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TMI Blog2017 (5) TMI 1217X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. CIT(A) was right in law as well as on facts in ignoring the fact that interest income from fixed deposits shall be treated as 'Income from Other Sources'. 4) That the appellant craves leave to add, alter, modify, include or delete any of the above grounds of appeal. 3. The brief facts of the case are that the assessee is an individual and engaged in the contractor business. The assessee filed his return of income declaring loss of Rs. 63,99,360/-. Under scrutiny, the AO determined the total income of the assessee at Rs. 1,07,31,890/-, wherein the additions/disallowances of Rs. 9,55,719/-, Rs. 1,61,75,533/- and Rs. 14,57,425/- were made on account of u/s. 14A, retention money/security deposit and treated interest earned on fixed deposits as income from other sources respectively. 4. Ground no.1 is relating to disallowance of Rs. 9,55,719/- made under Rule 8(1),(ii) and (iii) for the purpose of computation of expenditure u/s. 14A of the Act, the AO found that the assessee claimed that he earned an amount of Rs. 48,236/- as exempt income and disallowed no expenditure in earning such income. The AO after examining the accounts observed that the assessee borrowed fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been reflected in his personal Balance Sheet. No expenses have been claimed in his personal capacity in his Balance Sheet and therefore, no expenses could have been disallowed since none was claimed. The expenses of the proprietorship concern cannot be disallowed when the investments have not been made by the proprietorship concern and the investments have nothing to do with the activities of the proprietorship concern. The positive Capital Account balance of the appellant in his proprietorship concern clearly proves that the appellant has invested in the firm and not borrowed from it. Also there is clear segregation of the activities of the proprietorship concern from his personal activities. In view of the same, I delete the addition of Rs. 9,55,719/- on account of section 14A'read with Rule 8D." 6. The ld.DR submitted that the assessee earned dividend income and during the assessment proceeding the AO by examining the records found that the assessee borrowed funds and paid interest on such loans. He relied on the order of the AO. 7. The ld.AR submits that all the details have been provided to the AO. He submits that the assessee produced the balance sheet in the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erms of decision of supra held that no income on account of security deposit or retention money has accrued to assessee during the year under consideration and as such he deleted the addition made by the AO by stating as under:- "4.3 Ground No. 3 is in respect of the disallowance of Rs. 1,61,75,533/- on account of Retention Money/Security Deposit deducted by various authorities from the bills raised by the appellant which are only to be paid on satisfactory completion of the project. The appellant has relied on the agreements made with the various authorities before me and has also produced the evidences of deduction of Security Deposit / Retention Money by the various parties / authorities. The deduction of security deposit by the said authorities is not in dispute and is evident from the supporting documents issued by the various 'authorities. The agreements entered into by the appellant with the various parties also clearly shown that the security deposit is only to be paid to the appellant on satisfactory completion of the project or on various other terms and conditions. The appellant before me has relied on the decision of the Hon'ble Jurisdictional High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28 of retention money. The ld.AR placed his reliance on the decision in the case of supra and argued that the assessee had no right to claim any part of the retention money till the verification of satisfactory execution of the contract work and argued that the retention of money cannot be said to be accrued to assessee in the year under consideration. In support of the contention, he relied on the order of the CIT-A. 14. Heard rival submissions and perused the material available on record. We find that the retention money and security deposits are retained by the parties, who have given the contract to assessee and the said amounts would be refunded and accrued to assessee on satisfactory completion of contract work. Till then the assessee had no right to claim any parts of retention money, which retained by the parties. The Hon'ble High Court of Calcutta in the case of supra held that all the receipts of retention and security deposit are contingent and happening of future event. The retention and security deposit deducted by various parties cannot be said to have been accrued to the assessee during the year under consideration in which year the bills are raised. 15. Respectful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, he relied on the order of the CIT-A in directing the AO to delete the same by treating as business income. 21. Heard rival submissions and perused the material available on record. We find that the assessee filed necessary evidences available at pages 57-86 of the paper book, wherein it shows at page: 59 that the assessee has earned interest from UCO Bank, Indian Overseas Bank and SBI Bank. The assessee got refund from ICICI Bank on account of excess amount paid, details of which are available at pages 80 to 86 of the paper book. It is also observed that the assessee has made fixed deposits for obtaining bank guarantee towards earnest money in terms of contract and rebate received from the ICICI Bank towards excess EMI paid by the assessee. We find that the assessee being a contractor and in order to secure the contract work bank guarantee is required for smooth functioning of his contract business. Therefore, the interest as earned and refund by the assessee is to be treated as business income. The CIT-A was justified in doing so. We uphold the order of the CIT-A. The ground raised by the revenue is dismissed. 22. In the result, the appeal of the revenue is dismissed. Order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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