DY. COMMISSIONER OF INCOME TAX , CENTRAL CIRCLE-2(4), HYDERABAD vs. BUDHA PALITA TIMBER ESTATES PRIVATE LIMITED, VIJAYAWADA

आयकर अपील सं./ (निर्धारण वर्ा / Assessment Year : 2012-13) Dy. Commissioner of Income Tax, Vs. Budha Palita Timber Estates Central Circle-2(4), Private Limited, Hyderabad. Vijayawada. PAN: AADCB 3447 N (अपीलधर्थी/ Appellant) (प्रत्यर्थी/ Respondent) अपीलधर्थी की ओर से/ Assessee by : None प्रत्यधर्थी की ओर से / Revenue by : Dr. Satyasai Rath, CIT-DR सुिवधई की तधरीख / Date of Hearing : 20/03/2024 घोर्णध की तधरीख/Date of : 26/03/2024 Pronouncement O R D E R PER S. BALAKRISHNAN, Accountant Member :

This appeal filed by the Revenue is against the order of the Ld. Commissioner of Income Tax (Appeals)-12, Hyderabad in Appeal No. 10079/2017-18, dated 20/11/2017 arising out of the order passed U/s. 143(3) of the Income Tax Act, 1961 [the Act] for the AY 2012-13. 2 2. Briefly stated the facts of the case are that the assessee- company is engaged in the business of Real Estate, filed its return of income for the AY 2012-13 on 27/12/2012 admitting a loss of Rs. 7,00,598/- under the regular provisions of the Act and Rs. 2,41,55,847/- under the provisions of section 115JB of the Act. The case was selected for scrutiny under CASS. Accordingly, notices U/s. 143(2) and 142(1) of the Act were issued and duly served on the assessee. In response to the notices, the assessee’s Authorized Representative appeared from time to time and furnished certain information. Thereafter, the Ld. AO issued show cause notices dated 5/3/2015 and 9/3/2015 and called for the assessee’s objection on the proposal of estimation of assessee’s business income at 8% on gross receipts, net of all related expenses and allowable deductions. The Ld. AO also proposed that the interest income of Rs. 5,25,02,399/- received on deposits held in various banks would be reduced from the gross receipts for the purpose of estimation of business income and the same would be treated as income from other sources without allowing any allowances / deductions therefrom. In response, the assessee made various submissions before the Ld.AO. After considering the submissions of the assessee and the material available on record, the Ld. AO made two additions viz., (i) Business income estimated 3 at 5% of gross receipts - Rs.1,63,96,135/- (ii) Interest income of Rs. 4,59,66,944/- received on FDs treating it as income from other sources. Thus, the total income was determined at Rs. 6,23,63,079/- and passed the assessment order on 12/3/2015 U/s. 143(3) of the Act. Aggrieved by the order of the Ld. AO, the assessee preferred an appeal before the Ld. CIT(A). On appeal, the Ld. CIT(A) partly allowed the appeal of the assessee. Aggrieved by the of the Ld. CIT(A), the Revenue is appeal before the Tribunal by raising the following grounds of appeal:

“1. Whether on the facts and circumstances of the case, and in law, the Ld. CIT(A) failed in treating the interest income as business income without appreciating the fact that it has not been brought on record by the assessee that the surplus funds were put in FDRs on account of commercial expediency. Since the funds were not required at the relevant point of time in construction activities, the same were parked with bank to earn interest. Therefore, the interest earned on surplus funds parked with bank is not inextricably linked with the business activity of the assessee. Therefore, the interest earned by assessee cannot be treated as business income and same has been rightly treated as income from other sources by the Ld. AO.