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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI R.C. SHARMA
आदेश / O R D E R PER R.C. SHARMA(A.M.) This is an appeal by the assessee against the order of CIT(A) for the A.Y. 2013-14, in the matter of order passed u/s.143(3) of the IT Act. 2. Only grievance of assessee relates to treating the interest income of Rs. 29,24,546/- as income from other sources against business income declared by the assessee.
. Subhkam Stocks & Shares Pvt Ltd., Mumbai. - 2 - 3. Rival contentions have been heard and record perused. Facts in brief are that the assessee is a private company, during the previous year, relevant to the A.Y 2013-14, carried on its business of dealing in shares & securities. The assessee filed is return of income for the A.Y 2013-14 on 27.09.2013, declaring a total income / (loss) at Rs. Nil, comprising of income / loss from business. While assessing the income from business at Rs. Nil, A.O assessed interest income as income from other source at Rs. 29,24,546/-. By the impugned order, the CIT(A) confirmed the action of AO.
I found that assessee was in receipt of interest of Rs. 10,24,986/- on loan advanced, and interest of Rs. 18,98,560/- as interest on fixed deposits given to National Stock Exchange (NSE). I found that assessee was dealing in shares and securities and was members with National Stock Exchange. During the F.Y 2011-12, the assessee decided to surrender its trading membership of the exchange and for that purpose it was required to keep fixed deposit of Rs. 1,44,50,000/- for a period of three years as per the norms of surrendering the trading membership of ITA Nos. 5683//Mum/2018. Subhkam Stocks & Shares Pvt Ltd., Mumbai. - 3 - exchange, pending acceptance by the exchange of surrendering of trading membership by the assessee.
I have found that this deposit was under business compulsion, accordingly interest income is to be taxed as income from business only. This deposit was not kept by the assessee as per his sweet-will but under business compulsion, therefore interest on such deposit is to be assessed as income from business. However, interest income with respect to deployment of surplus funds with one of the party on temporary basis, does amount to deposit given under any business compulsion, but it was surplus fund which the assessee has deployed for earning interest income. Accordingly A.O has justified in treating such interest income as income from other sources.
In the result appeal of the assessee is allowed in part.