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TMI Blog2013 (5) TMI 919X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the order of the Commissioner of Income Tax (Appeals), Kolhapur dated 30.07.2008 which, in turn, has arisen from an assessment order dated 03.12.2007 passed by the Assessing Officer, under Section 143(3) of the Income Tax Act, 1961 (in short the Act ), for the assessment year 2005-06. 3. In this appeal, primary dispute relates to the nature of interest income earned from bank FDs amounting to ₹ 7,59,984/-. In the return of income, assessee had declared such interest income as income derived from its business activities and therefore the same was also claimed to be eligible for deduction under Section 80P(2)(a)(vi) of the Act. The Assessing Officer held that the interest received on FDs with the bank was liable to be assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Shyam Bihari vs. CIT (2012) 345 ITR 283 (Patna); and, (ii) Hon ble Karnataka High Court in the case of CIT vs. Chinna Nachimuthu Constructions (2008) 297 ITR 70 (Kar.). Thus, it was pointed out that interest income would be eligible for deduction under Section 80P(2)(a)(vi) of the Act. 6. On the other hand, the learned Departmental Representative appearing for the Revenue has referred to para 6 of the order of the CIT(A) to point out that an FD kept in bank is akin to an investment made and therefore income from such deposit is in the nature of the investment income as not business income . The learned Departmental Representative also submitted that in this case assessee failed to establish any link between the FDs and the securing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est income earned on the FDs was sought to be treated by the assessee as business income . The Revenue resisted the claim of the assessee but Hon ble Karnataka High Court upheld the stand of the assessee and ruled that such income should be treated as business income only. A similar question was raised before the Hon ble Patna High Court in the case of Shyam Bihari vs. CIT (supra) wherein also it was held that the interest earned on security deposits to the extent used for the purposes of securing contract work would be assessable as business income. 9. In the face of the aforesaid legal position laid down by the Hon ble Karnataka High Court as well as the Hon ble Patna High Court, the proposition canvassed by the assessee is well-found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l and submissions putforth by the assessee. Thus, we set-aside the matter to the Assessing Officer for passing an order afresh in the aforesaid manner as per law. 10. Resultantly, the appeal of the assessee in ITA No. 212/PN/2009 is treated as allowed for the statistical purposes. 11. ITA No.171/PN/2011 is an appeal by the Revenue which is directed against the order of the Commissioner of Income Tax (Appeals), Kolhapur dated 27.10.2010 which, in turn, has arisen from an order dated 20.01.2009 passed by the Assessing Officer, under Section 271(1)(c) of the Act, for the assessment year 2005-06. 12. In this appeal, the grievance of the Revenue is that the CIT(A) erred in cancelling the penalty levied by the Assessing Officer under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been remanded back to the file of the Assessing Officer for consideration afresh as per directions given therein. 15. In view of the aforesaid factual matrix, the penalty imposed by the Assessing Officer vide his order dated 20.01.2009 is unsustainable and we hold so. It may be mentioned that since the matter relating to the assessability of ₹ 7,59,984/- representing interest income has been restored back to the file of the Assessing Officer, the Assessing Officer would be at liberty to initiate proceedings under Section 271(1)(c) of the Act if warranted as per law after he passes an order in pursuance of our directions of even date contained in ITA No.212/PN/2010 dealing with the merits of the addition. 16. In the result, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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