The Tax Publishers2020 TaxPub(DT) 0199 (P&H-HC)

INCOME TAX ACT, 1961

Section 14

The Court in case of Phatela Cotgin Industries Pvt. Ltd. v. CIT [(2008) 303 ITR 0411 (P&H) : 2008 TaxPub(DT) 0706 (P&H-HC)] had held that in such a case where there is provision in the contract for interest on the delayed payment of outstanding balance, any delayed payment and interest thereon would be constituted as income from business and not income from other sources. Therefore, ground raised by Revenue was dismissed.

Head of income - Income from other sources or Business income - Interest income received by the assessee on delayed payments from customers and suppliers -

Assessee had earned interest income from security deposit made with the Electricity Board (HPSEB). AO treated the said interest income as 'Income from other sources' and did not allow the set-off of the same against the interest expenditure incurred by assessee on the loan amount obtained from the banks for business purposes. AO disallowed claim of assessee for treating the said income as 'business income' and further to include the said income into the eligible claim for deduction under section 80-IC. CIT(A) dismissed the appeal of assessee. However Tribunal reversed the order of CIT(A). Held: Assessee had referred to the judgment of the Court in case titled as Phatela Cotgin Industries Pvt. Ltd. vs. CIT [(2008) 303 ITR 0411 (P&H) : 2008 TaxPub(DT) 0706 (P&H-HC)], wherein it was held that in such a case where there is provision in the contract for interest on the delayed payment of outstanding balance, any delayed payment and interest thereon would be constituted as income from business and not income from other sources. Therefore, ground raised by Revenue was dismissed.

REFERRED : C.I.T. v. Emptee Poly-Yarn Pvt. Ltd. Civil Appeal No. 786 of 2010 : 2010 TaxPub(DT) 1353 (SC), CIT-V v. Oracle Software India Ltd. MANU/SC/0040/2010: 2010 (1) SCALE 425 : 2010 TaxPub(DT) 1317 (SC), Phatela Cotgin Industries Pvt. Ltd. v. CIT (2008) 303 ITR 0411 (P&H) : 2008 TaxPub(DT) 0706 (P&H-HC), ACIT v. VTL Investment Ltd., (formerly known as Vardhman Threads Ltd.[ITA Nos. 762/CHD/2009, ITA Nos. 550/CHD/2009, ITA Nos. 539/CHD/2011, dt. 11-12-2018].

FAVOUR : In assessee's favour.

A.Y. :


INCOME TAX ACT, 1961

Section 80-IC

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