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TMI Blog2016 (7) TMI 730X X X X Extracts X X X X X X X X Extracts X X X X ..... s sustainable. Consequently, addition made by the AO and upheld by the ld. CIT(A) is dismissed. - Decided in favour of assessee Addition under the head ‘other sources’ - whether there is no inextricable link between the FDs and the business of the assessee, therefore, the interest income earned from therefrom should be taxed under the head ‘income from other sources’? - Held that:- There were some fixed deposits by the assessee company with the bank and the assessee chose to utilise its FDs towards its obligations of keeping some margin money for bank guarantee. Therefore, we decline to accept allegation of the ld. CIT(A) that keeping some margin money for bank guarantee and having fixed deposits with the bank are two distinct and separate transactions. At the same time, we are satisfied that when the assessee chose to utilise its fixed deposits towards its obligation of keeping margin money towards it business obligation, then it has to be held that there is inextricable link between the fixed deposits and business obligation of keeping margin money. Hence the interest income has to be treated as business income and not income from other sources. - Decided in favour of assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account dump documents found at the premises on Sh. Pradeep Baranwal. 4. That on the facts and circumstances of the case the ld. CIT(A) grossly erred in exercising jurisdiction u/s 251 of the Act to enhance the income of the appellant by ₹ 4,18,472/- on account of dumb paper. 5. That on the facts and circumstances of the case the ld. CIT(A) grossly erred in upholding the addition to the tune of ₹ 2,87,028/- under the head other sources . 6. That on the facts and circumstances of the case the ld. CIT(A) erred in holding that there is no inextricable link between the FDs and the business of the appellant. 4. On a specific query raised by the Bench, the ld. Counsel for the assessee submitted that if the Bench is satisfied with the contention of the assessee on merits, then the assessee is not serious about Ground Nos. 1 and 2 challenging the validity of reopening of assessment and issuance of notice u/s 147 of the Act. The ld. DR fairly submitted the department has no serious objection if the appeal is heard on merits. Accordingly, Ground Nos. 1 and 2 of the assessee stand dismissed. Ground Nos. 3 and 4 5. The ld. AR submitted that the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity to show that the order of the ld. CIT(A), Varanasi dated 21.6.2011, which has been upheld by the ITAT, Allahabad dated 12.12.2012 for A.Y 2008-09 similar addition in the hands of the payer/purchaser Shri Pradeep Kumar Baranwal, has been deleted. In the absence of any contrary order, we can safely presume that the addition on similar allegation in the hands of the purchaser payer has been deleted by the ld. CIT(A) and the order of the ld. CIT(A) has also been upheld by the ITAT, Allahabad and there is no further appeal by the Revenue. Therefore, similar issue attained finality in favour of the purchaser Shri Pradeep Kumar Baranwal and thus the allegation has no legs to stand that there was over and above DD payment amounting to ₹ 49,56,108/- as concealed income of the assessee and the same deserves to be taxed u/s 28 of the Act. In view of the above, we decline to uphold the action of the AO and impugned order wherein the addition made by the AO has been upheld and thus we demolish the same as and when it has been adjudicated by the ld. CIT(A), Varanasi that no over and above cash payment was made by Shri Pradeep Kumar Baranwal towards purchase of shop No. 123 in the Mall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the ld. CIT(A). Accordingly, Ground Nos. 3 and 4 are allowed. Ground Nos. 5 and 6 11. Apropos these grounds, the ld. AR contended that the ld. CIT(A) has erred in upholding the addition to the tune of ₹ 2,87,028/- under the head other sources . The ld. AR also pointed out that the ld. CIT(A) erred in holding that there is no inextricable link between the FDs and the business of the assessee, therefore, the interest income earned from therefrom should be taxed under the head income from other sources . 12. The ld. AR vehemently pointed out that in respect of treatment of interest as income from other sources given by the AO, it was explained before the authorities below that the interest earned by the assessee had direct nexus with general operations of the business of the assessee and was hence taxable under the head business . To support this contention, the ld. AR placed his reliance on the decision of the Hon'ble Jurisdictional High Court of Delhi in the case of CIT Vs. Koshika Telecom reported at 287 ITR 479 [Del] and CIT Vs. JPDSC Ventures Ltd 335 ITR 132 [Del]. The d. Counsel drew our attention towards submissions of the assessee recorded by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee for A.Y 2008-08 are allowed. Assessee s Appeal ITA No. 998/Del/2013 Revenue s Appeal ITA No. 558/Del/2013 A.Y 2009-10 14. These cross appeals have been filed against the order of the ld. CIT(A)-II, New Delhi 26.11.2012 passed in first appeal No. 165/2011-12 for A.Y 2009-10. Effective grounds raised by the assessee read as under: 1. That on the facts and circumstances of the case, the order dated 22nd December, 2011, as passed by the Assistant Commissioner of Income-tax, Central Circle - 21 [hereinafter referred to as the A.O. ] and as upheld by the Commissioner of Income-tax (Appeals) - II, New Delhi [hereinafter referred to as the CIT(A)] vide order 26th November, 2012 is void ob initio. 2. That on the facts and circumstances of the case, the CIT (A) erred in holding that there is no inextricable link between the FDs and the business of the appellant to the entire tune of ₹ 3,04,939/-. 3. That on the facts and in circumstances of the case, the CIT(A) erred in holding that the Appellant failed to substantiate the claim as referred in Ground 2. 15. Grounds raised by the Revenue read as under: 1. That the Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and circumstances of the case of A.Y 2008-09 are quite similar to the present A.Y 2009-10 as the AO made addition on the same allegations which was upheld by the ld. CIT(A) by observing similar findings. Since by the earlier part of the assessee for A.Y 2008-09 we have allowed the ground of the assessee pertaining to the treatment of interest income accrued to the assessee from the fixed deposits kept in the bank, therefore, in the similar set of facts and circumstances of the case, we are of the considered view that our conclusion for A.Y 2008-09 would apply mutatis mutandis to A.Y 2009-10 also on this ground only. Thus the grounds Nos 1,2 and 3 are allowed. 19. Apropos Ground Nos. 1 and 2 of the Revenue, the ld. DR supported the action of the AO and the order of the ld. CIT(A) and contended that the ld. CIT(A) grossly erred in directing the AO to reduce ₹ 1,37,10,343/- being income assessed in A.Y 2008-09 under the head business income instead of ₹ 87,51,902/- reduced by the AO without properly appreciating that the assessment order for A.Y 2008- 09 has not been accepted by the assessee and the same has not reached to the finality. The ld. DR vehemently contende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The interest income was assessed separately as income from other sources. The figure to be reduced from the net profit would therefore be the income assessed by the AO under the business head in the preceding year and not the total income . Income assessed under other sources would not qualify for reduction from the net profit. While the general point raised by the appellant is in order, the actual quantum to be reduced will depend upon the income assessed under the business head in the preceding year. The AO is directed to give effect accordingly. Ground 3 of the appeal is therefore partly allowed. 22. In view of the above, from the assessment order available in the appeal file in ITA No. 997/Del/2013, we clearly note that the AO assessed income from business viz calculation of profitability on project completion basis at ₹ 1,37,10,343/- whereas while passing order for A.Y 2009-10 he reduced the amount of ₹ 87,51,902/- as profit already declared for the preceding A.Y 2008-09 which is not a proper and correct approach of the AO. In view of the above noted facts and circumstances, we are in agreement with the conclusion of the ld. CIT(A) which granted relief ..... X X X X Extracts X X X X X X X X Extracts X X X X
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