2012 (5) TMI 725 - AT - Income Tax

Interest on bank deposits and other interest receipts are to be considered as income from business and not under the head income from other sources

Summary

Issues:
1. Allowance of interest income under the head "business income" for set off of brought forward business loss.

Analysis:
The appeal by the Revenue challenged the order of the ld. CIT(A) allowing the appeal of the assessee company regarding the treatment of interest income on FDR under the head "business income" for set off of brought forward business loss. The Assessing Officer observed that the assessee earned interest income from bank deposits and claimed set off of brought forward business loss against it. The AO disagreed with the assessee's claim, stating that the interest income was not earned from loans and advances, which were the main business activities of the company. The AO assessed the interest income under the head "Income from other sources" and denied the set off of brought forward business loss. The ld. CIT(A) allowed the claim of the assessee based on his decision in the preceding assessment year. The Tribunal noted that the issue was similar to the previous year's decision where the interest income on bank deposits was considered as income from business. Since the Revenue did not provide any new evidence to challenge the ld. CIT(A)'s findings, the Tribunal upheld the decision, dismissing the appeal by the Revenue.

The Tribunal found that the ld. CIT(A) had correctly followed his earlier decision in the preceding assessment year and allowed the claim of the assessee regarding the treatment of interest income on bank deposits under the head "business income." The Tribunal referenced a previous decision in the assessee's case for the AY 2007-08, where a co-ordinate bench had dismissed the Revenue's appeal against the ld. CIT(A)'s decision. As the facts and circumstances in the current year were similar to the previous year, and no new evidence was presented by the Revenue to challenge the findings, the Tribunal declined to interfere with the ld. CIT(A)'s decision. The Tribunal dismissed the appeal by the Revenue, as no additional grounds were raised, and no new arguments were presented during the proceedings. Therefore, the Tribunal upheld the decision of the ld. CIT(A) to treat the interest income on bank deposits as business income, allowing the set off of brought forward business loss against it.