM BUSINESS U/S 41(2) OF THE ACT. 8.1 THE ASSESSEE HAS WRITTEN BACK A SUM OF RS. 14,5 6,005/- PROVIDED FOR BY IT AS LIABILITY IN EARLIER YEARS FOR JOB WORKS TO BE CARR IED OUT BY THE PARTIES IN THE COURSE OF INFRASTRUCTURE DEVELOPMENT WORK FOR THE AY 2001-02 . THIS SUM OF RS.14,56,005/- CONSIST OF RS. 5,57,083/- AS CIVIL WORKS GUARANTEE MONEY AND RS. 8,.98,922/- AS ELECTRIC WORK GUARANTEE MONEY. IN PURSUANT TO THE SETTLEMENT ARRIVED BETWEEN THE ASSESSEE AND M/S TACKE WIND ENERGY, THIS AMOUNT WAS DETERMIN ED AS NOT PAYABLE AND NO LONGER THE PROVISION. THE ASSESSEE ACCORDINGLY BRO UGHT BACK THIS AMOUNT TO ITS P&L ACCOUNT AS CREDIT WRITTEN BACK AND CLAIMED AS BUSIN ESS INCOME BECAUSE IT WAS CLAIMED AS BUSINESS EXPENDITURE IN THE EARLIER YEAR . 8.2 THE ASSESSING OFFICER TREATED THE SAID WRITTEN BACK CREDIT BALANCE AS INCOME FROM OTHER SOURCES. THE CIT(A) CONFIRMED THE ACTIO N OF THE ASSESSING OFFICER. 9 WE HAVE HEARD THE LD AR OF THE ASSESSEE AND THE L D DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THIS PROVISION WAS MA DE BY THE ASSESSEE AS A LIABILITY FOR CARRYING OUT THE BUSINESS ACTIVITY AND FINALLY IN P URSUANT TO THE SETTLEMENT ARRIVED AT BETWEEN THE ASSESSEE AND WIND MILLS SUPPLIERS, IT W AS DETERMINED AS THE SAID LIABILITY IS NO MORE PAYABLE. THERE IS NO DISPUTE THAT THE L IABILITY WAS RECORDED IN CONNECTION WITH CARRYING OUT THE BUSINESS ACTIVITY OF THE ASS ESSEE. 9.1 IT IS PERTINENT TO NOTE THAT IN THE EARLIER YEA R THE SAID LIABILITY WAS BOOKED AS BUSINESS EXPENDITURE. THEREFORE, SUBSEQUENT WRITTEN BACK OF THE SAME CAN GIVE RISE TO THE BUSINESS INCOME AND CANNOT BE TREATED AS OTH ER THEN THE BUSINESS INCOME OF THE ASSESSEE. FURTHER, WHEN WE HAVE ALREADY EXPRES SED OUR VIEW THAT THE ASSESSEE IS 8 K P POWER PVT LTD CONTINUE IN THE BUSINESS OF PROVIDING AND DEVELOPM ENT OF INFRASTRUCTURE FACILITY OF SETTING UP OF WIND MILLS AND LAYING OF NEW LINES F OR TRANSMISSION OF ELECTRICITY THEN, THE ACTION OF THE LOWER AUTHORITIES IN TREATING THE SAM E AS INCOME FROM OTHER SOURCES IS NOT JUSTIFIED. ACCORDINGLY, WE ALLOW THE CLAIM OF THE ASSESSEE. THE ORDER OF THE CIT(A) IS SET ASIDE ON THIS ISSUE. 10 NEXT ISSUE IS REGARDING DISALLOWANCE OF EXPENDIT URE. 10.1 THE ASSESSING OFFICER DISALLOWED THE ENTIRE EX PENDITURE OF RS. 18,51,657/- ON THE GROUND THAT THE ENTIRE INCOME HAS BEEN ASSESSED AS THE INCOME FROM OTHER SOURCES; THEREFORE, THE EXPENSES ALLOWABLE ARE ON LY COVERED AS PER PROVISIONS OF SEC. 57 OF THE ACT. 10.2 APART FROM THIS, THE ASSESSING OFFICER HAS ALS O QUESTIONED THE JUSTIFICATION OF INCREASE IN THE EXPENDITURE IN COMPARISON TO THE EA RLIER YEARS. THE CIT(A) HAS CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OF FICER BY GOING A STEP FURTHER IN OBSERVING THAT THE EXPENDITURE INCURRED EITHER IN RELATION TO THE SAID MOU OR TO SOME OTHER BUSINESS WHICH IS ONLY KNOWN TO THE ASSE SSEE COMPANY. 11 WE HAVE HEARD THE LD AR OF THE ASSESSEE AS WELL AS THE LD DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. SINCE THE ISSUE O F TREATMENT OF THE RENT INCOME AND WRITTEN BACK OF CREDIT BALANCE HAS BEEN DECIDED BY US IN FAVOUR OF THE ASSESSEE; THEREFORE, THE DISALLOWANCE OF EXPENDITURE SO FAR A S ON THE GROUND OF ALLOWABLE ONLY AS PER SEC 57 IS NOT SUSTAINABLE. HOWEVER, THE ASS ESSING OFFICER HAS OBSERVED IN THE ASSESSMENT ORDER AT PAGE 4 THAT IN COMPARISON TO THE PRECEDING YEAR, THERE IS HUGE AND ABNORMAL INCREASE IN VARIOUS EXPENSES WHIC H IS NEITHER EXPLAINED NOR JUSTIFIED BY THE ASSESSEE. THEREFORE, EVEN IF THE INCOME OF THE ASSESSEE IS ASSESSABLE AS BUSINESS INCOME, THE ONUS IS ON THE ASSESSEE TO ESTABLISH THAT THE EXPENDITURE 9 K P POWER PVT LTD HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PU RPOSE OF BUSINESS OF THE ASSESSEE. THE ASSESSEE HAS NOT FILED THE NECESSARY RECORDS BE FORE US TO JUSTIFY THE ABNORMAL INCREASE IN THE VARIOUS EXPENSES IN COMPARISON TO E ARLIER YEARS AND THAT TOO WHEN THE ASSESSEE HAS NOT OFFERED ANY INCOME FROM MAIN B USINESS ACTIVITY; THEREFORE, THIS ISSUE IS REQUIRED TO BE ADJUDICATED AFRESH AFTER VE RIFICATION AND EXAMINATION OF THE RECORDS IN SUPPORT OF THE CLAIM OF THE ASSESSEE. AC CORDINGLY, WE SET ASIDE THIS ISSUE TO THE RECORD OF THE ASSESSING OFFICER TO DECIDE THE S AME AFRESH AS PER LAW. ITA NO. 1257/MUM/2009(AY 2005-06) 12 THERE IS A DELAY OF ONE DAY IN FILING THIS APPEA L BY THE ASSESSEE. THE ASSESSEE HAS FILED AN APPLICATION ALONG WITH AN AFFIDAVIT EX PLAINING THE REASONS FOR DELAY IN FILING THIS APPEAL. 13 WE HAVE HEARD THE LD AR AS WELL AS THE LD DR A ND CONSIDERED THE AFFIDAVIT FILED BY THE ASSESSEE. WE ARE SATISFIED THAT THE AS SESSEE WAS HAVING SUFFICIENT CAUSE FOR THE DELAY OF ONE DAY IN FILING THIS APPEAL. AC CORDINGLY, WE CONDONE THE DELAY OF ONE DAY IN FILING THIS APPEAL AND ADMIT THE SAME FO R ADJUDICATION ON MERIT. 13.1 ALL THE GROUNDS RAISED IN THIS APPEAL BY THE A SSESSEE ARE COMMON AS TO THE GROUNDS OF APPEAL RAISED FOR AY 2004-05 EXCEPT THE GROUND NO.6 AND THE AMOUNT INVOLVED. THEREFORE, THE GROUNDS OTHER THAN GROUND NO.6 OF THE APPEAL FOR AY 2005- 06 ARE DISPOSED OFF IN TERMS OF OUR FINDINGS FOR TH E AY 2004-05. 14 THE GROUND NO.6 RAISED BY THE ASSESSEE IN THIS A PPEAL READS AS UNDER: THE LD CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMI NG THE INTEREST EARNED OF RS. 2,25,967/- BY THE APPELLANT COMPANY AS INCOME FROM O THER SOURCES AND NOT AS INCOME FROM BUSINESS 10 K P POWER PVT LTD 15 THE ASSESSEE EARNED INTEREST OF RS. 2,25,967/- A ND CLAIMED THE SAME AS BUSINESS INCOME. THE ASSESSING OFFICER DECLINED THE CLAIM OF THE ASSESSEE. THE ASSESSING OFFICER TREATED THE SAME AS INCOME FROM O THER SOURCE. ON APPEAL, THE CIT(A), THOUGH CONFIRMED THE ACTION OF THE ASSESSIN G OFFICER; HOWEVER, THE CIT(A) OBSERVED THAT NO DEDUCTION U/S 80HHC IS ALLOWABLE O N INTEREST. 16 WE HAVE HEARD THE LD AR OF THE ASSESSEE AND THE LD DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. NOTHING HAS BEEN BROU GHT BEFORE US TO SHOW AS TO HOW THE INTEREST PAID BY THE ASSESSEE IS CONNECTED WITH THE BUSINESS ACTIVITY AND THEREFORE, WE FIND NO MERIT AND SUBSTANCE IN THE CL AIM OF THE ASSESSEE. IT IS SETTLED PROPOSITION OF LAW THAT INTEREST ON DEPOSIT IS ASSE SSABLE UNDER THE HEAD INCOME FROM OTHER SOURCE EXCEPT IN THE CASE OF THE DEPOSIT IS MADE FOR BUSINESS REQUIREMENT AND NOT AS A SURPLUS FUND OR OTHER ADVANCE. THEREF ORE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) ON THIS ISS UE. 17 IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 21 ST , DAY OF OCT 2011. SD/ SD/- ( J SUDHAKAR REDDY ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 21 ST OCT2011 RAJ* 11 K P POWER PVT LTD COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI