M/S. CONSOLIDATED COIN COMPANY PVT. LTD.,DELHI vs. DCIT, NEW DELHI

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ITA 6186/DEL/2014Status: DisposedITAT Delhi21 June 2016AY 2007-084 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that interest earned on fixed deposits made for business purposes should be treated as business income. Therefore, the difference in classification did not amount to concealment or furnishing inaccurate particulars, making the penalty unsustainable.

What were the facts?

The assessee, a 100% EOU, declared interest income on fixed deposits as 'Income from other sources'. During assessment, it revised its claim to treat this interest as 'Business income' eligible for exemption. The AO added the interest income and imposed a penalty.

What were the issues?

Whether penalty under Section 271(1)(c) is leviable when the assessee bona fide reclassified interest income from 'other sources' to 'business income' which was eligible for exemption.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 10B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCHES : SMC-II : NEW DELHI

Before: SHRI R.S. SYAL

For Appellant: Shri Satyajit Goel, CA
For Respondent: Shri Deepak Garg, Sr. DR
Hearing: 21.06.2016Pronounced: 21.06.2016

ORDER This appeal filed by the assessee is directed against the order passed by the CIT(A) on 10.09.2014 confirming the penalty amounting to Rs.13,21,500/- imposed by the AO u/s 271(1)(c) of the Act, in relation to the assessment year 2007-08.

2.

Briefly stated, the facts of the case are that the assessee is carrying on business of manufacturing and export/sale in coin blanks and strips.

The assessee is a 100% EOU whose income is fully exempt u/s 10B of the Act. During the year under consideration, the assessee earned certain interest income on fixed deposits which were made with the bank as margin money and/or for bank guarantee. Such bank interest amounting to Rs.36,04,094/- was declared in the return of income as ‘Income from other sources’ on which no benefit of exemption u/s 10B was claimed.

However, during the course of assessment proceedings, the assessee filed a revised computation of income claiming such interest as `Business income’, eligible for exemption u/s 10B. The AO negatived the assessee’s claim on such interest income and made addition for the same. Thereafter, penalty was imposed u/s 271(1)(c) of the Act in respect of such charging of interest income to tax, which came to be affirmed in the first appeal.

3.

I have heard the rival contentions and perused the relevant material on record. It is evident from the assessment order itself that the assessee received interest on fixed deposits made with the bank as margin money and/or for bank guarantees. This shows that fixed deposits were made for the purpose of business and there was a live link between the carrying on of a business and earning of interest income. When the position is so, such interest income ought to have been treated as `Business income’ as has been held by the Hon’ble Delhi High Court in Principal CIT vs. Universal Precision Screws vide its judgment dated 6.7.2015 in whose copy has been placed on record.

In my considered opinion, the treatment of interest income which was claimed as ‘Business income’, but, assessed as ‘Income from other sources’ and which ought to have been rightly assessed as ‘Business income’, cannot be equated with concealment of income or furnishing of inaccurate particulars of income attracting penalty u/s 271(1)(c).

Overturning the impugned order, I order for the deletion of penalty.

4.

In the result, the appeal is allowed.

The order pronounced in the open court on 21.06.2016.

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