PR COMMISSIONER OF INCOME TAX-10 vs. CONTINENTAL FOUNDATION JOINT VENTURE

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ITA/122/2016HC DelhiDLHC01000149201626 April 2017Bench: HON'BLE DR. JUSTICE S.MURALIDHAR,HON'BLE MR. JUSTICE CHANDER SHEKHAR3 pages
AI SummaryDismissed

What did the High Court hold?

The tribunal upheld the CIT(A)'s decision that bank guarantee commission was directly linked to earning interest on FDRs and should be deducted. The matter was remanded to the AO regarding eligibility for deduction under Section 80HHBA on interest income.

What were the facts?

The Revenue appealed against the ITAT's order concerning the deduction of bank guarantee commission from interest earned on FDRs. The CIT(A) had held that interest income from FDRs, Citi Bank account, and DRB claims were linked to the assessee's business.

What were the issues?

Whether bank guarantee commission paid is an allowable deduction against interest income earned on FDRs. Whether interest income is eligible for deduction under Section 80HHBA.

Which sections of the Income-tax Act were involved?

Section 80HHBA

AI-generated summary — verify with the full judgment below

$~30&31 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA122/2016 PR COMMISSIONER OF INCOME TAX-10 Appellant Through: Mr. Rahul Chaudhary, Advocate versus CONTINENTAL FOUNDATION JOINT VENTURE .... Respondent Through: Mr. Ajay Vohra, Sr. Adv. with Ms.Kavita Jha and Ms. Shivani Khandekar, Advs. And + ITA 349/2016 PR. CIT-10 Appellant Through: Mr. Rahul Chaudhary, Advocate versus CONTESIENTALFOUNDATION JOINT VENTURE .... Respondent Through: Mr. Ajay Vohra, Sr. Adv. with Ms.Kavita Jha and Ms. Shivani Khandekar, Advs. CORAM: JUSTICE S.MURALIDHAR JUSTICE CHANDER SHEKHAR ORDER % 26.04.2017 1. These appeals by the Revenue are directed against the common order dated 24th June 2015 passed by the Income Tax Appellate Tribunal (ITAT) in ITA Nos. 1168 and 1737/Del/2006 for Assessment Years (AYs) 2002-03 and ITA Nos. 3736 and 4204/Del/2006 for AY 2003-04. By an order dated Notice in the present appeals was confined to the question of allowing deduction of bank guarantee commission from the interest earned on the FDRs. ITA Nos.122/2016& 349/2016 Page 1 of3 Digitally Signed By:AMULYA Signature Not Verified

i 2. It is seen that the Commissioner of Income Tax (Appeals) ('CIT(A)') in the order dated 14^*^ February, 2006, took note of the fact that the interest income earned by the Assessee was from various sources as under:- (i) Rs.9,28,70,416/- on FDR with Banks ii) Rs. 27,12,100/-. on I.T. refund iii) Rs.4,62,207/- on A/c with Citi Bank in London iv) Rs. 2,15,99,944/- On DRB (Dispute Review Board) Claims Total - Rs.9,95,24,945/- 3. A categorical finding was rendered by the CIT(A) that items at SI. Nos. (i), (iii) and (iv) were closely and intimately linked with the business of the Assessee and, therefore, the interest income mentioned at SI. Nos. (i), (iii) and (iv) should be assessed as business income. 4. The CIT(A) also rendered a categorical finding that the interest amount of Rs. 2,15,99,944/- received on the claims settled by the Dispute Review Board ('DRB') related to the housing project and therefore, interest should be held to be income derived from execution of housing project, which should be entitled to deduction under Section 80HHBA of the Act. 5. The matter travelled to the ITAT in appeal. In the impugned order the ITAT maintained the finding that 'bank guarantee commission' was directly linked with earning of interest on FDRs and the learned CIT(A) was justified in directing the AO to reduce the bank guarantee commission from the interest on FDRs. The ITAT remanded the matter to the AO only as regards the question of eligibility for deduction under Section 80HHBA on ITA Nos. 122/2016 & 349/2016 Page 2 of3

account of interest. f 6. As far as the treatment ofthe bank guarantee commission paid to the bank is concerned, its ehgibiiity as business expenditure would remain unchanged whether the interest amount is treated as business income or income from other sources. 7. In that view of the matter, the Court sees no reason to frame any question on the issue ofbank guarantee commission. 8. The appeals are dismissed. APRIL 26, 2017 sd ITA Nos. 122/2016 & 349/2016 S.MURALIDHAR, J CHANDER SHEKHAR, J Page 3 of3

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