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Income Tax Appellate Tribunal, BENCH “G”,MUMBAI
O R D E R
PER PAWAN SINGH, JM:
This appeal u/s 253 of the Income-tax Act is directed by the assessee against the order of CIT(A)-48, Mumbai dated 05.08.2015 for Assessment Year (AY) 2010-11.
Brief facts of the case are that a search and seizure action u/s 132 and survey u/s 133A of the Income-Tax Act was carried out in case of Asian Star Group on 29.10.2010. Consequent upon search, the notice u/s 153 of the Act was issued to the assessee. In response to the notice, assessee filed return of income on 27.09.2011. While framing the assessment u/s 143(3) r.w.s. 153A, the Assessing Officer (AO) besides the other addition made the addition of Rs. 44,59,441/- holding that the income from other sources which was earned as interest on FD’s is not eligible for exemption u/s 10A. Aggrieved by the order of AO, assessee filed appeal before the CIT(A)
wherein the disallowance was sustained. Further aggrieved, the assessee has filed the present appeal before us. 3. We have heard the ld. Authorized Representative (AR) of the assessee and the ld. Departmental Representative (DR) for Revenue. The Ld. AR of assessee argued that the grounds of appeal raised in the present appeal are covered in favor of assessee in his own case for AY 2008-09 in dated 30.09.2013. On the other hand ld. DR for the Revenue strongly supported the order of authorities below.
4. We have considered the rival contentions of the parties and seen that the similar issue arose in assessee’s own case for AY 2008-09 and the Co- ordinate Bench of this Tribunal made the following order: “The dispute arose on the treatment of the said interest income. Assessee considered the same as a 'business receipt'. Assessee claimed exemption u/s 10A of the Act in respect of the said interest receipts. Per contra, Revenue Authorities treated the same as 'income from other sources' and denied the benefit of deduction u/s 10A of the Act. Aggrieved with the same, assessee is in appeal before us.
4. During the proceedings before us, Ld Counsel for the assessee submitted that the assessee has not made FDs with the bank out his excess funds or for a longer period with an intention to earn interest income. Further, elaborating the same, Ld Counsel for the assessee submitted that the FDs made were out of the working capital and out of the business funds. It is the business requirement of the assessee that the FDs are to be made with the directions of the bank. Referring to various documents placed in the paper book, Ld Counsel for the assessee brought our attention to the correspondence placed at page 28 onward and read out the relevant instances of the bank insisting the assessee to prepare term deposits in the bank. Further, bringing our attention to various decisions of the Tribunal, wherein one of us (AM) to the order in the case of ACIT vs. M/s. Prestress Wire Industries in ITA No. 8418/M/2010 (AY 2007-2008) and ITA No. 6312/M/2011 (AY 2008-2009) and others dated 31.1.2014, Ld Counsel for the assessee mentioned that the said decision is relevant for the proposition that, under the identical factual matrix, the receipts were treated as 'business receipts' and declared as eligible for deduction u/s 80IA of the Act. In this regard, he brought our attention to the relevant paras 14 to 16 of the said Tribunal's order (supra). Further, bringing our attention to other decisions of the Tribunal, Ld Counsel for the assessee mentioned that they relate to prior to the amendment to section 10A(4) of the Act. He also relied on the Judgment of the Apex Court in the case of CIT vs. Karnal Cooperative Sugar Mills Ltd 243 ITR 2 (SC) and the judgment of the Bombay High court in the case of CIT vs. Indo Swiss Jewells Ltd 284 ITR 389 (Bom) and also on various precedents of the Hon'ble Supreme Court as well as various High Courts, copies of which are placed in voluminous paper book, and submitted that the said judgments were relied upon by the Tribunal in adjudicating the issue in favour of the assessee in the said case dated 31.1.2014 (supra).
After hearing both the parties and on perusal of the said order of the Tribunal, we find the issue is covered in favour of the assessee on the facts of this case. For the sake of completeness of this case, we extract the said paras 14 to 16 of the said Tribunal's order in the case of M/s. Prestress Wire Industries and the same read as under: 14. Regarding the issue of interest received from fixed deposits kept as margin money for bank guarantees, Ld Counsel for the assessee mentioned that the temporary deployment of funds should be assessed as 'business income' and not as 'income from other sources' as treated by the Assessing Officer. In this regard, Ld Counsel relied on the following decisions. i) CIT vs. Vidyut Steel Ltd. 219 ITR 30 (AP) ii) CIT vs. Koshika Telecom Ltd 287 ITR 479 (Del) iii) CIT vs. Karnal Cooperative Sugar Mills Ltd 243 ITR 2 (SC) iv) CIT vs. Indo Swiss Jewells Ltd 284 ITR 389 (8om) 15. On the other hand, Ld OR dutifully relied on the order of the AO.
We have heard both the parties and perused the orders of the Revenue Authorities as well as citations quoted by the Ld Counsel along with the relevant material placed before us. On perusal of the cited judgments of the higher judiciary, we find that they are relevant for the proposition that the there is no question of isolating the interest received on margin money paid for obtaining bank guarantee and assessing it as separate income under section 56. Therefore, agree with the view of the Tribunal that the income derived on the margin money for obtaining bank guarantee cannot be separately assessed under section 56. Considering the binding judgments given by the Hon1Jle High Courts as well as the Hon1Jle Supreme Court, we are of the opinion that the interest derived on margin money for the purpose of obtaining bank guarantee should be assessed as 'business income' instead of 'income from other sources; Accordingly, we decide this part of the ground in favour of the assessee."
Considering the above settled nature of the issue, we are of the opinion that the said interest receipts constitute business receipts and are eligible for deduction u/s 10A of the Act. Accordingly, the grounds raised
by the assessee are allowed.”
5. Considering the similarities of the facts of present, we are of the opinion that the interest receipt constitute the business receipt and are eligible for deduction u/s 10A as held in assessee’s own case for AY-2008-09. In the result, appeal of the assessee is allowed. Order pronounced in the open court on this 7th October, 2016./- Sd/- Sd/- (R.C.SHARMA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 07/10/2016 S.K.PS
Copy of the Order forwarded to :