2019 (5) TMI 1825 - AT - Income Tax

Fixed deposit interest income - correct head of income - Income from Business Profession or Income from Other Sources - CIT(A) directed the AO treat the interest income earned from fixed deposits by the assessee under the head income from business and profession - as per revenue assessee has itself described interest on film loan in Profit and Loss account separately which could be categorized as income from Business and Profession - HELD THAT - CIT(A) has held that in case of the assessee it is not a simple case of making investments in FDRs with a view to earn interest income. The assessee used to receive advances for various jobs and the advances and it is not possible to utilise the advances so received immediately. As the production of films requires formulation ideas concept of theme approval from the respective department the assessee deposits the money received in advance for short duration. CIT(A) further pointed out that the duration of deposit reveals the fact that the FDRs were not deposited for longer period and the same were made as a time gap arrangement - we agree with the Ld. CIT(A) that the interest income earned by the assessee from FDRs cannot be treated as the income from other sources. CIT(A) has passed the order in the present case by following the order of his predecessor passed in assesses own case for the AY 2011-12. No infirmity in the order of the Ld. CIT(A). - Decided against revenue.

Summary

Issues Involved:
Appeal against order by CIT(A) for assessment year 2012-13 regarding treatment of interest income from fixed deposits as income from business or other sources.

Analysis:
1. The assessee, a film distribution company, declared nil income for the assessment year but the AO assessed the total income at ?4,95,21,970/- after adjustments. The AO determined the total loss to be carried forward at ?16,01,24,234/-.
2. The appeal was filed by the assessee against the assessment order, primarily contesting the treatment of interest income of ?5,33,90,060/- as income from other sources instead of business income. The CIT(A) ruled in favor of the assessee, leading to the revenue's appeal.
3. The revenue challenged the CIT(A)'s order, arguing that the interest income from fixed deposits should be taxed under other sources, not business income. They cited previous judgments to support their stance.
4. The counsel for the assessee countered by stating that the issue was previously decided in favor of the assessee for the AY 2011-12, and the same facts applied in the current case. They argued that the CIT(A) rightly followed the previous decision.
5. Upon review, the Tribunal found that the CIT(A) had correctly decided the issue based on the assessee's business activities and the purpose of the fixed deposits. The Tribunal agreed that the interest income should be considered as business income, not from other sources, as it was related to the business activities of the assessee.
6. The Tribunal upheld the CIT(A)'s order, dismissing the revenue's appeal and affirming that the interest income from fixed deposits was rightly treated as income from business. The decision was based on the previous ruling and the nature of the assessee's business activities.

In conclusion, the Tribunal upheld the CIT(A)'s decision regarding the treatment of interest income from fixed deposits as income from business, dismissing the revenue's appeal.