ACIT 10(1), MUMBAI V. ELARA CAPITAL (I) P L;TD, MUMBAI

ITA 6838/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8842 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 11-09-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 10-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V KRISHNMOORTHY
• Keywords: Business income; Tax effect

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO. 6838/MUM/2011 ASSESSMENT YEAR-2008-09 THE ACIT 10(1), AAYAKAR BHAVAN, MUMBAI-400 020 VS. M/S. ELARA CAPITAL (I) PVT. LTD., 304, 3 RD FLOOR, VAIBHAV CHAMBERS, BKC BANDRA (E), MUMBAI-400 051 PAN- AABCE 6487B (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI V. KRISHNMOORTHY RESPONDENT BY: NONE DATE OF HEARING :11.09.2012 DATE OF PRONOUNCEMENT: 26.9.2012 O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)- 21, MUMBAI DT.26.7.2011 PERTAINING TO ASSESSMENT YE AR 2008-09. 2. THE SOLE GRIEVANCE OF THE REVENUE IS THAT THE LD . CIT(A) ERRED IN DELETING THE ADDITION OF INTEREST INCOME OF RS. 47, 38,816/- WITHOUT APPRECIATING THE FACT THAT THE INCOME IS NOT DERIVE D FROM ANY BUSINESS ACTIVITY THEREFORE LIABLE TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCE. 3. NONE APPEARED ON BEHALF OF THE ASSESSEE THEREFOR E WE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE AND DISPOSE OF THIS MAT TER EX PARTE ON MERIT. 4. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE COMPANY IS IN THE BUSINESS OF MERCHANT BANKING. FOR THE YEAR UND ER CONSIDERATION, THE ITA NO.6838/M/2011 2 ASSESSEE FILED ITS RETURN OF INCOME ON 30.9.2008 DE CLARING TOTAL INCOME AT RS. 37,37,721/-. THE RETURN WAS REVISED ON THE SAME DA Y DECLARING THE SAME INCOME AS THE ORIGINAL RETURN DID NOT BEAR THE DIGI TAL SIGNATURE. THE RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT AND ACCORDINGL Y STATUTORY NOTICES WERE ISSUED AND SERVED UPON THE ASSESSEE. 5. INTER ALIA, THE ASSESSING OFFICER OBSERVED THAT T HE ASSESSEE HAS RECEIVED INTEREST ON FIXED DEPOSIT TO THE TUNE OF R S. 47,38,816/-. THE AO FURTHER OBSERVED THAT THE ASSESSEE HAS SHOWN THE IN TEREST EARNED ON FIXED DEPOSIT AS BUSINESS INCOME. EXPLANATION WAS SOUGHT FROM THE ASSESSEE IN RESPECT OF ITS TREATMENT OF INTEREST ON FDR AS BUSI NESS INCOME AND WHY IT SHOULD NOT BE TAXED UNDER THE HEAD INCOME FROM OTH ER SOURCES. ON RECEIVING NO RESPONSE/REPLY FROM THE ASSESSEE, THE AO WENT ON TO TAX THE SAME UNDER THE HEAD INCOME FROM OTHER SOURCES DED UCTING IT FROM THE HEAD INCOME FROM BUSINESS. 6. THE ASSESSEE CARRIED THIS MATTER BEFORE THE LD. CIT(A). IT WAS THE CONTENTION OF THE ASSESSEE THAT THE FIXED DEPOSIT M ADE HAD A DIRECT NEXUS WITH THE BUSINESS ACTIVITY OF THE ASSESSEE AND THER EFORE IT HAS RIGHTLY SHOWN THE INTEREST EARNED ON FIXED DEPOSIT UNDER THE HEAD BUSINESS INCOME. THE LD. CIT(A) WAS CONVINCED WITH THE SUBMISSIONS OF TH E ASSESSEE CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE AND ALLOWED THE APPEAL. WHILE ALLOWING THE APPEAL, THE LD. CIT(A) OBSERVED THAT T HERE IS NO TAX EFFECT WHETHER INTEREST INCOME HAS ASSESSED UNDER THE HEAD BUSINESS INCOME OR UNDER THE HEAD INCOME FROM OTHER SOURCES. 7. REVENUE IS AGGRIEVED BY THIS FINDING OF THE LD. CIT(A) AND BEFORE US . THE LD. DEPARTMENTAL REPRESENTATIVE WHILE SUPPORTIN G THE ORDER OF THE AO ARGUED THAT THE ASSESSEE HAS FAILED TO ESTABLISH AN Y NEXUS BETWEEN FDR AND ITS BUSINESS ACTIVITY. ITA NO.6838/M/2011 3 8. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. DR AND CAREFULLY PERUSED THE ORDERS OF THE LOWER AUTHORITIES. IT IS NOT DISPUTED THAT ASSESSEE IS A MERCHANT BANKER. FOR THE PURPOSE OF MAINTAINI NG THE MINIMUM NET WORTH REQUIREMENT OF LICENSE ISSUED BY SEBI, THE ASSESSEE HAD TO MAKE A FIXED DEPOSIT. WE FIND THAT THE LD. CIT(A) WHILE DECIDIN G THE APPEAL IN FAVOUR OF THE ASSESSEE HAS DISTINGUISHED THE FACTS OF THE CAS E FROM THE FACTS OF THE DECISION OF MUMBAI SPECIAL BENCH IN THE CASE OF DC IT VS TIMES GUARANTEE LTD. (2010) 41 DTR 193. AFTER CONSIDERING THE ORDE R, WE FIND THAT THE MAKING OF DEPOSITS HAD A DIRECT NEXUS WITH THE ASSESSEES BUSINESS ACTIVITY. WE ALSO FIND THAT THERE IS NO LOSS TO THE REVENUE WHETHER THE INTEREST INCOME IS TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES OR UNDER THE HEAD BUSINESS INCOME. WE AGREE WITH THE FINDINGS OF LD. CIT(A) THAT THERE IS NO TAX EFFECT ON TREATMENT OF SUCH INTEREST INCOME UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION. THEREFORE WE DO NOT FIND ANY REASON TO TINKER WITH THE FINDINGS OF LD. CIT(A), ACCORDINGLY ORDER OF THE LD. CIT(A) IS CONFIRMED. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 26 TH DAY OF SEPTEMBER, 2012 SD/- SD/- (D.K. AGARWAL) (N.K. BILLAIYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 26 TH SEPTEMBER, 2012 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR E BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI