DCIT 24(3), MUMBAI vs. SEA PRINCESS REALTY, MUMBAI

The only issue in dispute is in relation to learned Commissioner (Appeals)’s decision in accepting assessee’s claim of treating the interest income as income under the head business and profession as against income from other sources as held by the Assessing Officer.

Briefly stated the facts are, assessee is a company engaged in the business of real estate development. In the course of assessment proceedings, the Assessing Officer noticed that during the relevant previous year, assessee had received interest of ` 1,42,98,247, on FDR but has credited to the Profit & Loss account by treating it as business income. He, therefore, called upon the assessee to explain why the same should not be treated as income from other sources. Though, the assessee objected to the view expressed by the Assessing Officer but the Assessing Officer noting that the assessee had invested surplus funds available with it in FDR and advancing loan the interest earned thereon has to be treated as income from other sources and accordingly, he treated the interest income of ` 1,42,98,247, as income from other sources. Being aggrieved of such decision of the Assessing Officer, assessee preferred appeal before the learned Commissioner (Appeals).

Learned Commissioner (Appeals) noticing the fact that identical issue arose in assessee’s own case for assessment years 2006–07, 2007–08 and 2008–09, wherein the first appellate authority following the decision of the Hon'ble Jurisdictional High Court in CIT v/s Lok Holdings, [2009] 308 ITR 356 (Bom.), had decided the issue in favour of the assessee by holding that interest income earned is assessable

At the outset, learned Counsels appearing for the rival parties agreed before us that the issue in dispute has been decided in favour of the assessee by the Tribunal in assessee’s own case for the preceding assessment years 2006–07 to 2008–09. Copy of orders passed by the Tribunal is placed on record.

We have considered the submissions of the parties and perused the material available on record. On a perusal of the latest order of the Tribunal in ITA no.5006/Mum./2011, dated 8th January 2014, in assessee’s own case for assessment year 2008–09, it is noticed the Tribunal while deciding identical nature of dispute followed its order in assessee’s own case for assessment year 2006–07 and held that the interest income earned from surplus funds parked in loans and fixed deposits having direct nexus with business activity has to be treated as income from business. There being no material difference in facts, respectfully following the consistent view taken by the Tribunal in assessee’s own case as referred to above, we uphold the order of the 4 M/s. Sea Princess Realty learned Commissioner (Appeals) by dismissing the ground raised by the Department.

In the result, appeal stands dismissed. Order pronounced in the open Court on 04.03.2016