What did the Tribunal hold?

The Tribunal restored both the main issue of classifying interest income and the additional ground regarding allowing expenses against such income to the file of the CIT(A) for fresh adjudication.

The assessee claimed interest income from bank deposits as business income, but the Assessing Officer and CIT(A) treated it as income from other sources. The deposits were made from advances received from customers for a project that was under litigation.

What were the issues?

Whether interest income from bank deposits should be treated as business income or income from other sources, and whether expenses can be set off against income from other sources.

Bab Developers Pvt. Ltd. vs ITO | ITAT Mumbai 2019

Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI

Before: SHRI C.N. PRASAD, HONBLE & SHRI MANOJ KUMAR AGGARWAL, HONBLE

For Appellant: Ms. Arathi Sathe

For Respondent: Shri Akhtar H. Ansari

Hearing: 13.11.2019Pronounced: 13.11.2019

O R D E R PER C.N. PRASAD (JM) 1. This appeal is filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals) – 3, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 11.06.2018 for the A.Y. 2012-13.

Assessee in its appeal challenged the order of the Ld.CIT(A) in considering the interest income from bank deposits under the head

(A.Y: 2012-13) Bab Developers Pvt. Ltd., “income from other sources” instead of “business income” as claimed by the assessee.

Ld. Counsel for the assessee, at the outset submits that Assessing Officer while completing the assessment assessed income from bank deposits pending litigation in the Hon'ble High Court on the prospective buyers, assessed interest income on deposits kept in bank under the head income from other sources as against the claim for assessing the said interest under the head business income. It is stated that these advances were received from the customers in respect of Kurla project and since the matter went into litigation and the case is pending before the Hon'ble High Court, the advances were kept in bank deposits. Ld. Counsel for the assessee submits that the treatment of the Assessing Officer in assessing the interest income from deposits under the head income from other sources has been affirmed by the Ld.CIT(A).

Ld. Counsel for the assessee referring to the additional ground filed by the assessee contended that if the Revenue is considering interest income under the head income from other sources they should have also considered allowing expenses like legal fees, secretarial fees, audit fees etc., against the said interest income.

(A.Y: 2012-13) Bab Developers Pvt. Ltd., 5. On a query by the Bench as to whether this contention was raised before the Ld.CIT(A) it is stated by the Ld. Counsel for the assessee that this contention has been raised for the first time before the Tribunal. Considering the submissions of the Ld. Counsel for the assessee since this contention have not been raised the before the Ld.CIT(A), we are of the view that this issue has to be examined by the Ld.CIT(A). Ld. DR has no serious objection in sending back this ground to the file of the Ld.CIT(A). On hearing both sides, we restore this ground relating to allowing expenses against income from other sources to the file of the Ld.CIT(A) for adjudication. We restore the main ground of appeal also i.e. whether the interest income is assessable under the head business or other sources to the file of the Ld.CIT(A) for fresh adjudication. Thus, we restore this appeal to the file of the Ld.CIT(A) for denovo adjudication, after providing adequate opportunity of being heard to the assessee.

In the result, appeal of the assessee is allowed for statistical purpose.

Order pronounced in the open court on the 13th November, 2019

BAB DEVELOPERS PVT. LTD.,MUMBAI vs. ITO 2 (1)(1), MUMBAI

What did the Tribunal hold?

What were the facts?

What were the issues?

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