The Tax Publishers2020 TaxPub(DT) 4909 (Mum-Trib)

INCOME TAX ACT, 1961

Section 14

Interest earned by assessee was obviously attributable and incidental to business carried on by it and interest can be assessed under the head Income from other sources, only if it cannot be brought within one or the other of specific heads of charge, therefore, interest earned by assessee cannot be assessed as Income from other sources.

Head of income - Income from other sources or business income - Fixed deposit interest income -

Assessee was engaged in the business of distribution of films, film production, film finance, media campaign, exports of films, service projects including subtitling, hiring of equipments, video studio, etc. During the assessment proceedings, AO found that assessee had shown interest on fixed deposits under the head 'Income from business'. He directed it to explain as to why the interest income should not be taxed as income from other sources. AO held that as per the Audit Report the nature of business of assessee consisted of distribution of films, production of films, film finance and media campaign. Interest received from the deposits made with the bank was not a part and parcel of the business activities carried by it. Accordingly, he rejected the claim made by assessee that interest income from fixed deposits should be treated as business income. CIT(A) held that it was not a simple case where idle money was part fixed deposits and the assessee had earned income, that the idle money was made productive itself by investing, that assessee was an enterprise of government of India, that it was under direct control of the Ministry of Information and Broadcasting, that the Government of India was 100% shareholder of the assessee-company, that the object of the company was to plan, promote, organize and integrate the activities of development of film industry, as per the policy of the government, that various amounts were received as advances by the assessee from Ministry of Culture, Ministry of Information and Broadcasting, Department of Land resources, Ministry of Environment and Forests, District water and Sanitation Department, that advances were received for production of films, regional language films for restoration of various regional films as per policy of 11th 5-year plan, that various advances were received by it for the business purposes, that for production of such films adequate time was required, that there were lots of complications, activities and techniques related issues for production of films, that the advances received by it could not be utilised for that reason, that with a view to safeguard the advances the company decided to deposit the money with the banks, that a general approach for taxing interest income earned on fixed deposit as income from other sources could not become a prevailing force. Held: This Tribunal in assessee's own case [I.T.A.No.5737/Mum/2015, dt. 27-6-2018] had already adjudicated the very same issue in dispute and had dismissed the appeal of revenue as held interest earned by assessee was obviously attributable and incidental to business carried on by it, that it would not be correct to say that this interest was totally de hors the business carried on by it. It is well-settled that interest can be assessed under the head Income from other sources, only if it cannot be brought within one or the other of the specific heads of charge. Therefore, interest earned by assessee cannot be assessed as Income from other sources.

Relied:Tuticorin Alkali Chemicals & Fertilizers Ltd. v. CIT (1997) 227 ITR 72 (SC) : 1997 TaxPub(DT) 1304 (SC), Bihar State Co-operative Bank Limited v. CIT (1960) 39 ITR 114 (SC) : 1960 TaxPub(DT) 139 (SC), Pr. CIT v. Sangam Power Generation Company Ltd. [ITA No. 87of 2016,dtd.31-8-2017] : 2017 TaxPub(DT) 4103 (All-HC), CIT v. Lok Holdings (2009) 308 ITR 356 (Bom) : 2009 TaxPub(DT) 268 (Bom-HC), CIT v. Paramount Premises (Private) Ltd. (1991) 190 ITR 259 (Bom) : 1991 TaxPub(DT) 582 (Bom-HC), Asstt. CIT v. National Film Development Corporation [I.T.A. No.5956/Mum/2017, dt. 17-5-2019] and Asstt. CIT v. National Films Development Corporation Ltd. [ITA. No.5737/Mum/2015, dt. 27-6-2018].

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