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TMI Blog2015 (10) TMI 2701X X X X Extracts X X X X X X X X Extracts X X X X ..... and decipher whether income earned from fixed deposit with bank by the assessee company could be assessed under the head ‘Income from other sources’ , thus CIT was unsure whether the treatment meted out by the assessee company in treating the said income from interest on FDR with bank as ‘Income from Business’ is right or wrong which does not show that the finding as arrived at by the AO is erroneous and hence the order of CIT does not meet the requirement of Section 263 of the Act. Our view is fortified by the judgment of Hon’ble Delhi High Court of Globus Infocom Ltd. v. CIT (2014 (9) TMI 18 - DELHI HIGH COURT) and also CIT v. Gabriel India Limited (1993 (4) TMI 55 - BOMBAY High Court) Thus set aside to the file of the AO to re-decide the issue as to whether the interest income earned from fixed deposit with bank is to be assessed under the head ‘Income from other sources’ or as ‘Business income’ is unsustainable in law and is set aside and the assessment order of the AO dated 08th October 2010 passed u/s 143(3) of the Act is restored . We order accordingly. - ITA Nos.2637/Mum/2013 - - - Dated:- 28-10-2015 - Shri Shailendra Kumar Yadav, Judicial Member, and Shri Ramit Koch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce interest income of ₹ 15,18,20,478/- was earned by the assessee company on bank fixed deposits by investing surplus funds, the same should have been assessed under the head Income from Other Sources u/s 56 of the Act and brought forward losses cannot be set off against the income assessed under the head Income from Other Sources . The CIT held that the AO by treating the interest income of ₹ 15,18,20,478/- from FDR s as business income has allowed excess set off of brought forward business losses amounting to ₹ 15,18,20,478/- and hence in view of these facts , the assessment order passed by the AO u/s 143(3) of the Act on 08th October 2010 was considered to be erroneous and prejudicial to the interest of Revenue and hence show cause notice dated 26th February 2013 was issued u/s 263 of the Act to the assessee company asking it to explain as to why the assessment order u/s 143(3) of the Act dated 08th October 2010 passed by the AO should not be set aside. 5. The assessee company in reply to afore-stated show cause notice replied that the assessee company is a subsidiary company of Canara Bank with the basic objective of dealing in Government Securities and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is case is not cumulatively met and proceedings u/s 263 of the Act are vitiated. The assessee company relied upon the following decisions to support its contentions : (i) Malabar Industrial Co. Ltd. v. CIT 243 ITR 83(SC) (ii) CIT v. Greenworld Corporation 314 ITR 81(SC) (iii) CIT v. Gabriel India Limited (1993) 203 ITR 0108 (Bom.) 6. The CIT held that interest on short term deposit with bank received from investment of surplus funds is to be assessed under the head Income from other sources . The CIT relied upon the following decisions: (i) Krishna Polyester Ltd. v. DCIT, 274 ITR 21 (Bom.) (ii) Ferro Concrete Construction (India) Pvt. Ltd. v. CIT, 290 ITR 713(MP) (iii)South India Shipping Corporation Ltd. v. CIT, 240 ITR 24 (Mad.) (iv) CIT v. Monarch Tools Pvt. Ltd. , 260 ITR 258(Mad.) The CIT held that in view of these above stated decisions, the issue is not free from doubt that the income earned by the assessee company from fixed deposits kept with the banks could be assessed under the head Income from other sources and perusal of assessment records reveals that the AO has not applied his mind to this issue and has not examined this issue during as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he file of the AO to re-decide the issue as to whether the interest income earned from fixed deposit with bank is to be assessed under the head income from other sources or as business income . Thus, the assessee company submitted that it is not permissible for the CIT to issue notice u/s 263 of the Act on one ground and to pass the orders u/s 263 of the Act on other ground. The assessee company relied upon the following decisions to support its above-stated proposition as under: (i) Star India Ltd. v. Addl. CIT, 143 TTJ 307(Mum. Trib.) (ii) B S Sangwan v. ITO ,67 SOT 447 (Del. Trib.) (iii) Vesuvius India Limited v. CIT , 54 SOT 172(Kol. Trib.) (iv) CIT v. Contimeters Electricals Pvt. Ltd. , 317 ITR 249(Del.) (v) CIT v. G K Kabra , 211 ITR 336 (AP) (vi) CIT v. Ashish Rajpal , 320 ITR 674. The assessee company submitted that if two views are possible and the AO has taken one view which is a possible view, then the assessment orders cannot be held to be erroneous and prejudicial to the interest of Revenue. The assessee company referred to notice dated 09th July 2010 u/s 142(1) of the Act issued by the AO along with questionnaire whereby the AO has enquired ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) Jewels of India v. ACIT 325 ITR 92(Bom.) (iii) Globus Infocom Limited v. CIT 369 ITR 1 (Del.) (iv) Star India Limited v. Addl. CIT 143 TTJ 307(Mum. Trib.) 9. The Ld DR relied upon the orders dated 19th March 2013 u/s 263 of the Act passed by the CIT. The Ld. DR stated that there is no discussion in the assessment order dated 08th October 2010 u/s 143(3) of the Act passed by the AO about the treatment of this income from interest on FDR with bank by deploying surplus funds by the assessee company to be treated as Income from Business or Income from other sources which shows that the AO has not made detailed enquiry in respect of this matter and hence has not applied his mind before accepting the interest income earned from FDR with Bank on deployment of surplus funds. Thus, the Ld. DR submitted that the orders dated 08th October 2010 u/s 143(3) of the Act of the AO is erroneous and prejudicial to the interest of the Revenue and hence the orders dated 19th March 2013 of CIT u/s 263 of the Act setting aside the assessment orders dated 08th October 2010 u/s 143(3) of the Act of the AO is correct and needs to be upheld. The Ld. DR also submitted that that the conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the case of the assessee company, the Parent Bank i.e. Canara Bank took over the business of Primary Dealership from the assessee company w.e.f. 20.02.2007 and thereafter the assessee company delved into stock broking business . The assessee company on cessation of business of PD started liquidating its stock-in-trade of securities and treasury bills which generated heavy liquid money. The assessee company also liquidated stock-in-trade of equity shares and booked profit . These securities were continuously liquidated over a period of one year i.e. financial year 2007-08 which created generation of liquid money, which was temporarily parked into Fixed Deposit with banks for short periods, mainly up to 6 months till they are deployed in stock broking business ventured by the assessee company . The assessee company after cessation of PD Business diversified into stock broking business. The controversy revolves around whether the interest income earned from FDR with banks by deployment of liquid funds arisen from liquidation of government securities and treasury bills on cessation of PD business in the interim period and before the deployment of the funds in stock broking busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as brought to tax by the AO under the head income from business is one of the possible views adopted by the AO in the assessment proceedings u/s 143(3) of the Act culminating into an order dated 08th October 2010 and the same view as adopted by the AO cannot be held to be an erroneous view. The AO has taken this view in bringing to tax this income from interest from FDR with banks as Business Income which is one of the possible view and it is established principle of taxing statute that if two views are possible, then the view which favours tax payer shall prevail and hence it could not be said that the view adopted by the AO is an erroneous view . It is impressible for the CIT to substitute his view in such a situation and that too in the proceedings u/s 263 of the Act even if the view of the CIT is a better view than the view adopted by the AO unless it is established that the view adopted by the AO is clearly an erroneous view and is prejudicial to the interest of Revenue. The CIT has relied upon the following decisions which are clearly distinguishable as under: (i) Krishna Polyster Ltd v. DCIT, 274 ITR 21(Bom.)- In this case the tax payer made public issue and got sur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany. (v) CIT v. Monarch Tools Private Limited, 260 ITR 258(Mad.)- In the instant case, the tax payer was engaged in the business of design, fabrication, erection and commissioning of Plant and Machinery having received advance from customers which was not immediately required for business purposes was deployed in the FDR, the interest was held to be income from other sources but in the instant case the assessee company is in business of deployment of funds/money in government securities and treasury bills which has just ceased and is now contemplating starting share broking business. The facts are clearly distinguishable. The assessing company during the assessment proceedings has duly replied to all the queries raised by the AO , the assessee company referred to notice dated 09th July 2010 issued u/s 142(1) of the Act by the AO along with questionnaire whereby the AO has enquired, inter-alia, about the computation of income earned by the assessing company during the impugned assessment year with direction to submit audited Balance Sheet along with notes and annexures, nature of business of the assessee company, details of carry forward losses, details of other income earned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on by the CIT and his observations are based on mere suspicion and are uncertain . Yet , a direction was issued to the AO to carry out fresh inquiries to do the exercise once again and decipher whether income earned from fixed deposit with bank by the assessee company could be assessed under the head Income from other sources , thus CIT was unsure whether the treatment meted out by the assessee company in treating the said income from interest on FDR with bank as Income from Business is right or wrong which does not show that the finding as arrived at by the AO is erroneous and hence the order of CIT does not meet the requirement of Section 263 of the Act. Our view is fortified by the judgment of Hon ble Delhi High Court of Globus Infocom Ltd. v. CIT (2014) 369 ITR 14 (Delhi) and also Hon ble jurisdictional High Court of Bombay in CIT v. Gabriel India Limited 203 ITR 108 (Bom.) . The reliance of the CIT on the decisions of CIT v. Jagdish Chand Walia Sons 234 ITR 595(P H.), CIT v. Emery Stone Manufacturing Co. 213 ITR 843(Raj.) , Mofussil Warehouse and Trading Co. Ltd. v. CIT 238 ITR 867 (Mad.) and Hon ble Supreme Court decision in Malabar Industrial Co. Ltd v. CIT 243 ITR 83( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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