2011 (4) TMI 1407 - AT - Income Tax

Summary

Issues involved: Assessment of interest income on fixed deposits receipts and lease charges under different heads of income.

Assessment of interest income on fixed deposits:
The appeal and cross-objection were filed regarding the assessment of interest income on fixed deposits receipts. The main contention was whether the interest income should be assessed as business income or income from other sources. The CIT(A) directed the interest on fixed deposits to be assessed as income from business and allowed a deduction u/s. 80HHC. However, the ITAT referred to a Supreme Court decision stating that interest derived from fixed deposits does not have a direct nexus with the business of the assessee and should be assessed under the head 'income from other sources'. Therefore, the ITAT set aside the CIT(A) order and restored the Assessing Officer's decision.

Assessment of lease charges:
The cross-objection raised concerns about the assessment of lease charges under the head 'income from house property' instead of 'income from business'. The CIT(A) upheld the Assessing Officer's decision, stating that since the property was leased out, the lease rent received constituted income from house property. However, the assessee argued that the lease rent was part of the business income as the property was leased for better exploitation of the commercial asset. The ITAT noted that in previous assessment years, the Revenue had accepted the rental income as 'income from business'. Considering the principle of consistency, the ITAT directed the Assessing Officer to assess the lease income under the head 'income from business'. As a result, the appeal of the Revenue was allowed, and the cross-objection of the assessee was partly allowed.