K.Satyanarayana Reddy & Co. V. ACIT, Circle 10(1), Hyderabad

ITTA/273/2013

AI Insights

The case involves M/s. K.Satyanarayana Reddy & Co., the appellant, contesting the assessment of interest income from bank deposits under the head 'other sources' by the ACIT, Circle 10(1), Hyderabad, the respondent. The appellant argued that the deposits were intricately connected with business activities and should not be separately assessed once the books of account were rejected. The Tribunal and subsequently the High Court found that the deposits were made from surplus funds and did not have a direct link to the business, leading to the interest income being assessed under 'other sources'.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 677579 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 12-07-2013
• Assessment Year: misc
• Other Referred Cases: Tuticorin Alkali Chemicals & Fertilisers Limited Vs. CIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: K KUMAR
• Keywords: Business activity; Credit Facility; Deposits; Fact Finding; Income tax appellate tribunal; Interest income; Legal Position; Surplus Funds
• Section: 227 ITR 172

Judgement Text

"IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD FRIDAY, THE TWELFTH DAY OF JULY TWO THOUSAND AND THIRTEEN PRESENT THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SEN GUPTA AND THE HON'BLE MS. JUSTICE G.ROHINI I.T.T.A. No. 273 OF 2013 Between: M/s. K.Satyanarayana Reddy & Co., Vysya Bank Colony, Near Dubai Gate, Old Bowenpally, Secunderabad ..... Appellant AND ACIT, Circle 10(1), Hyderabad. .....Respondent The Court made the following : JUDGMENT: (per the Hon’ble the Chief Justice Sri K.J. Sengupta) This appeal is sought to be admitted on the following suggested questions of law against the judgment and order of the learned Tribunal dated 20.11.2012 in relation to the assessment year 2008- 2009. 1. On the facts and in the circumstances of the case, whether the Income Tax Appellate Tribunal is right in law in not appreciating the legal position that when the deposits are not out of surplus funds and are intricately connected with the business activity, income from such deposits cannot be separately assessed once the books of account are rejected? 2. On the facts and in the circumstances of the case, whether the Tribunal is right in holding that the interest on deposits are assessable under the head “other sources” even when books of accounts are rejected, relying on a decision that relate to deposits out of surplus funds, though in the facts of the assessee’s case, it is not so? 3. On the facts and in the circumstances of the case, whether the Income Tax Appellate Tribunal is right in not appreciating the legal position that once books of account are rejected no further addition could be made by relying on the very same books since the interest receipts are considered in it and are appearing in profit and loss account prepared based on such books of account? Having heard Sri K.Vasanth Kumar, learned Senior Counsel, for the appellant having gone through the impugned judgment and order of the learned Tribunal, it appears to us that the learned Tribunal came to the fact-finding that the deposit was made out of the surplus fund for the purpose of availing of credit facility from the bank. Learned Tribunal on fact finding, held that the interest income that has been received by the assessee on its own funds, kept in deposit with the bank and it did not have any direct link or nexus with the business that was being carried on by the assessee. In view of the fact-finding by the Tribunal, it is difficult to hold otherwise. The Tribunal on fact finding held conclusively that this is not the income from business but income from other sources. The learned Tribunal has correctly relied on the decision of the Supreme Court in the case of Tuticorin Alkali Chemicals & Fertilisers Limited Vs. CIT reported in 227 ITR 172. Therefore, in the facts and circumstances of this case, it is purely a question of fact and once again we cannot go into re-appreciation of the fact. When the fact is established, the application of law automatically follows. In our view, the law has been correctly applied. There is no need to admit this appeal for taking further decision in the matter. Consequently, we dismissed the appeal. No order as to costs. ______________________ Kalyan Jyoti Sengupta, CJ. __________ G.Rohini, J. July 12, 2013 MAS "