2015 (12) TMI 1018 - AT - Income Tax

Interest income earned on business advances kept with the sister concerns - treated as business income OR income from other sources - Held that - On perusal of the said Tribunal s order in the case of ACIT vs. M/s. Piem Hotels Ltd, assessee s sister concerns case we have no hesitation to come to a conclusion that the interest income earned on business advances kept with the sister concerns should be treated as business income instead of income from other sources . Considering the same, we find no infirmity in the order of the CIT (A) and upheld the decision taken by him. - Decided in favour of assessee.

Summary

Issues:
1. Classification of interest income under the head 'income from business/profession' or 'income from other sources'.
2. Eligibility of interest income for deduction under section 80HHD of the Income Tax Act, 1961.

Issue 1: Classification of Interest Income:
The appeal involved a dispute regarding the classification of interest income of Rs. 3,51,91,070 earned by the assessee from deposits under the head 'income from business/profession' or 'income from other sources'. The Revenue contended that the interest income should be assessed under 'income from other sources' as it did not arise from business activities. However, the CIT (A) treated the interest income as business income, citing consistency with earlier assessments and decisions of the Tribunal. The Revenue relied on a judgment by the Bombay High Court to support their argument that interest income should be considered 'income from other sources'. The assessee, on the other hand, relied on the CIT (A) and a Tribunal decision in a related case to argue for the interest income to be treated as business income.

Issue 2: Eligibility for Deduction under Section 80HHD:
The second issue revolved around the eligibility of the interest income for deduction under section 80HHD of the Act. The Revenue contended that the interest income did not qualify for deduction under this section as it was not derived from services provided to foreign tourists. The CIT (A) and the Tribunal, however, upheld the assessee's claim for deduction under section 80HHD, emphasizing the business expediency of the transactions and the nature of the income earned in the normal course of business. The Tribunal's decision was influenced by the principle of consistency in assessments and previous Tribunal rulings in similar cases.

In conclusion, the Tribunal dismissed the Revenue's appeal and upheld the CIT (A)'s decision to treat the interest income as business income rather than income from other sources. The Tribunal also supported the eligibility of the interest income for deduction under section 80HHD, based on the business expediency and normal course of business activities. The Cross Objection filed by the assessee was deemed infructuous and dismissed in light of the Tribunal's decision in the Revenue's appeal.