M/s. Aradhana Investment Ltd., Kolkata V. ACIT, Central Circle - 2(1), Kolkata, Kolkata

ITA 728/KOL/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7824 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 17-04-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Assessment record; Revised return; TDS

Judgement Text

I.T.A. NO. 728/KOL/2018 ASSESSMENT YEAR: 2009-2010 M/S. ARADHANA INVESTMENT LIMITED 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA D BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, VICE-PRESIDENT (KZ) AND SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER I.T.A. NOS. 728/KOL/2018 ASSESSMENT YEAR: 2009-2010 M/S. ARADHANA INVESTMENT LIMITED,.................. ....................... APPELLANT 5, MIDDLETON STREET, KOLKATA-700 071 [PAN: AAECA 1808 K] -VS.- ASSISTANT COMMISSIONER OF INCOME TAX,............ ..................RESPONDENT CENTRAL CIRCLE-2(1), KOLKATA, 110, SHANTIPALLY, AAYAKAR POORVA, E.M. BYE PASS, KOLKATA-700 107 APPEARANCES BY: SHRI SOUMITRA CHOUDHURY, ADVOCATE, FOR THE APPELLA NT SHRI I. JAMIR, JCIT, SR. D.R., FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : FEBRUARY 13, 2019 DATE OF PRONOUNCING THE ORDER : APRIL 24, 2019 O R D E R PER SHRI P.M. JAGTAP, VICE-PRESIDENT (KOLKATA ZONE) :- THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-15, KOLKATA DA TED 24.01.2018. 2. IN GROUNDS NO. 1 TO 3, THE ASSESSEE HAS CHALLENG ED THE ACTION OF THE LD. CIT(APPEALS) IN UPHOLDING THE ORDER OF THE ASSE SSING OFFICER TREATING THE INTEREST INCOME OF RS.2,48,18,698/- AS INCOME FROM OTHER SOURCES IN PLACE OF BUSINESS INCOME. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH DERIVES INCOME FROM RENT, LENDING ACTIVITY, POWER GENERATIO N AND INVESTMENT. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION W AS FILED BY IT ON 22.09.2009 DECLARING TOTAL INCOME OF RS.4,50,43,750 /-. THEREAFTER A I.T.A. NO. 728/KOL/2018 ASSESSMENT YEAR: 2009-2010 M/S. ARADHANA INVESTMENT LIMITED 2 REVISED RETURN WAS FILED BY THE ASSESSEE ON 11.09.2 010 DECLARING TOTAL INCOME OF RS.4,66,16,040/-. AS DISCLOSED IN THE SAI D RETURN, INTEREST INCOME OF RS.2,48,18,698/- WAS RECEIVED BY THE ASSE SSEE DURING THE YEAR UNDER CONSIDERATION AS UNDER:- HUDCCO RS, 2,35,616/ - INTEREST ON PMS RS. 30,943/ - CESC LIMITED RS. 78,974/ - INTEREST ON I.T. REFUND RS. 7,66,458/ - DBS BANK LIMITED RS. 5,77,919/ - HDFC LIMITED RS. 6,82,603/ - CANARA BANK RS.2,24,46,185/ - RS.2,48,18,698/ - DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSEE WAS CALLED UPON BY THE ASSESSING OFFICER TO EXPLAIN AS TO WHY THE AFORESAID INTEREST INCOME SHOULD NOT BE ASSESSED UNDER THE HEAD INCOM E FROM OTHER SOURCES IN PLACE OF BUSINESS INCOME AS CLAIMED B Y THE ASSESSEE. IN REPLY, IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE T HAT ITS MAIN BUSINESS BEING FINANCING AND INVESTMENT, INTEREST INCOME EAR NED CONSTITUTED ITS BUSINESS INCOME. IT WAS ALSO SUBMITTED THAT SIMILAR INTEREST INCOME EARNED IN THE EARLIER YEARS WAS TREATED AS BUSINESS INCOME AND THE SAID TREATMENT WAS ACCEPTED BY THE ASSESSING OFFICER. TH E ASSESSING OFFICER DID NOT FIND MERIT IN THE SUBMISSIONS MADE BY THE A SSESSEE. ACCORDING TO HIM, INTEREST ON INCOME-TAX REFUND COULD NOT BE REG ARDED AS INCOME FROM CARRYING ON ANY BUSINESS. HE ALSO HELD THAT THE OTH ER INVESTMENTS MADE BY THE ASSESSEE IN FIXED DEPOSITS WITH BANKS, ETC. WAS OUT OF ITS SURPLUS FUND AND THE SAME, THEREFORE, COULD NOT BE TREATED AS INCOME DERIVED BY THE ASSESSEE FROM ITS BUSINESS OF MONEY LENDING. HE ACCORDINGLY BROUGHT TO TAX THE ENTIRE INTEREST INCOME EARNED BY THE ASS ESSEE DURING THE YEAR UNDER CONSIDERATION UNDER THE HEAD INCOME FROM OTH ER SOURCES. I.T.A. NO. 728/KOL/2018 ASSESSMENT YEAR: 2009-2010 M/S. ARADHANA INVESTMENT LIMITED 3 4. THE ACTION OF THE ASSESSING OFFICER IN TREATING THE INTEREST INCOME AS INCOME FROM OTHER SOURCES IN PLACE OF BUSINESS I NCOME WAS CHALLENGED BY THE ASSESSEE IN THE APPEAL FILED BEFORE THE LD. CIT(APPEALS). DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LD. CIT( APPEALS), THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS WERE REITERATED ON BEHALF OF THE ASSESSEE THE LD. CIT(APPEALS), HOWEVER, DID NOT FIND MERIT IN THE SA ID SUBMISSIONS AND PROCEEDED TO UPHOLD THE ACTION OF THE ASSESSING OFF ICER IN TREATING THE INTEREST INCOME AS INCOME FROM OTHER SOURCES FOR TH E FOLLOWING REASONS GIVEN IN HIS IMPUGNED ORDER:- I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT AND PERUSED THE RELEVANT ASSESSMENT RECORDS. ON EXAMINA TION OF THE AUDITED ACCOUNT OF THE APPELLANT, IT IS FOUND T HAT THE APPELLANT IS OBTAINING INCOME FROM-INTEREST, RENT, WINDMILL INCOME, INCOME FROM DIVIDEND, PROFIT ON SALE OF INV ESTMENT AND DERIVATIVE INCOME ETC. THE APPELLANT HAS NOT GI VEN LOANS TO ANY PARTY. THE APPELLANT HAD INVESTED SURPLUS FU NDS IN BANK DEPOSITS FOR WHICH HE HAD RECEIVED INTEREST INCOME AS FOLLOWS: HUDCCO RS, 2,35,616/- INTEREST ON PMS RS. 30,943/- CESC LIMITED RS. 78,974/- INTEREST ON I.T. REFUND RS. 7,66,458/- DBS BANK LIMITED RS. 5,77,919/- HDFC LIMITED RS. 6,82,603/- CANARA BANK RS.2,24,46,185/- RS.2,48,18,698/- ON EXAMINATION OF THE INTEREST RECEIVED BY THE APPE LLANT, IT IS CLEAR THAT INTEREST ON I.T. REFUND, INTEREST FROM C ESC LTD AND INTEREST FROM PMF ARE COME UNDER THE HEAD INCOME FR OM OTHER SOURCES AND UNDER NO STRETCH OF IMAGINATION CAN BE HELD TO BE INCOME FROM BUSINESS. AS REGARDS, INTEREST INCOME FROM HUDCCO, DBS BANK L TD, HDFC AND CANARA BANK, THESE ARE .RESULTING FROM SUR PLUS FUNDS OF THE APPELLANT AND HAVE NO NEXUS WITH THE B USINESS OF THE APPELLANT. THE APPELLANT CITED THE FOLLOWING CA SE LAW I.E. M/S MORGAN WALKER & CO LTD VS ACIT, ITA NO. 1108/KO L/2016 FOR THE AY 2008-09 (ITAT KOLKATA BENCH). HOWEVER, T HE FACTS OF THE CASE ARE DISTINGUISHED. IN M/S MORGAN WALKER & CO (SUPRA), THE HON'BLE ITAT HAD FOLLOWED THE PRINCIPL E OF CONSISTENCY AND HELD THAT AS IN THE PREVIOUS YEAR I NTEREST INCOME WAS HELD TO BE INCOME FROM BUSINESS, THE SAM E PRINCIPLE SHOULD BE FOLLOWED IN THE SUCCEEDING YEAR S. HOWEVER, I.T.A. NO. 728/KOL/2018 ASSESSMENT YEAR: 2009-2010 M/S. ARADHANA INVESTMENT LIMITED 4 IN THE CASE UNDER APPEAL, THE AIR OF THE APPELLANT HAD NOT ADDUCE ANY EVIDENCE THAT INTEREST INCOME EARNED FRO M FIXED DEPOSITS AND INTEREST ON TDS AND FROM CESC LTD HAD BEEN CONSIDERED AS INCOME FROM BUSINESS IN EARLIER ASSES SMENT YEARS. EVEN IF, THE A.O. HAD ALLOWED THESE INTEREST INCOMES AS INCOME FROM BUSINESS, THEY HAD TO BE DISALLOWED BEC AUSE AS PER THE ACT INTEREST ON I T REFUND AND FROM BANK DE POSITS NOT RELATED TO BUSINESS COMES UNDER THE HEAD INCOME FRO M OTHER SOURCES. INTEREST INCOME IS EITHER ASSESSED AS BUSI NESS INCOME OR AS INCOME FROM OTHER SOURCES DEPENDING UPON THE ACTIVITIES CARRIED ON BY THE ASSESSEE. IF THE INVESTMENT YIELD ING INTEREST IS PART OF THE BUSINESS OF THE ASSESSEE, THE SAME W OULD BE ASSESSABLE AS BUSINESS INCOME BUT WHERE THE EARNING OF THE INTEREST INCOME IS INCIDENTAL TO AN NOT THE DIRECT OUTCOME OF THE BUSINESS CARRIED ON BY THE ASSESSEE, THE SAME I S ASSESSABLE AS INCOME FROM OTHER SOURCES. BUSINESS IMPLIES SOM E REAL, SUBSTANTIAL AND SYSTEMATIC OR ORGANIZED COURSE OF A CTIVITY WITH A PROFIT MOTIVE. INTEREST, GENERATED FROM SUCH AN ACTIVITY, IS BUSINESS INCOME; ELSE IT WOULD BE INTE REST FROM OTHER SOURCES. AS EARNING OF INTEREST IS NOT PART OF THE BUSINESS OF THE APPELLANT, THE INTEREST AMOUNT EARNED RS.2,48,18,69 8/- IS CONSIDERED AS INCOME FROM OTHER SOURCES. THIS GROUN D OF APPEAL FAILS, IS THEREFORE, DISMISSED. THE A.O. IS DIRECTED ACCORDINGLY. 5. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE MAIN BUSINESS OF THE ASSESSEE WAS OF INVESTMENT AND FINANCING AND TH E INTEREST INCOME EARNED FROM INVESTMENT MADE IN DEPOSITS OF BANK, ET C. CONSTITUTED ITS BUSINESS INCOME AND NOT INCOME FROM OTHER SOURCES. HE HAS CONTENDED THAT SIMILAR INTEREST INCOME EARNED BY THE ASSESSEE IN THE EARLIER YEARS WAS OFFERED TO TAX AS ITS BUSINESS INCOME BY THE AS SESSEE-COMPANY AND THE SAME WAS ACCEPTED BY THE ASSESSING OFFICER EVEN IN THE ASSESSMENTS COMPLETED UNDER SECTION 143(3), INTER ALIA, FOR A.Y . 2007-08 AND 2008-09. 6. THE LD. D.R., ON THE OTHER HAND, STRONGLY RELIED ON THE ORDERS OF THE AUTHORITIES BELOW IN SUPPORT OF THE REVENUES CASE THAT INTEREST INCOME EARNED BY THE ASSESSEE FROM THE INVESTMENT MADE OUT OF SURPLUS FUND CONSTITUTED ITS INCOME FROM OTHER SOURCES. I.T.A. NO. 728/KOL/2018 ASSESSMENT YEAR: 2009-2010 M/S. ARADHANA INVESTMENT LIMITED 5 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERV ED THAT THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, WHICH IS ENGAGED INT ER ALIA IN THE BUSINESS OF INVESTMENT AND MONEY LENDING AND THERE IS NO DIS PUTE ABOUT THE SAME. DURING THE YEAR UNDER CONSIDERATION, IT HAD EARNED INTEREST INCOME OF RS.2,48,18,698/- IN THE FORM OF INTEREST AND THE SA ID INTEREST INCOME BARRING THE AMOUNT OF RS.7,66,458/- EARNED BY THE A SSESSEE ON INCOME- TAX REFUND WAS RECEIVED ON THE INVESTMENT MADE IN D EPOSITS OF BANKS, ETC. THE INTEREST INCOME TO THAT EXTENT EARNED BY THE AS SESSEE THUS HAD A DIRECT NEXUS WITH ITS MAIN BUSINESS OF INVESTMENT A ND LENDING AND IN OUR OPINION, IT, THEREFORE, CONSTITUTED ITS BUSINESS IN COME, WHICH WAS CHARGEABLE TO TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION AS RIGHTLY CLAIMED BY THE ASSESSEE. IT IS ALSO OBSERVED THAT SIMILAR INTEREST EARNED BY THE ASSESSEE FROM THE IN VESTMENT MADE IN DEPOSITS WITH BANKS, ETC IN THE EARLIER YEARS WAS D ECLARED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION AND T HE SAME WAS ACCEPTED BY THE ASSESSING OFFICER EVEN IN THE ASSESSMENTS MA DE UNDER SECTION 143(3), INTER ALIA, FOR A.YS. 2007-08 AND 2008-09. KEEPING IN VIEW ALL THESE FACTS OF THE CASE, WE ARE OF THE VIEW THAT TH E ENTIRE INTEREST INCOME EARNED BY THE ASSESSEE DURING THE YEAR UNDER CONSID ERATION BARRING THE INTEREST OF RS.7,66,458/- RECEIVED BY THE ASSESSEE ON INCOME-TAX REFUND IS CHARGEABLE TO TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION AS RIGHTLY CLAIMED BY THE ASSESSEE AND NOT UNDER THE HEAD INCOME FROM OTHER SOURCES AS TREATED BY THE ASSES SING OFFICER AS WELL AS BY THE LD. CIT(APPEALS). WE ACCORDINGLY DIRECT THE ASSESSING OFFICER TO BRING TO TAX INTEREST INCOME TO THE EXTENT OF RS.2, 40,52,240/- AS BUSINESS INCOME OF THE ASSESSEE AND ALLOW PARTLY GROUNDS NO. 1 TO 3 OF THE ASSESSEES APPEAL. 8. AS REGARDS THE OTHER ISSUE RAISED BY THE ASSESSE E IN GROUNDS NO. 4 & 5 RELATING TO THE ALLOWABILITY OF DEDUCTION ON AC COUNT OF INTEREST PAID TO BANK AMOUNTING TO RS.8,29,174/-, IT IS OBSERVED THA T THE SAME IS I.T.A. NO. 728/KOL/2018 ASSESSMENT YEAR: 2009-2010 M/S. ARADHANA INVESTMENT LIMITED 6 CONSEQUENTIAL TO THE MAIN ISSUE INVOLVED IN GROUNDS NO. 1 TO 3 OF THE ASSESSEES APPEAL. KEEPING IN VIEW THE DECISION REN DERED BY US ON THE MAIN ISSUE INVOLVED IN GROUNDS NO. 1 TO 3 DIRECTING THE ASSESSING OFFICER TO BRING TO TAX, THE INTEREST INCOME EARNED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION UNDER THE HEAD PROFITS AN D GAINS OF BUSINESS OR PROFESSION, WE DIRECT THE ASSESSING OFFICER TO CON SIDER THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF INTEREST PAID TO BANK AMOUNTING TO RS.8,29,174/- AGAINST THE SAID INCOME IN ACCORDANCE WITH LAW. GROUNDS NO. 4 & 5 OF THE ASSESSEES APPEAL ARE ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON APRIL 24, 201 9. SD/- SD/- (SATBEER SINGH GODARA) (P.M. JAGTAP) JUDICIAL MEMBER VICE -PRESIDENT (KZ) KOLKATA, THE 24 TH DAY OF APRIL, 2019 COPIES TO : (1) M/S. ARADHANA INVESTMENT LIMITED, 5, MIDDLETON STREET, KOLKATA-700 071 (2) ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(1), KOLKATA, 110, SHANTIPALLY, AAYAKAR POORVA, E.M. BYE PASS, KOLKATA-700 107 (3) COMMISSIONER OF INCOME TAX (APPEALS)-15, KOLKA TA, (4) COMMISSIONER OF INCOME TAX- , (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.