M/S. FIRSTFLIGHT PROPERTIES PVT. LTD,MUMBAI vs. THE ACIT CC -5(3), `MUMBAI

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ITA 106/MUM/2022Status: DisposedITAT Mumbai23 August 2022AY 2017-183 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that the Assessing Officer and CIT(A) did not properly consider the jurisdictional High Court decisions and that the assessee should be given an opportunity to present its case. The matter was restored to the Assessing Officer for fresh examination.

What were the facts?

The assessee, a real estate developer, received interest income of Rs. 26,12,230/- by parking funds on short-term deposit. The Assessing Officer treated this as income from other sources, netting it off against interest expenditure. The assessee contended that the funds were from borrowed capital and the interest income should be set off against interest expenditure, citing High Court decisions.

What were the issues?

Whether interest income earned on short-term deposits should be assessed as income from other sources or set off against interest expenditure, and the applicability of High Court precedents to the facts of the case.

Which sections of the Income-tax Act were involved?

Not explicitly mentioned in the provided text, but the issue relates to the head of income under which interest income should be assessed.

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(3)Show list

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Income Tax Appellate Tribunal, “SMC” Bench, Mumbai

For Appellant: Shri Nishit Gandhi
For Respondent: Shri Vivek Upadhyay
Hearing: 18.08.2022Pronounced: 23.08.2022

The assessee has filed this appeal challenging the order dated 30.11.2021 passed by learned CIT(A)-53, Mumbai and it relates to A.Y. 2017- 18. The assessee is aggrieved by the decision of learned CIT(A) in confirming the assessment of interest income of Rs. 26,12,230/- as income from other sources.

2.

The facts relating to the issue are stated in brief. The assessee is a real estate developer. During the course of assessment proceedings, the Assessing Officer noticed that the assessee has received interest income of Rs.26,12,230/- and it netted off the same against interest expenditure of Rs.12.39 crores, which was included in the “Work in Progress”. The Assessing Officer noticed that the assessee has earned interest income of Rs. 26,12,230/- by parking it fund on short term basis. By placing reliance on the decision of Hon'ble Supreme Court in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd. (1997) 93 taxman 502, the Assessing Officer held that the 2 M/s. Firstlight Properties Pvt. Ltd.

above said interest income assessable in the hands of the assessee under the head ‘income from other sources’. The assessee submitted that the funds parked in the fixed deposits are out of borrowed funds and hence interest income was rightly netted off against interest expenditure. It was also submitted that the treatment given by the assessee would get support from the following decisions rendered by Hon'ble Bombay High Court : a) CIT Vs. Paramount Premises (P) Ltd. (1991) 190 ITR 259 b) CIT Vs. Lok Holdings (2010) 189 taxman 452.

The Assessing Officer did not agree with the submissions of the assessee. Accordingly, he assessed interest income in the hands of the assessee under the head ‘income from other sources’. The Learned CIT(A) also confirmed the same.

3.

The Learned AR submitted that the Assessing Officer has wrongly relied upon the decision of Hon'ble Supreme Court in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd. (supra), since the facts of the above said case are not applicable to the present case. He further submitted that the tax authorities have not taken note of the decision rendered by Hon'ble Jurisdictional Bombay High Court in the case of Paramount Premises (P) Ltd. (supra) and Lok Holdings (supra). He submitted that the deposits/advances were given for the business purposes and further there is direct nexus between the borrowed funds and advances/deposits given. Accordingly he submitted that learned CIT(A) was not justified in confirming the assessment of interest income under the head ‘income from other sources’.

4.

On the contrary, learned DR submitted that the assessee has not produced any material either before the Assessing Officer or learned CIT(A) to prove that the advances/deposits were given for business purposes.

5.

Having heard the rival submissions, I am of the view that, in the interest of natural justice, assessee may be provided with an opportunity to present its case properly before the Assessing Officer. I also noticed that the Assessing

3 M/s. Firstlight Properties Pvt. Ltd.

Officer/learned CIT(A) has not explained as to how the decision rendered by Hon'ble Bombay High Court in the case of Paramount Premises (P) Ltd. and Lok Holdings (supra) are not applicable to the facts of the present case. Accordingly I am of the view that this issue requires fresh examination at the end of the Assessing Officer. Accordingly, I set aside the order passed by learned CIT(A) and restore the same to the file of the Assessing Officer for examining it afresh. I also direct the assessee to furnish all information and explanation in support of its contention. After affording adequate opportunity of being heard to the assessee, the Assessing Officer may take appropriate decision in accordance with law.

6.

In the result, appeal filed by the assessee is treated as allowed for statistical purposes.

Order pronounced in the open court on 23.08.2022.

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