THE BOMBAY OIL P.LTD,MUMBAI vs. DCIT 9(2), MUMBAI

We heard the parties and perused the record. The assessee is engaged in the business of investment into financial instruments, mutual funds etc. The assessee received interest income and miscellaneous income as detailed below during the year under consideration:- Interest on income tax refund - 18,87,297 Interest on deposits with Bank - 7,47,260

Interest on deposits/ICD with corporate - 33,97,892 Interest received from a concern - 10,421 ------------------ 60,42,870 ========== The assessee offered the above said interest income under the head Business. The assessing officer noticed that the assessee’s application for getting status of “Non-Banking Financial Company” (NBFC) was rejected by RBI. Further the assessee’s objective was to make investments in financing/mutual funds. Accordingly he held that the deposits made with banks/corporate cannot be treated as business activity of the assessee. Accordingly he assessed the above said income under the head income from other sources. The assessee had claimed various expenses in its profit and loss account. The AO rejected them, since there was no business income assesable in the hands of the assessee, as the AO had assessed the interest income under the head Income from other sources. The Ld CIT(A) also confirmed the same and hence the assessee has filed this appeal.

The Ld A.R submitted that the assessee is engaged in the business of investing in financial instruments and the deposits were made in the course of carrying on the business. He submitted that the assessing officer has accepted the identical business activities carried on by the assessee in the past, i.e., in the 143(3) assessments completed for assessment years 2005-06 to 2009-10. Accordingly he submitted that there is no necessity for the AO to take a different view in this year alone and the same has violated the principles of consistency. In this regard, the Ld A.R placed reliance on the decision rendered by Hon’ble Supreme Court in the case of Radhoswamy Satsang (198 ITR 321), the decision rendered by Hon’ble Bombay High Court in the case of Gopal Purohit (336 ITR 287) and also other decisions.

The Ld A.R submitted that the rejection of the application for securing NBFC status would not render the assessee business less and the income

On the contrary, the Ld D.R placed strong reliance on the order passed by Ld CIT(A).

Having heard rival submissions, we are of the view that there is merit in the contentions of the assessee. We notice that the assessee has been earning income of identical nature in the past and the assessing officer has assessed the same under the head Income from business. Even though the principle of resjudicata is not applicable to the income tax proceedings, yet we notice that the tax authorities have not given any reason as to why the decision taken on identical issue in the earlier years should not be followed. Hence we are of the view that the Ld A.R was justified in contending that the principle of consistency should be followed in the year under consideration. The deposits made with the banks and corporate, in our view, can be considered as part of business activities of the assessee as it is engaged in the business of investing in financial instruments.

At the time of hearing, the ld A.R fairly admitted that the interest on income tax refund is assessable under the head Income from other sources. Accordingly we uphold the view taken by the Ld CIT(A) in respect of interest from income tax refund.

In respect of remaining interest income, we set aside the order passed by Ld CIT(A) and direct the AO to assess the same under the head Income from business.

We notice that the AO has rejected the claim of expenses, since he assessed the interest income under the head Income from business. There was also no occasion for him to examine the various expenses claimed by the assessee. In the preceding paragraphs, we have held that the interest income from deposits made with banks and other parties is assessable as business income. In this view of the matter, the various expenses claimed by the assessee require examination at the end of the AO. Accordingly we set aside the order passed by Ld CIT(A) in respect of expenses and restore the same to the file of the AO for examining the same.

In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the open court on 29th November, 2017. आदेश क� घोषणा खुले �यायालय म� �दनांक 29 नवंबर, 2017 को क� गई । Sd/- Sd/- (राम राम राम लाल राम लाल लाल नेगी लाल नेगी नेगी / Ram Lal Negi) (बी नेगी बी बी. आर बी आर आर. बा�करन आर बा�करन बा�करन / B.R. Baskaran) बा�करन �याियक सद�य / JUDICIAL MEMBER लेखा लेखा लेखा सद�य लेखा सद�य सद�य / ACCOUNTANT MEMBER सद�य मुंबई Mumbai; �दनांक/Dated :29.11.2017. Jv.Sr.PS. आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : अ�ेिषत 1.Appellant /अपीलाथ� 2. Respondent /��यथ� 3.The concerned CIT(A)/संब� अपीलीय आयकर आयु�, 4.The concerned CIT /संब� आयकर आयु� 4