2015 (9) TMI 1247 - SC - Income Tax

Interest earned from Fixed Deposits before business actually commenced - interest from other sources OR business income - Held that - We are not going into this issue inasmuch as this appeal can be disposed of on the ground that consistency does demand that there being no change in circumstances, the income for the year 1993-94 would also have to be treated business income as for the previous three years. - Decided in favour of assessee.

Summary

Issues: Classification of interest earned from fixed deposits before business commencement as 'interest from other sources' or 'business income' for Assessment Year 1993-94.

Analysis:
The Supreme Court addressed the issue of classification of interest earned from fixed deposits before business commencement for Assessment Year 1993-94. The Assessing Officer initially categorized the interest under 'interest from other sources,' but the Commissioner of Income Tax (Appeals) reversed this decision based on consistency with previous years where similar interest was treated as 'business income.' The Income Tax Appellate Tribunal upheld this decision in 2004. The Revenue appealed to the High Court of Delhi under Section 260A of the Income Tax Act, but the appeal was dismissed in 2006 on the grounds of consistency with previous years' treatment. The Revenue then argued before the Supreme Court citing a previous case, Tuticorin Alkali Chemicals & Fertilizers Ltd. vs. Commissioner of Income-tax, where such income was treated as 'interest from other source.' However, the Supreme Court held that the appeal could be decided based on the principle of consistency, as there were no changes in circumstances for the Assessment Year 1993-94 compared to the previous three years. Therefore, the income for the year 1993-94 should also be treated as 'business income' in line with past treatment. Consequently, the appeal was dismissed by the Supreme Court.