M/S. WESTERN ELECTRICITY SUPPLY COMPANY OF ODISHA LTD.,SAMBALPUR vs. DCIT, BHUBANESWAR

This is an appeal filed by the assessee against the order of CIT(A)-1,

Bhubaneswar, dated 18.3.2015 for the assessment year 2010-2011.

confirming the action of the Assessing Officer assessing the interest income

earned on fixed deposits of Rs.16,30,14,270/- under the head “income

from other sources” in place of ïncome from business and profession”

shown by the assessee.

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the assessee has shown interest income from bank on fixed deposits of

Rs.16,30,14,270/-. The assessee has claimed to have received security

deposits from its customers to whom the assessee supplies electricity. The

assessee has kept this security deposits in fixed deposits with Bank. The

assessee also pays interest to its customers on the security deposits

received from them. The assessee earned interest from bank on fixed

deposits of Rs.16,30,14,270/- and has also claimed expenses as interest

paid on security deposits of Rs.15,80,33,663/-. The Assessing Officer

observing that the assessee failed to show any nexus of interest income

earned on security deposits with the business of the assessee held that the

interest income was to be assessed under the head “income from other

sources” and not under the head “business income”.

that in the assessment year 2007-08, the assessee had shown interest

income earned from security deposits kept with the bank as Fixed Deposits

of Rs.1,80,75,192, which was assessed by the Assessing Officer in an

assessment made u/s.143(3) of the Act vide order dated 21.4.2009 under

the head “business income”. Further, in the assessment year 2008-09, the

assessee had shown interest income earned from security deposits kept

with the bank as Fixed Deposits of Rs.4,25,80,370, which was assessed by

the Assessing Officer in an assessment made u/s.143(3) of the Act vide

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order dated 28.12.2010 under the head “business income”. He further

submitted that in the assessment year 2009-10, the assessee had shown

interest income earned from security deposits kept with the bank as Fixed

Deposits of Rs.15,11,97,105/-, which was assessed by the Assessing

Officer in an assessment made u/s.143(3) of the Act under the head

“business income”. He argued that in the year under appeal only, the

interest earned on security deposits with the bank as fixed deposits has

been assessed under the head “income from other sources”. He submitted

that though the principle of res-judicata are not applicable to income tax

proceedings but it has been held by the Hon’ble Supreme Court in the case

of RADHASOAMI SATSANG vs. COMMISSIONER OF INCOME TAX, 193 ITR

321 (SC) where a fundamental aspect permeating through the different

assessment years has been found as a fact one way or the other and parties

have allowed that position to be sustained by not challenging the order, it

would not be at all appropriate to allow the position to be changed in a

subsequent year. Hence, it was his prayer that the orders of lower

authorities should be reversed and the appeal of the assessee should be

accepted.

orders of lower authorities.

authorities and materials available on record. In the instant case, the

undisputed facts of the case are that the assessee earned interest on

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security deposits received from its customers kept with the bank as fixed

deposit of Rs. 16,30,14,270/-, which was shown by the assessee in its

return of income filed under the head business income. The Assessing

Officer assessed the same under the head income from other sources,

which was confirmed in appeal by the CIT(A). The contention of the Ld

A.R. of the assessee is that in the immediately preceding assessment year

2007-08, the interest income earned on security deposits of the assessee

of Rs.1,80,75,192/-, in the assessment year 2008-09, the interest income

earned from security deposits of Rs.4,25,80,370 and in the assessment

year 2009-10, the interest income earned from security deposits of

Rs.15,11,97,105/-, has been assessed under the head “business income”by

the Assessing Officer in assessment made u/s.143(3) of the Act . Therefore

consistency should be maintained in the present year under appeal and the

interest income should be assessed under the head “business income”. For

this proposition, reliance is placed on the decision of Hon’ble Supreme Court

in the case of RADHASOAMI SATSANG (supra), wherein, it was held as

under:

“Where a fundamental aspect permeating through the different “assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. Hence, it was his prayer that the orders of lower authorities should be reversed and the appeal of the assessee should be accepted.”

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the case of CIT Vs. Excel Industries Ltd. 358 ITR 295(SC), wherein, it

has been held as under:

“That a consistent view had been taken in favour of the assessee on the questions raised, starting with the assessment year 1992-93, that the benefits under the advance licences or under the duty entitlement pass book did not represent the real income of the assessee. There was no reason for the court to take a different view unless there were very convincing reasons, which there were not.

Supreme Court and keeping in view the fact no change in facts has been

brought on record by the revenue during the year under appeal, I set aside

the orders of lower authorities and direct the Assessing Officer to assess

the interest income earned from security deposits received from its

customers under the head “business income” and allow this ground of

appeal of the assessee.

Sd/- (N.S Saini) ACCOUNTANT MEMBER

Cuttack; Dated 08/03/2017 B.K.Parida, SPS

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Copy of the Order forwarded to : 1. The Appellant : M/s. Western Electricity Supply Company of Odisha Ltd., Corporate Office, Burla, Sambalpur 2. The Respondent. DCIT, Circle-2 (2), Bhubaneswar. 3. The CIT(A)-1, Bhubaneswar 4. CIT-1, Bhubaneswar. 5. DR, ITAT, Cuttack 6. Guard file. BY ORDER, //True Copy//

SR.PRIVATE SECRETARY ITAT, Cuttack