2022 (6) TMI 1394 - AT - Income Tax

Addition of interest income under the head income from other sources - Assessee in process of setting up of a plant - whether assessment is bad in law as the AO has exceeded his scope and there is lack of jurisdiction? - HELD THAT - The assessee was in the process of setting up of a plant. AO took the view that the interest income is assessable under the head Income from other sources and the business loss claimed by the assessee should be capitalised. Accordingly he computed NIL income under the head business. Accordingly the AO assessed entire interest income under the head income from other sources. CIT(A) confirmed the assessment of interest income following the decision rendered in the case of Tuticorin Alkali Chemicals Fertilisers Ltd 1997 (7) TMI 4 - SUPREME COURT CIT(A) has confirmed the assessment by following the decision rendered by Hon ble Supreme Court. Accordingly no reason to interfere with the order passed by Ld CIT(A). Though the assessee has raised a legal ground challenging the scope of assessment proceedings no material was placed before me in support of the said ground. Accordingly reject the same. Appeal filed by the assessee is dismissed.

Summary

Issues:
1. Addition of interest income under the head income from other sources.
2. Legal ground challenging the assessment's validity and jurisdiction.

Analysis:
1. The appellant challenged the addition of Rs.40,78,335 as interest income under the head income from other sources. The appellant contended that the assessment was bad in law due to the AO exceeding his scope and lack of jurisdiction. The appellant, represented by Shri Srihari Kutsa, cited financial difficulties affecting proper assistance. The appeal was disposed of on merits based on available record materials and after hearing the Departmental Representative (D.R.).

2. The appellant, engaged in manufacturing aluminum castings metals, pipes, rods, etc., held a fixed deposit of Rs.6.91 crores with Karur Vysya Bank, earning interest income of Rs.47,49,673. The appellant incurred expenses of Rs.37,15,365 and declared total income of Rs.6,71,340 after deducting expenses from the interest income. The AO assessed the interest income under the head "Income from other sources" and capitalized the business loss claimed by the appellant due to setting up a plant. The AO assessed the entire interest income under the head income from other sources, a decision affirmed by the Ld CIT(A) based on the Tuticorin Alkali Chemicals & Fertilisers Ltd case (1997) (227 ITR 172)(SC).

3. The Tribunal noted the Ld CIT(A) confirming the assessment based on the Supreme Court's decision and found no reason to interfere with the order. Despite the appellant raising a legal ground challenging the assessment proceedings' scope, no supporting material was presented, leading to its rejection. Consequently, the appeal was dismissed, and the order was pronounced on 1st June 2022.