2019 (7) TMI 1565 - AT - Income Tax

Interest income - Income from Other Sources OR Business Income - HELD THAT - Tribunal while allowing the interest income as Business Income followed the decision of Jaipur Bench in Infrastructure Development Company of Rajasthan Ltd. Vs. DCIT. 2016 (9) TMI 957 - ITAT JAIPUR , Indian Oil Panipat Power Consortium vs. ITO 2013 (10) TMI 982 - GUJARAT HIGH COURT , CIT vs. Facor Power Ltd. 2016 (1) TMI 461 - DELHI HIGH COURT . Therefore, considering the decision of Tribunal in assessee s own case for Assessment Year 2011-12 and respectfully following the same, Ground No.1 to 3 of appeal are allowed. Deduction u/s 37 - HELD THAT - We have noted that out of total claim CIT(A) has already allowed the claim of Audit Fees, Tax Audit Fees and Director s Fees and remaining was not allowed. The remaining expenditure consist Legal and Consultation Fees Travelling and Conveyance fees, Rates Taxes, Bank Commission and Fees for other services. Considering the nature of expenses incurred by assessee as narrated above all the expenses are necessary for corporate entity, therefore, all the expenses are allowed

Summary

Issues:
1. Tax treatment of interest income under the head "Income from Other Sources."
2. Claim for deduction of interest payment against the interest income.
3. Allowance of expenses under section 37 of the Act.

Analysis:

1. The appellant contested the tax treatment of interest income of ?72,73,294 under the head "Income from Other Sources." The Assessing Officer and ld. CIT(A) considered it taxable under this head. The appellant argued that the interest earned was linked to the infrastructure project and should be treated as business income. The Tribunal referred to previous judgments in the appellant's favor for Assessment Year 2011-12. Following the precedent, the Tribunal allowed the interest income to be treated as "Business Income."

2. The appellant also sought a deduction of ?1,14,40,967 against the interest income. The Tribunal found this claim to be raised in the alternative to the first issue, which had already been resolved in favor of the appellant. Therefore, further discussion on this issue was deemed unnecessary.

3. The appellant claimed expenses of ?10,10,740 under section 37 of the Act, which were partially allowed by the ld. CIT(A). The appellant argued that all expenses were necessary for the corporate entity and should be allowed. The Tribunal noted that some expenses were already allowed by the ld. CIT(A) while others were disallowed. Upon review, the Tribunal allowed all expenses as they were essential for the corporate entity, directing the Assessing Officer to comply. Consequently, the appeal of the assessee was allowed, and the order was pronounced on 24/07/2019.