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2022 (3) TMI 1239 - AT - Income TaxCorrect head of income - treatment to the interest income being interest eared on fixed deposits as Business Income or Income from Other Sources . - HELD THAT - We have perused the findings returned by the Ld. CIT(A) who has decided the issue in favour of the assessee by following the order passed by the Tribunal in assessee s group company cases passed 2015 (12) TMI 1649 - ITAT MUMBAI which are based upon the decision rendered by Hon ble Karnataka High Court in case of Swish Chandra Co. 1998 (7) TMI 73 - KARNATAKA HIGH COURT and decision rendered by Hon ble Bombay High Court in case of CIT Vs. Lok Holdings 2008 (1) TMI 365 - BOMBAY HIGH COURT When it is settled principle of law that in cases where assessee is engaged in development of properties advances taken by it from customer to purchase the flats was deposited with the banks in the course of business the interest income earned there from is to be treated as business income and not as income from other sources . So in these circumstances we find no illegality or perversity in the findings returned by the Ld. CIT(A) hence Ground No.1 Claim of business loss on account of depreciation and amortization of amalgamation expenses which was capitalized to work in progress - CIT(A) has allowed the business loss claimed by the assessee on account of depreciation and amortization of amalgamation expenses which was capitalized to work in progress as the assessee was having only one contract - HELD THAT When this issue has already been decided in favour of the assessee by the Tribunal in an appeal filed against the assessment order passed under section 143(3) of the Act the same was liable to be decided in favour of the assessee when again disallowed during the assessment framed under section 153C read with section 143(3) - when the assessee has been consistently following the particular accounting method business loss claimed by the assessee on account of depreciation and amortization of amalgamation expenses is liable to be allowed. A particular accounting method consistently being followed by the assessee cannot be disturbed by the AO in treating the impugned expenses as part of work in progress and as such when the claim of the assessee is in accordance with the method of accounting consistently being followed the claim of the assessee is allowable. Moreover this issue has already been decided by the Tribunal in favour of the assessee during the appellate proceedings initiated on the basis of assessment framed under section 143(3) - Decided against revenue.
Issues Involved:
1. Treatment of interest income earned on fixed deposits as 'Business Income' versus 'Income from Other Sources'. 2. Allowance of business loss claimed on account of depreciation and amortization of amalgamation expenses, capitalized to work-in-progress. Detailed Analysis: Issue 1: Treatment of Interest Income - Facts and Background: The assessee, engaged in the construction and development of a Special Economic Zone (SEZ), earned interest income from fixed deposits amounting to ?8,36,30,107/- (A.Y. 2008-09), ?7,44,58,749/- (A.Y. 2009-10), and ?47,61,041/- (A.Y. 2013-14). The Assessing Officer (AO) treated this interest income as "Income from Other Sources" instead of "Business Income" as claimed by the assessee. - CIT(A) Findings: The Commissioner of Income Tax (Appeals) [CIT(A)] directed the AO to treat the interest income as "Business Income". The CIT(A) relied on precedents, including the case of M/s. Hiranandani Palace Gardens Pvt. Ltd., where similar interest income was treated as business income. The CIT(A) noted that the interest income was directly linked to the business and not separate from it. - Tribunal's Decision: The Tribunal upheld the CIT(A)'s decision, emphasizing that the interest income earned from temporary deposits of customer advances related to the project should be treated as "Business Income". The Tribunal cited the Hon'ble Bombay High Court's decision in CIT vs. Lok Holdings and the Hon'ble Karnataka High Court's decision in Swish Chandra & Co. vs. CIT, which supported the treatment of such interest income as business income. Issue 2: Allowance of Business Loss - Facts and Background: For A.Y. 2009-10 and A.Y. 2013-14, the assessee claimed business losses of ?62,55,068/- and ?1,38,38,226/- respectively on account of depreciation and amortization of amalgamation expenses, capitalized to work-in-progress. The AO disallowed these claims, arguing that the expenses should be capitalized as work-in-progress since the project was under construction. - CIT(A) Findings: The CIT(A) allowed the business loss claims, referring to the Tribunal's earlier decision in the assessee's own case dated 11.01.2017. The CIT(A) highlighted that the assessee consistently followed a particular accounting method, and no incriminating material was found during the search to justify disturbing the concluded position. - Tribunal's Decision: The Tribunal concurred with the CIT(A), noting that the issue had already been decided in favor of the assessee in previous Tribunal orders. The Tribunal reiterated that a consistently followed accounting method should not be disturbed, and the business loss claims were in line with the method of accounting and legal precedents. Conclusion: The Tribunal dismissed the Revenue's appeals, affirming the CIT(A)'s decisions on both issues. The interest income from fixed deposits was to be treated as "Business Income", and the business loss claims on account of depreciation and amortization of amalgamation expenses were to be allowed. The Tribunal found no illegality or perversity in the CIT(A)'s findings and upheld the decisions based on settled legal principles and consistent accounting practices. The appeals were dismissed, and the order was pronounced in the open court on 25.03.2022.
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