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| The Tax Publishers2020 TaxPub(DT) 2727 (Kol-Trib) INCOME TAX ACT, 1961
Section 14
Where the assessee placed FDRs as security for business purposes but did not offer interest on FDR as income then the AO was directed to arrive at correct head of income and tax accordingly the interest income.
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Head of income - Income from 'Other sources' or 'Business income' - Interest from Fixed deposits made in connection with Contract business -
Assessee had received interest from different FDRs. AO noted that the assessee received an amount as interest from FDRs and tax was deducted at source under section 194A. According to AO, assessee had not reflected this amount of interest income in his ITR. According to AO this receipt came under the fold of income from 'Other Sources'. However, according to assessee, since the FDRs were solely made for the purpose of doing his business and FDRs were offered as collateral securities to bank and/or as tender money i.e. E/money, Security Deposit and so on to different contractees, this interest earned should partake the colour of the business income and not from â€Other Sourcesâ€. Held: FDR was used as security for obtaining the contract and was essential condition for bagging the contract, however, assessee had not bothered to give any material/evidence to show that interest accrued on the FDRs/deposit was incidental and that main purpose of FDR's was it was a condition for getting the contract or to avail the bank guarantee/security deposit/E-money/tender money etc. It was noted that assessee only made these contentions, but failed to produce any material to substantiate his contention that interest accrued from FDR should be treated as income from business. Therefore, matter was remanded back to AO with a direction to examine the matter afresh regarding the characterization/nature of receipt and assessee was at liberty to produce necessary evidences to substantiate its claim.
Relied:CIT v. Govinda Choudhury & Sons (1993) 203 ITR 881 (SC) : 1993 TaxPub(DT) 0419 (SC) CIT & Anr. v. Chinna Nachimuthu Constructions (2008) 297 ITR 70 (Karn) ; 2008 TaxPub(DT) 1230 (Karn-HC) Dy. CIT v. M/s. Britannia Engineering Ltd. [ITA No. 475/Ko1/2013 dt. 6-4-20 16] : 2016 TaxPub(DT) 2129 (Kol-Trib) Dy. CIT v. Sri B. Diwakar [ITA No. 761/Bang/ 2009 dtd. 31-3-2010] : 2019 TaxPub(DT) 8284 (Bang-Trib) Saroj Dassani v. Asstt. CIT [ITA No. 5360/Del/2004 dt. 2.12.2005] : 2006 TaxPub(DT) 1062 (Del-Trib)
REFERRED :
FAVOUR : Matter remanded
A.Y. : 2015-16
IN THE ITAT, KOLKATA BENCH
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