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TMI Blog2013 (11) TMI 310X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. Therefore, in the aforesaid view of the matter, the expenditure claimed cannot be disallowed and has to be set off against the interest income earned during the assessment year under dispute – Decided in favor of Assessee. - ITA.No.1719/Hyd/2012 - - - Dated:- 30-8-2013 - Chandra Poojari And Saktijit Dey, JJ. For the Appellant : Shri T Chaitanya Kumar, AR For the Respondent : Shri R Laxman, DR ORDER:- PER : Saktijit Dey The assessee in the present appeal has basically challenged the addition of Rs.2,78,42,337/- as income from other sources without allowing claim of expenditure therefrom. 2. Briefly the facts are, the assessee is a company in which the public are not substantially interested. The assessee, as claimed by it, has been carrying out the operations of software development and information technology enabled services, infrastructure development such as development of information technology park and commercial complex. For the impugned assessment year the assessee files its return of income declaring total income of Rs.9,59,802/-. In course of the assessment proceedings, the Assessing Officer noticed that the assessee had shown interest income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansion of business activities, but still then interest earned on deposits made out of capital contribution is to be treated as income from other sources. The Assessing Officer further held that Director s annual report in schedule N under significant account policies and note to the accounts clearly establishes that there is not merely a change in the name but a total change in line of business w.e.f. 24.11.2006 from I.T. related activities to infrastructure development. The Assessing Officer opined that had it been an expansion of the business activity, the assessee would have continued the earlier business of I.T. and ITES activities in addition to the new business of infrastructure development. Whereas, in the P L account for the year under dispute, the assessee has not shown any income on account of its earlier business activities. It was further noted by the Assessing Officer that though in the immediately preceding financial years 2005-06 and 2006- 2007, the assessee had shown income from I.T. and ITES services at Rs. 2.39 crores and Rs.44,78,000/- respectively, but no such income was shown by the assessee in the year under dispute which reveals the fact that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness of infrastructure development. 6.6. It is clear that the Assessing Officer has rightly applied the judgment of the Hon ble Apex Court in the cases of Tuticorin Alkali Chemicals and Fertilizers Ltd. vs. CIT in 227 ITR 172; and CIT vs. Coromandel Cements Ltd. in 234 ITR 412. There is no doubt that the share premium amount received was invested in short term funds. At this stage, the new business for which the funds had been received had not commenced while the old one had ceased. Therefore, I agree with the A.O. that the income earned on interest on deposits was to be classified as Income from other sources ." 6. The learned A.R reiterating the stand taken before the revenue authorities submitted that there is no change in line of business but there is only a change of name. Referring to the memorandum of association of the earlier company M/s. Pioneer Talafone Pvt. Ltd. and the assessee company, the learned AR submitted that the objects of both companies are virtually the same and the company has been filing its return of income regularly. It was submitted that the management of the company is also same and the company has already commenced its business and continuin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DR referred to the note of the Managing Director as contained in the notes on accounts of the annual report. The learned DR also relied upon the following decisions : (i) Tuticorin Alkali Chemicals Fertilizers Ltd. v. CIT (1997) 227 ITR 172 (SC) (ii) CIT v. Coromandel Cements Ltd. (1998) 234 ITR 412 (SC) 8. We have heard submissions of the parties and perused the materials on record as well as the Orders of the revenue authorities. At the outset we may put it on record that there is no controversy with regard to the fact that the interest income is to be assessed under the Head "Income from Other Sources". The assessee not only itself in the computation of income filed with the return of income for the impugned assessment year has treated it as income from other sources but has reiterated the same before us also. Therefore, in the aforesaid factual backdrop, it has to be examined whether the administrative and other expenditure can be set off against the interest income. On a perusal of the assessment order as well as the order of the CIT(A) it would be evident that set off of business expenditure/loss was denied on the ground that the assessee has completely stopped i ..... 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