2013 (6) TMI 249 - AT - Income Tax

Profits and gains of business or profession v/s income from other sources - Recoveries from candidates who did not stick upto the agreement Security deposits (forfeiture) & Bank guarantee invoked , Administrative fees collected from candidates, Interest income from bank fixed deposit, Excess received from overseas client & Others - Held that - A receipt during the course of the business is a receipt which is attributable to the business activity of the assessee or a receipt of the assessee which has a nexus direct or indirect with the business of the assessee or receipts arising out of the business asset of the assessee is assessable under the head profits and gains of business or profession . As in the instant case, the lower authorities have not verified the nature and source of six receipts in question properly, it shall be fair and in the interest of justice to restore this issue back to the file of the AO for deciding afresh by passing a speaking order after allowing proper opportunity of hearing to the assessee. The profits and gains derived from export which is allowable as deduction u/s 10B is to be computed in accordance with the provisions of section 10B(4) wherein profits and gains of the undertaking is to be ascertained which may not be same as the amount assessable under the head profits and gains of business or profession of the assessee. Thus, the grounds of appeal of the assessee are allowed for statistical purposes.

Summary

Issues:
- Whether the income of Rs. 38,01,867 should be assessed under the head of 'business income' or 'income from other sources'?

Analysis:
1. The appeal was filed against the CIT(A)'s order confirming the deduction of Rs. 38,01,867 from 'business income' and assessing it under 'other sources'.

2. The Assessing Officer excluded the amount from business income, stating it had no direct nexus with the business. The CIT(A) upheld this decision, considering the income contingent on events beyond the assessee's control.

3. The assessee argued that the amount was part of its business income, not contingent, as it involved recruiting technical persons for overseas assignments.

4. The Tribunal found the lower authorities failed to properly analyze the nature of the receipts in question. As the receipts were related to the business activity, it should be assessed under 'profits and gains of business or profession'.

5. The Tribunal observed that the Assessing Officer and CIT(A) did not adequately examine the nature and source of the receipts. The case was remanded to the Assessing Officer for a fresh decision after providing a proper opportunity for the assessee to be heard.

6. The Tribunal clarified that profits eligible for deduction under section 10B might differ from the amount assessable under 'profits and gains of business or profession'.

7. Ultimately, the appeal of the assessee was allowed for statistical purposes, and the case was remanded back to the Assessing Officer for a fresh decision.