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TMI Blog2015 (1) TMI 1061X X X X Extracts X X X X X X X X Extracts X X X X ..... erly basis to manage the affairs of the building but has to incur certain expenditures on monthly basis so the funds collected in the meantime are kept in fixed deposits with banks. This is its regular and ongoing activity followed by the appellant for years and is not a onetime activity. Thus, interest income earned on these deposits cannot be considered as income from other sources and be considered as income from business. 1.3 Miscellaneous income of Rs. 1,74,424/- is charges recovered from unit holders for providing copy of building plan, memorandum and articles of association, car stickers and miscellaneous facilities and miscellaneous balances written back etc. Thus, the nature of income would show that the same is business income. 1.4 Without prejudice to above it is submitted that even if interest & miscellaneous incomes are considered as income from other sources, the same be treated as business income for the purposes of set off of its carried forward business loss of earlier years. 2.1 The assessing officer has erred in adding depreciation of Rs. 68,4 1,555 as provided in the accounts while computing book profit u/s 11 5JB of the Income tax Act and CIT(A) in confirming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of the appellant, the reasons for the same should be recorded. No such reasons have been recorded in the assessment order. Hence, disallowance be deleted. 2.3 The assessing officer has erred in computing the disallowance under Rule 8D of Rs. 53,500 as against Rs. 26,750 computed by the appellant and noted in the statement of facts. This is a mistake apparent on record. 3.1 The assessing officer has erred in adding depreciation of current year of Rs. 84,043 as provided in the accounts while computing book profit u/s 11 5JB of the Income tax Act and CIT(A) in confirming the same. 3.2 It is submitted that as the accounts are prepared as per Schedule VI of The Companies Act 1956 read with the Accounting Standards as referred to in section 11 SJB no addition/reduction except as provided in the explanation to subsection 2 to section 11 5JB can be made. Hence the addition made be deleted. 3.3 It is submitted that CIT(A)'s order wrongly refers to addition made u/s. 14A whereas the issue is relating to depreciation on building. 3.4 Without prejudice to above it is stated that the assessing officer has erred in not reducing the unabsorbed depreciation or business loss whichever is les ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . So far as it relates to Ground No. 1 in both the appeals, first and foremost case of the assessee is that interest earned by it on FDRs and miscellaneous income both are in the nature of „business income?. In the alternative, it is claimed that even if these incomes are held to be assessable under the head „income from other sources?, then also the assessee is entitled to the benefit of set off of brought forward losses and this issue was raised by the assessee in the first appeal and has not been adjudicated by learned CIT(A) by way of speaking order. 8. For proper appreciation of the facts it may be mentioned here that during the course of assessment proceedings the Assessing Officer came to the notice that interest earned by the assessee from FDRs alongwith interest earned by the assessee on income tax refund and miscellaneous income were offered as business income. According to the Assessing Officer such income should be treated as income from other sources. He required the assessee to explain as to why this income should not be treated as income from other sources. The reply of the assessee as been reproduced in the assessment order in para 6.3 which reads as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t one time activity. Based on above, the appellant submits that, the interest income earned on these deposits cannot be considered as income from other sources. The same be considered as business income. The appellant relies on the following judgement of Mumbai High Court in: CIT Vs Paramount Premises (P) Ltd. 190 ITR 259 ( Xerox of head note enclosed). It is further added that classification under "heads of income" is only for computation of income and not to determine character of income as the businessmen considers it. Here, the appellant the way it handles the cash flow it carries on a business of investing the funds held for a long period. Hence, in commercial basis, it is a business income as held by the Supreme Court. 2.3 Without prejudice to above, it is submitted that even if interest income is considered as income from other sources the same be allowed to be set off against earlier year's business loss. 10. As it can be seen from the above submissions, it is the contention of the assessee that certain obligations regarding municipal taxes are to be discharged on quarterly basis whereas the assessee collected from the unit holders once in a year. Secondly, Municipal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion income is eligible for set off against brought forward business loss. 13. It was submitted by learned Authorised Representative that though this issue was not raised before the Assessing Officer and was only raised before learned CIT(A), but learned CIT(A) did not pass a speaking order upon the same, therefore the matter may be restored back to the file of the learned CIT(A) or Assessing Officer for proper consideration of the submissions of the assessee and the above decisions in accordance with law. 14. On the other hand learned Departmental Representative relied upon the order passed by learned CIT(A) and the Assessing Officer. He submitted that by very nature income received by the assessee on FDRs is in the nature of income from other sources. He submitted that the miscellaneous income earned by the assessee is also of similar character. Therefore, he submitted that learned CIT(A) did not commit any error in upholding the action of the Assessing Officer. He submitted that to the extent of depreciation learned CIT(A) has already accepted the claim of the assessee and as per provisions of section 72 benefit of set off of brought forward business losses against income from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f law after giving the assessee a reasonable opportunity of hearing. We direct accordingly. Ground No. 1.1 to 1.3 are dismissed and Ground No. 1.4 is allowed for statistical purposes in the manner aforesaid. In short, Ground No. 1 is partly allowed. 16. Apropos ground No. 2; copy of audit report submitted u/s. 115JB in Form No. 29B is filed at page No. 2 to 5 of the paper book. According to the said report in Column No. 7, it is stated that profit and loss account is prepared in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956 (1 of 1956). In column No. 9 it is stated that net profit according to profit and loss account referred in Column No. (7) above, is a loss of Rs. 51,44,353/-. In Column No. 10 it is described that amount of net profit as shown in profit and loss account as increased by the amounts referred to in clauses (a) to (f) of Explanation to sub-section (2) of this section (file working separately where required) is stated as under :- Loss Rs. 51,44,353/- Add Fringe benefit Tax Rs. 5,750/- Deferred Tax Rs. 8,39,954/- Rs. 42,98,694/- 17. However, the Assessing Officer during the course of asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... la Manorma Co. Ltd. Vs. CIT (300 ITR 251) is misplaced on the ground that the provisions which were construed by Hon'ble Supreme Court were of section 115J, while in the present case provisions are of section 115JB. Accordingly the Assessing Officer computed book profit of the assessee as under :- Calculation u/s. 115JB of the Act. Loss as per P&L Account Rs. 42,98,649/- Add : depreciation in P&L Account (para 5) Rs. 68,41,555/- Book profit Rs. 25,42,906/- Such action of the Assessing Officer was agitated before learned CIT(A), who has upheld the action of the Assessing Officer on the ground that it is necessary that the expenditure claimed in the profit and loss account should have character of expenditure related to the impugned year and as in the present case depreciation does not relate to year under consideration, action of the Assessing Officer was to be upheld. The assessee is aggrieved, hence has filed ground No. 2. 19. It was submitted by ld. AR that the Assessing Officer has wrongly rejected the claim of the assessee on the ground that provisions considered in the decision of Hon'ble Supreme Court in the case of Malayala Manorama Co. Ltd. (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresentative relied upon the order passed by the Assessing Officer and learned CIT(A). He submitted that prima-facie the depreciation was not admissible and this has been clearly brought out by learned CIT(A) as well as Assessing Officer. Thus, he submitted that the order passed by learned CIT(A) should be confirmed. 22. We have heard both the parties and their contentions have carefully been considered. We have already mentioned that the assessee has filed audit report in appropriate form computing the book profit. It has been clearly stated in the said report that the profit and loss account has been prepared in accordance with the provisions of Parts II & III of Schedule VI of the Companies Act, 1956, and amounts which are to be added as per Explanations of Sub-section (2) are also duly stated in the audit report and finally a loss has been computed at Rs. 42,98,649/-. To this amount, the Assessing Officer has further added a sum of Rs. 68,41,555/-. The question in the present appeal is that when the assessee has submitted audit report in Form No. 29B certifying that the profit and loss account has been prepared as per Parts II & III of Schedule VI of the Companies Act then, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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