M/s Harbhajan Singh & Co., Sangrur V. DCIT, Circle, Sangrur

ITA 727/CHANDI/2018

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5680 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 17-05-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: SANKET SINGLA
• Keywords: Business income; Diversion of income; Capital receipt; TDS; Capital Gains
• Section: 251; 191; 56; 28

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BE NCH A, CHANDIGARH , . '.., # $, %& BEFORE: SH.SANJAY GARG, JM & DR. B.R.R. KUMAR, AM ./ ITA NO. 727/CHD/2018 ( ) / ASSESSMENT YEAR : 2012-13 M/S HARBHAJAN SINGH & CO. H.O. SINGLA ENCLAVE, CLUB ROAD, SANGRUR THE DCIT, CIRCLE SANGRUR ./ PAN NO: AADFH9441H / APPELLANT / RESPONDENT / ASSESSEE BY : SHRI. SANKET SINGLA / REVENUE BY : SMT. CHANDRAKANTA ! ' # / DATE OF HEARING: 26/11/2018 $%&'() # / DATE OF PRONOUNCEMENT : 29/11/2018 %*/ ORDER PER DR. B.R.R. KUMAR, A.M: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER OF THE LD. CIT(A), PATIALA DT. 28/03/2018. 2. IN THE PRESENT APPEAL ASSESSEE HAS RAISED THE FO LLOWING GROUNDS: 1. THE ORDER OF THE WORTHY COMMISSIONER OF INCOME TAX (APPEALS), PATIALA IS AGAINST THE LAW, FACTS, CIRCUMSTANCES, NATURAL JUST ICE, EQUITY, BAD IN LAW AND ALL OTHER KNOWN PRINCIPLES OF LAW. 2. THE WORTHY COMMISSIONER OF INCOME TAX (APPEALS), PA TIALA IS NOT JUSTIFIED IN SUSTAINING THE ADDITION OF RS, 3,91,497/- MADE ON A CCOUNT OF INTEREST ON INCOME TAX REFUND UNDER THE HEAD 'INCOME FROM OTHER SOURCE S' AS THE ASSESSMENT HAS BEEN FRAMED BY APPLYING A NET PROFIT @ 7% ON THE GR OSS RECEIPT OF THE ASSESSEE. 3. THE BRIEF FACTS TAKEN FROM THE ORDER OF THE LD. CIT(A) IS THAT THE ASSESSEE IS A PARTNERSHIP FIRM AND FILED ITS RETURN DECLARING I NCOME OF RS. 48,90,510/- THE CASE WAS SELECTED WAS SCRUTINY AND ASSESSED U/S 143 (3) BY APPLYING THE FLAT RATE OF @ 7% AND THE ASSESSING OFFICER ALSO MADE AN ADDITION OF RS. 6,45,921/- ON ACCOUNT OF INTEREST FROM FDR, RS. 3,91,497/- ON ACC OUNT OF INTEREST FROM INCOME TAX REFUND AND RS. 1621/- ON ACCOUNT OF REBATE AND DISCOUNT SEPARATELY UNDER 2 THE HEAD INCOME FROM OTHER SOURCE BY IGNORING THE F ACTS AND PAST HISTORY IN THE ASSESSEES OWN CASE. 4. THE LD. CIT(A) DELETED THE INTEREST RECEIVED FRO M FDRS BASED ON THE STAND TAKEN BY THE REVENUE CONSISTENTLY. THE RELEVANT PAR T OF ORDER OF THE REVENUE IS REPRODUCED HEREUNDER FOR THE SAKE OF REFERENCE IN SNAM PROGETTI S. P. A. V. ADD/. CTT[1981] 132 TTR 70/[1982] 10 TAXMAN 86 (DELHI), IT WAS HELD THAT NEXUS WITH THE ACTIVITIES CANNOT BE OVERLOOKED MORE SO WHERE THE INCOME IS ATTRIBUTABLE TO OR DERIVED FROM THE TARGETED ACTIVITY. 12. IN TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. (S UPRA), A THREE-JUDGE BENCH OF THE APEX COURT WAS DEALING WITH THE ISSUE WHERE THE COMPANY HAD SURPLUS FUNDS IN ITS HANDS AND IN ORDER TO EARN INCOME OUT OF THE SURPLUS FUNDS, IT INVESTED THE AMOUNT FOR THE PURPOSE OF EARNING INTEREST. THE COMPANY HAD BORROWED FUNDS, WHICH WAS NOT IMMEDIATELY REQUIRED BY THE CO MPANY AND THE SAME WAS KEPT INVESTED IN SHORT-TERM DEPOSIT WITH BANKS. IN THAT CONTEXT, THE APEX COURT HELD AS FOLLOWS (PAGE 183) : 'IT IS DIFFICULT TO FOLLOW THIS REASONING. IF A PER SON BORROWS MONEY FOR BUSINESS PURPOSES BUT UTILISES THAT MONEY TO EARN INTEREST, HOWEVER TEMPORARILY, THE INTEREST SO GENERATED WILL BE HIS INCOME. THIS INCOME CAN BE UTILISED BY THE ASSESSEE WHICHEVER WAY HE LIKES. HE MAY OR MAY NOT DISCHARGE HIS LIABILITY TO PAY INTEREST WITH THIS INCOME. MERELY BECAUSE IT WAS UTILISED TO REPAY THE INTEREST ON THE LOAN TAKEN BY THE ASSESSEE, IT DID NOT CEASE TO BE HIS I NCOME. THE INTEREST EARNED BY THE ASSESSEE COULD HAVE BEEN USED FOR MANY OTHER PU RPOSES. IF THE ASSESSEE PURCHASED A HOUSE OR DISTRIBUTED DIVIDEND OR PAID S ALARY TO ITS EMPLOYEES WITH THE MONEY RECEIVED AS INTEREST, WILL THE INTEREST AMOUN T BE TREATED AS NOT HIS INCOME ? THIS IS NOT A CASE OF DIVERSION OF INCOME BY OVER RIDING TITLE. THE ASSESSEE WAS ENTIRELY AT LIBERTY TO DEAL WITH THE INTEREST AMOUN T AS HE LIKED. THE APPLICATION OF THE INCOME FOR PAYMENT OF INTEREST COULD NOT AFFECT ITS TAXABILITY IN ANY WAY.' 14. IN CIT V. BOKARO STEEL LTD.[1999] 236ITR 31 5/ 102 TAXMAN 94 (SC), THE APEX COURT WAS DEALING WITH THE SITUATION WHEREIN A GOVE RNMENT COMPANY, DURING THE PERIOD OF CONSTRUCTION OF PLANT, HAD ADVANCED MONIE S TO CONTRACTORS ON WHICH IT WAS EARNING INTEREST AND RECEIVED CHARGES FROM QUAR TERS LET OUT TO THE EMPLOYEES. IT ALSO RECEIVED HIRE CHARGES ON PLANT L ET OUT TO THE CONTRACTORS AND RECEIVED ROYALTY ON STONES REMOVED FROM ITS LAND. I N THAT FACTUAL BACKDROP, THEIR LORDSHIPS REFERRED TO THE DECISION IN TUTICORIN ALK ALI CHEMICALS & FERTILIZERS LTD. (SUPRA) AND ANALYSED THE FACTS AND CAME TO OPINE TH US (PAGE 322) : 'THAT CASE DEALT WITH THE QUESTION WHETHER INVESTME NT OF BORROWED FUNDS PRIOR TO COMMENCEMENT OF BUSINESS, RESULTING IN EARNING OF I NTEREST BY THE ASSESSEE WOULD AMOUNT TO THE ASSESSEE EARNING ANY INCOME. THIS COU RT HELD THAT IF A PERSON BORROWS MONEY FOR BUSINESS PURPOSES, BUT UTILISES T HAT MONEY TO EARN INTEREST, HOWEVER TEMPORARILY, THE INTEREST SO GENERATED WILL BE HIS INCOME. THIS INCOME CAN BE UTILISED BY THE ASSESSEE WHICHEVER WAY HE LI KES. MERELY BECAUSE HE UTILISED IT TO REPAY THE INTEREST ON THE LOAN TAKEN , WILL NOT MAKE THE INTEREST INCOME AS A CAPITAL RECEIPT. THE DEPARTMENT RELIED UPON TH E OBSERVATIONS MADE IN THAT JUDGMENT (AT PAGE 179) TO THE EFFECT THAT 'IF THE C OMPANY, EVEN BEFORE IT COMMENCES BUSINESS, INVESTS SURPLUS FUNDS IN ITS HA NDS FOR PURCHASE OF LAND OR HOUSE PROPERTY AND LATER SELLS IT AT PROFIT, THE GA IN MADE BY THE COMPANY WILL BE ASSESSABLE UNDER THE HEAD 'CAPITAL GAINS'. SIMILARL Y, IF A COMPANY PURCHASES RENTED HOUSE AND GETS RENT, SUCH RENT WILL BE ASSES SABLE TO TAX UNDER SECTION 22 AS INCOME FROM HOUSE PROPERTY. LIKEWISE, A COMPANY MAY HAVE INCOME FROM OTHER 3 SOURCES . . . THE COMPANY MAY ALSO, AS IN THAT CASE , KEEP THE SURPLUS FUNDS IN SHORT-TERM DEPOSITS IN ORDER TO EARN INTEREST. SUCH INTEREST WILL BE CHARGEABLE UNDER SECTION 56 OF THE INCOME-TAX ACT'. THIS COURT ALSO EMPHASISED THE FACT THAT THE COMPANY WAS NOT BOUND TO UTILISE THE INTEREST S O EARNED TO ADJUST IT AGAINST THE INTEREST PAID ON BORROWED CAPITAL. THE COMPANY WAS FREE TO USE THIS INCOME IN ANY MANNER IT LIKED. HOWEVER, WHILE INTEREST EAR NED BY INVESTING BORROWED CAPITAL IN SHORT-TERM DEPOSITS IS AN INDEPENDENT SO URCE OF INCOME NOT CONNECTED WITH THE CONSTRUCTION ACTIVITIES OR BUSINESS ACTIVI TIES OF THE ASSESSEE, THE SAME CANNOT BE SAID IN THE PRESENT CASE WHERE THE UTILIS ATION OF VARIOUS ASSETS OF THE COMPANY AND THE PAYMENTS RECEIVED FOR SUCH UTILISAT ION ARE DIRECTLY LINKED WITH THE ACTIVITY OF SETTING UP THE STEEL PLANT OF THE A SSESSEE. THESE RECEIPTS ARE INEXTRICABLY LINKED WITH THE SETTING UP OF THE CAPI TAL STRUCTURE OF THE ASSESSEE- COMPANV. THEY MUST, THEREFORE, BE VIEWED AS CAPITAL RECEIPTS GOING TO REDUCE THE COST OF CONSTRUCTION.' 15. IN THIS CONTEXT, WE MAY REFER WITFR PROFIT TO C IT V. KARNAL CO-OPERATIVE SUGAR MILLS LTD.[2000] 243 ITR 2/[2001] 118 TAXMAN 489 (S C) WHEREIN THE ASSESSEE HAD DEPOSITED MONEY TO OPEN A LETTER OF CREDIT FOR THE PURCHASE OF THE MACHINERY REQUIRED FOR SETTING UP ITS PLANT IN TERMS OF THE A SSESSEE'S AGREEMENT WITH THE SUPPLIER. IT WAS ON THE MONEY SO DEPOSITED THAT SOM E INTEREST HAD BEEN EARNED. IN THAT FACTUAL BACKDROP, THE APEX COURT RULED THUS : 'THIS IS, THEREFORE, NOT A CASE WHERE ANY SURPLUS S HARE CAPITAL MONEY WHICH IS LYING IDLE HAS BEEN DEPOSITED IN THE BANK FOR THE PURPOSE OF EARNING INTEREST. THE DEPOSIT OF MONEY IN THE PRESENT CASE IS DIRECTLY LI NKED WITH THE PURCHASE OF PLANT AND MACHINERY. HENCE, ANY INCOME EARNED ON SUCH DEP OSIT IS INCIDENTAL TO THE ACQUISITION OF ASSETS FOR THE SETTING UP OF THE PLA NT AND MACHINERY. IN THIS VIEW OF THE MATTER THE RATIO LAID DOWN BY THIS COURT IN TUT ICORIN ALKALI CHEMICALS AND FERTILIZERS LTD. V. CIT(19971227ITR 172 (SCI WILL N OT BE ATTRACTED. THE MORE APPROPRIATE DECISION IN THE FACTUAL SITUATION IN TH E PRESENT CASE IS IN CIT V. BOKARO STEEL LTD. 119991236 ITR 315 (SO.' 16. IN BONGAIGAON REFINARY & PETROCHEMICALS LTD. V. CTT[2001] 251 ITR 329/119 TAXMAN 488 (SC), THE QUESTION THAT AROS E FOR CONSIDERATION WAS WHETHER THE TRIBUNAL WAS JUSTIFIED IN HOLDING T HAT THE ITEMS OF INCOME DERIVED BY THE ASSESSEE DURING THE FORMATION PERIOD FOR THE MAIN BUSINESS WERE NOT TAXABLE INCOME BUT WERE TO BE ADJUSTED AGAINST THE PROJECT COST FOR THE OIL REFINERY AND PETROCHEMICALS, THE MAIN BUSINESS FOR WHICH THE COMPANY WAS SET UP. IT IS WORTH NOTING THAT THE HIGH COURT HAD ANSW ERED THE ISSUE IN NEGATIVE RELYING ON THE DECISION IN TUTICORIN ALKALI CHEMICA LS & FERTILIZERS LTD. (SUPRA). IN THAT CONTEXT, THEIR LORDSHIPS OPINED THUS (PAGE 330 ): 'THAT WAS A CASE IN WHICH THE QUESTION RELATED TO I NTEREST EARNED BY A COMPANY DURING ITS FORMATIVE PERIOD BY INVESTMENTS. THIS CO URT HAS HELD IN CIT V. BOKARO STEEL LTD. 119991236 ITR 315 (SCI THAT IT IS SO CON FINED AND DID NOT APPLY WHERE THE RECEIPTS WERE DIRECTLY CONNECTED WITH OR WERE INCID ENTAL TO THE WORK OF CONSTRUCTION OF THE ASSESSEE'S PLANT. THE DECISION IN CIT V. BOKARO STEEL LTD.119991 236 ITR 315 (SC) HAS BEEN FOLLOWED BY A TWO-JUDGE B ENCH OF THIS COURT IN CIT V. KARNAL CO-OPERATIVE SUGAR MILLS LTD. F20001 243 ITR 2 (SC) AND BY A THREE-JUDGE BENCH IN CIT V.KARNATAKA POWER CORPORATIONF20011247 ITR 268 (SC). IN FACT, IN THE LATTER CASE, IT WAS NOT DISPUTED BY THE REVENUE THA T THE QUESTION THAT RELATED TO HIRE CHARGES PAID BY CONTRACTORS HAD TO BE ANSWERED IN THE LIGHT OF THE JUDGMENT INBOKARO STEEL LTD. 'S CASE (19991236 ITR 315 (SC). IT IS, THEREFORE, NOT POSSIBLE NOW TO TAKE ANY VIEW DIFFERENT FROM THAT TAKEN IN BOKAR O STEEL LTD. S CASE (19991236 ITR 315 (SC).' 17. IN CITV. KOSHIKA TELECOM LTD.[2006] 287 ITR 479 (DELHI), THE FACTUAL MATRIX WAS THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF OP ERATING CELLULAR MOBILE TELEPHONE SERVICES. IN TERMS OF A L ICENCE AWARDED IN ITS FAVOUR FOR OPERATION OF THE SAID SERVICES IN THE STATES OF UTT AR PRADESH, BIHAR, ORISSA AND WEST BENGAL, THE ASSESSEE WAS REQUIRED TO PROVIDE F INANCE AND PERFORMANCE 4 BANK GUARANTEES TO THE DEPARTMENT OF TELECOMMUNICAT IONS. THE ASSESSEE ARRANGED THE SAID BANK GUARANTEES FROM THE INSTITUT IONS WHICH, IN CONNECTION WITH THE FURNISHING OF THE GUARANTEES, REQUIRED DEP OSIT OF MARGIN MONEY FROM WHICH HE EARNED THE INCOME. THE TRIBUNAL TREATED IT AS ASSESSABLE AS BUSINESS INCOME. WHILE DISMISSING THE APPEAL OF THE REVENUE, THIS COURT EXPRESSED THE FOLLOWING VIEW (PAGE 481) : I 'THE FINDING OF FACT RECORDED BY THE COMMISSIONER O F INCOME-TAX (APPEALS) AND AFFIRMED BY THE TRIBUNAL IS TO THE EFFECT THAT THE DEPOSIT OF THE MARGIN MONEY BY THE ASSESSEE WITH THE BANKS WAS INEXTRICABLY LINKED TO THE FURNISHING OF THE BANK GUARANTEES BY THE ASSESSEE TO THE DEPARTMENT OF TEL ECOMMUNICATIONS FOR OBTAINING A LICENCE. THAT FINDING IN OUR VIEW CONCL UDES THE CONTROVERSY INASMUCH AS IF THE DEPOSITS WERE INDEED INEXTRICABLY LINKED TO THE BUSINESS OF THE ASSESSEE, THE QUESTION WHETHER THE INCOME ACCRUING ON THE SAI D DEPOSITS WOULD CONSTITUTE BUSINESS INCOME STANDS ANSWERED BY THE DECISIONS OF THE SUPREME COURT INBOKARO STEEL LTD. [19991 236 TTR 315 (SO AND KAMA/ CO-OPER ATIVE SUGAR MILLS LTDJ2000I 243 TTR 2 (SO. BOTH THESE DECISIONS ARE IN OUR VIEW SUFFICIENT AUTHORITY FOR THE PROPOSITION THAT WHERE THE INCOME IN THE NATURE OF INTEREST FLOWS FROM DEPOSITS MADE BY THE ASSESSEE WHICH DEPOSITS ARE IN TURN INE XTRICABLY LINKED TO THE BUSINESS OF THE ASSESSEE, THE INCOME DERIVED ON SUC H DEPOSITS CANNOT BE TREATED AS INCOME FROM OTHER SOURCES.' 18. IN INTERNATIONAL MARKETING LTD. V. TTO[2007] 292 TT R 504/ 159 TAXMAN 24 (DELHI), FOLLOWING THE LAW IN TUTICORIN ALKALI CHEM ICALS & FERTILIZERS LTD. (SUPRA), IT WAS HELD THAT WHERE THE AUTHORITIES BELOW CONCURREN TLY TOOK THE VIEW THAT THE ASSESSEE HAD NOT CARRIED ON ANY BUSINESS DURING THE RELEVANT ASSESSMENT YEAR AND THAT THE INTEREST EARNED BY THE ASSESSEE ON SUR PLUS FUNDS DEPOSITED WITH DIFFERENT COMPANIES WAS TAXABLE AS INCOME FROM OTHE R SOURCES, THE VIEW TAKEN COULD NOT BE FAULTED WITH. 19. IN INDIAN OIL PAN/PAT POWER CONSORTIUM LTD. V. TTO[ 2009] 315 TTR 255/ 181 TAXMAN 249 (DELHI), THIS COURT HAD POSED THE QUESTI ON REGARDING THE TREATMENT WHICH WAS TO BE ACCORDED TO THE INTEREST EARNED ON MONIES RECEIVED AS SHARE CAPITAL BY THE ASSESSEE WHICH WERE TEMPORARILY PUT IN A FIXED DEPOSIT AWAITING ACQUISITION OF LAND WHICH HAD RUN INTO LEGAL ENTANG LEMENTS ON ACCOUNT OF TITLE. THE ASSESSING OFFICER AND THE COMMISSIONER OF INCOM E-TAX (APPEALS) HAD TREATED THAT THE INTEREST WAS IN THE NATURE OF CAPITAL RECE IPT WHICH WAS LIABLE TO BE SET OFF AGAINST PRE-OPERATIVE EXPENSES. THE TRIBUNAL, RELYI NG ON TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LTD. (SUPRA), DISLODGED THE FINDING RECORDED BY THE FIRST APPELLATE AUTHORITY. WHILE DEALING WITH THE APPEAL OF THE ASS ESSEE, THE BENCH REFERRED TO THE DECISION IN BOKARO STEEL LTD. (SUPRA) HOLDING T HUS (PAGE 260) : 'IT IS CLEAR UPON A PERUSAL OF THE FACTS AS FOUND B Y THE AUTHORITIES BELOW THAT THE FUNDS IN THE FORM OF SHARE CAPITAL WERE INFUSED FOR A SPECIFIC PURPOSE OF ACQUIRING LAND AND THE DEVELOPMENT OF INFRASTRUCTURE. THEREFO RE, THE INTEREST EARNED ON FUNDS PRIMARILY BROUGHT FOR INFUSION IN THE BUSINES S COULD NOT HAVE BEEN CLASSIFIED AS INCOME FROM OTHER SOURCES. SINCE THE INCOME WAS EARNED IN A PERIOD PRIOR TO COMMENCEMENT OF BUSINESS IT WAS IN THE NATURE OF CA PITAL RECEIPT AND HENCE WAS REQUIRED TO BE SET OFF AGAINST PRE-OPERATIVE EX PENSES. IN THE CASE OF TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LTDJ19971227 TTR 1 72 (SO IT WAS FOUND BY THE AUTHORITIES THAT THE FUNDS AVAILABLE WITH THE ASSES SEE IN THAT CASE WERE 'SURPLUS' AND, THEREFORE, THE SUPREME COURT HELD THAT THE INT EREST EARNED ON SURPLUS FUNDS WOULD HAVE TO BE TREATED AS 'INCOME FROM OTHER SOUR CES'. ON THE OTHER HAND IN BOKARO STEEL LTD.(19991 236 TTR 315 (SO WHERE THE A SSESSEE HAD EARNED INTEREST ON ADVANCE PAID TO CONTRACTORS DURING PRE-COMMENCEM ENT PERIOD WAS FOUND TO BE 'INEXTRICABLY UNITED' TO THE SETTING UP OF TH E PLANT OF THE ASSESSEE AND HENCE WAS HELD TO BE A CAPITAL RECEIPT WHICH WAS PE RMITTED TO BE SET OFF AGAINST PRE-OPERATIVE EXPENSES.' 20. RECENTLY, IN CTT V. PRODUCIN (P.) LTD.[2010] 322 TT R 270/ 191 TAXMAN 79 (SC), THE APEX COURT WAS DEALING WITH THE ISSUE WHETHER THE INTEREST INCOME RECEIVED BY THE ASSESSEE ON SHORT-T ERM FIXED DEPOSIT CONSTITUTED 5 PART OF THE TOTAL TURNOVER OF THE ASSESSEE'S BUSINE SS AND ALSO WHETHER IT FORMED A PART OF THE TOTAL BUSINESS INCOME OF THE ASSESSEE. IN THAT CASE, THERE WAS NO DISPUTE THAT THE AMOUNT RECEIVED BY THE ASSESSEE WA S FROM THE AMOUNT HE HAD INVESTED IN THE FDR BUT THERE WAS NO ACTUAL DATA WH ETHER THE SAID AMOUNT WAS IN TERMS OF THE AGREEMENT OR CONTRACT OF EXPORT, WHETH ER IT WAS A PART OF THE ADVANCE OR WHETHER IT WAS PART OF THE SURPLUS AT TH E HANDS OF THE ASSESSEE- COMPANY. IN THAT FACTUAL BACKDROP, THE APEX COURT H ELD THUS (PAGE 271) : 'AT PAGE 88 OF THE PAPER BOOK THE TRIBUNAL HOLDS TH AT THE INTEREST INCOME WAS GENERATED BY WAY OF KEEPING THE 'ADVANCES' RECEIVED BY THE ASSESSEE IN THE COURSE OF ITS REGULAR BUSINESS ACTIVITY. WE DO NOT KNOW ON WHAT BASIS THIS OBSERVATION HAS BEEN MADE. IT IS NOT CLEAR WHETHER THE CONTRACT BETWEEN THE PARTIES WAS EXAMINED OR NOT. THE HIGH COURT WHILE D ISPOSING OF THE MATTER HAS ALSO NOT EXAMINED THE FACTUAL BASIS. ACCORDING TO T HE DEPARTMENT, IT WAS THE CASE OF SURPLUS BEING INVESTED IN FDR WHEREAS ACCOR DING TO THE ASSESSEE IT WAS THE CASE OF ADVANCE HAVING BEEN RECEIVED FROM THE E XPORTER WHICH WAS INVESTED IN FDR FOR SHORT DURATION. IN VIEW OF THE ABSENCE OF FACTUAL MATRIX WE ARE OF THE VIEW THAT TO DECIDE THE QUESTION AS TO WHETHER THE RECEIPT FELL UNDER SECTI ON 28 OR UNDER SECTION 56 THE MATTER NEEDS TO BE REMITTED TO THE TRIBUNAL FOR FRE SH CONSIDERATION IN ACCORDANCE WITH LAW.' 21. KEEPING IN VIEW THE AFORESAID PRONOUNCEMENTS IN THE FIELD, THE PRESENT CONTROVERSY IS TO BE ADJUDGED. AS IS NOTICEABLE FRO M THE STIPULATIONS IN THE AGREEMENT, 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 TERMINATION OF THE AG REEMENT AND NHAI WOULD HAVE BEEN AT LIBERTY TO APPROPRIATE THE BID SECURIT Y. THAT APART, THE RELEASE OF SUCH PERFORMANCE SECURITY DEPENDED UPON CERTAIN CON DITIONS. THUS, IT IS CLEARLY EVINCIBLE THAT THE BANK GUARANTEE WAS FURNISHED AS A CONDITION PRECEDENT TO ENTERING INTO THE CONTRACT AND FURTHER IT WAS TO BE KEPT ALIVE TO FULFIL THE OBLIGATIONS. QUITE APART FROM THE ABOVE, THE RELEAS E OF THE SAME WAS DEPENDENT ON THE SATISFACTION OF CERTAIN CONDITIONS. THUS, TH E PRESENT CASE IS NOT ONE WHERE THE ASSESSEE HAD MADE THE DEPOSIT OF SURPLUS MONEY LYING IDLE WITH IT IN ORDER TO EARN INTEREST; ON THE CONTRARY, THE AMOUNT OF INTER EST WAS EARNED FROM FIXED DEPOSITS WHICH WERE KEPT IN THE BANK FOR FURNISHING THE BANK GUARANTEE. IT HAD AN INEXTRICABLE NEXUS WITH SECURING THE CONTRACT. THER EFORE, WE ARE DISPOSED TO THINK THAT THE FACTUAL MATRIX IS COVERED BY THE DECISIONS RENDERED IN BOKARO STEEL LTD. (SUPRA), KAMA/ CO-OPERATIVE SUGAR MILLS LTD. (SUPRA ) AND KOSHIKA TELECOM LTD. (SUPRA) AND, ACCORDINGLY, WE HOLD THAT THE VIEW EXP RESSED BY THE TRIBUNAL CANNOT BE FOUND FAULT WITH. 22. RESULTANTLY, WE DO NOT FIND ANY SUBSTANTIAL QUE STION OF LAW BEING INVOLVED IN THE PRESENT APPEAL AND, ACCORDINGLY, THE SAME STAND S DISMISSED WITHOUT ANY ORDER AS TO COSTS.' AND FURTHER RELYING ON THE JUDGMENT OF THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF CIT VS JAYPEE DSC VENTURES, UA 357201 D ATED 11.03.2011 THE ADDITION OF INTEREST ON FDRS OF RS. 6,45,921/- WAS DELETED WHILE UPHOLDING THE INTEREST RECEIVED FROM THE INCOME TAX REFUND OF RS. 3,91,497/- ON THE GROUNDS THAT THE FDR INTEREST AND THE INTEREST ON INCOME TA X REFUND CANNOT BE EQUATED ON THE SAME GROUNDS. 5. BEFORE US THE LD. AR ARGUED THAT THE INCOME TAX REFUND ARISE OUT OF THE EXCESS TDS DEDUCTED. THE TDS WAS AKIN TO THE FDRS M ADE OUT OF BUSINESS 6 COMPULSIONS AND OUT OF BUSINESS ACCOUNT AND HENCE T HE INTEREST WAS TREATED AS BUSINESS INCOME RIGHTLY BY THE REVENUE. IT WAS ARGU ED THAT, SIMILARLY THE TDS WAS ALSO DEDUCTED OUT OF BUSINESS PAYMENTS AND THE REFU ND ARISED IS OUT OF THE EXCESS DEDUCTION. THE AMOUNTS RECEIVED ON WHICH THE TDS DEDUCTED WAS ON ACCOUNT OF BUSINESS RECEIPTS ONLY, HENCE THE INTERE ST RECEIVED ON EXCESS TDS PARTAKES THE CHARACTER OF BUSINESS RECEIPTS. 6. LD. DR RELIED ON THE ORDER OF THE LD. CIT(A). 7. WE FIND THAT THE INTEREST EARNED WAS EARNED DUE TO THE FACT THAT EXCESS TAX DEDUCTED. THE HONBLE HIGH COURT OF DELHI VIDE ORDER DT. 27.07.2012 IN ITA 1208/2011 COMMISSIONER OF INCOME TAX-I V VS. M/S D ELHI STATE INDUSTRIAL & INFRASTRUCTURE DEVELOPMENT CORPORATION LTD. (DEL) D EALING WITH THE SIMILAR ISSUE HAS HELD THAT INTEREST RECEIVED ON INCOME TAX REFUN D IS A STATUTORY INTEREST RECEIVED AND HENCE HAS TO BE SUBJECT TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. IN THE INSTANT CASE THE ASSESSEE HA S RECEIVED INTEREST FROM THE INCOME TAX DEPT ON THE EXCESS TDS DEDUCTED AND HENC E THE INTEREST IS LIABLE TO BE ASSESSED AS INCOME FROM OTHER SOURCES AND NOT UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION 8. AS A RESULT APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- / (SANJAY GARG ) . '.., # $ / ( DR. B.R.R. KUMAR, AM) / JUDICIAL MEMBER %& / ACCOUNTANT MEMBER DATE: 29/11/2018 AG *% + ,- . -(/ COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. * * ! // CIT 4. * * ! / ()/ THE CIT(A) 5. - 23 4, * # *4), 67839/ DR, ITAT, CHANDIGARH 6. 38 :'/ GUARD FILE