1999 (12) TMI 109 - AT - Income Tax

Summary

Issues involved:
The appeal involves the treatment of interest income earned on surplus funds as business income and the allowance of deduction under section 32AB of the IT Act.

For the assessment year 1989-90:
The Assessing Officer (AO) initially treated the interest income earned by the assessee as income from other sources, denying the deduction under section 32AB. However, the CIT(A) allowed the appeal, considering the interest income as part of business income. The Department appealed, citing case law to support their position.

For the assessment year 1990-91:
Similar to the previous year, the AO treated the interest income as income from other sources, which was overturned by the CIT(A) in favor of the assessee. The Department appealed, presenting arguments based on case law to challenge the decision.

Court's Analysis and Decision:
After considering the arguments and case laws presented by both parties, the ITAT Delhi-E found no fault in the CIT(A)'s orders. The ITAT upheld the CIT(A)'s decision that the interest income should be treated as business income. The ITAT referenced various legal precedents, including the Supreme Court's definition of "business" and the principles established in different High Court cases regarding the treatment of interest income derived from surplus funds. The ITAT concluded that the interest income earned by the assessee was indeed part of business income, given the purposeful utilization of surplus funds for business expansion. Consequently, the ITAT dismissed the Department's appeals for both assessment years.