2011 (12) TMI 755 - AT - Income Tax

Appellate Tribunal: Interest Income Classification Dispute Decision

The Appellate Tribunal upheld the classification of interest income as 'Income from Other Sources,' rejecting the assessee's claim that it should be ... - Issues Involved: The judgment involves the issue of whether interest income earned by the assessee should be considered as 'Income from Business' or 'Income from Other Sources.'Issue 1: Classification of Interest Income The assessee, a company owned by the Government of Maharashtra for tourism development, received interest on grants deposited in fixed deposits. The Assessing Officer (AO) treated the interest income as 'Income from Other Sources,' while the assessee claimed it to be business income. The CIT(A) upheld the AO's decision. The assessee argued that the interest was directly connected to its business activities as per Ministry of Tourism directions. Citing various judicial pronouncements, the assessee contended that interest income from such deposits should be considered as 'Income from Business.' However, the Departmental Representative (D.R) relied on a Bombay High Court case to support the AO's decision. The Tribunal dismissed the appeal, stating that the interest income did not have a direct relationship with the business activity, hence classifying it as 'Income from Other Sources.'Significant Legal References: - CIT Vs. A.P. Industrial Infrastructure Corporation Ltd.- CIT Vs. Lok Holdings Ltd.- CIT v. Paramount Premium P. Ltd.- CIT Vs. Shree Panchaganga Sahakari Sakhar Karkhana Ltd.- CIT Vs. Producin (P) Ltd.- Commissioner of Income-tax Vs. Indo Swiss Jewels Ltd.- CIT vs. Swani Spice Mills Pvt. Ltd.- CIT Vs. Asian Star Co. Ltd.- Tuticorin Alkali Chemicals & Fertilizers Ltd. Vs. CIT- CIT Vs. Bokaro Steel Ltd.- CIT Vs. Karnataka Power Corpn.- Bongaigaon Refinery & Petrochemicals Ltd. Vs. CIT- CIT Vs. Govinda Choudhury & Sons- CIT Vs. Karnal Co-operative Sugar Mills Ltd.- CIT Vs. Autokast Ltd.- CIT Vs. Goldtex Furnishing Industries- CIT Vs. Cosmos International- Kashmir Arts Vs. CIT- CIT Vs. Ravi Ratna Exports (P) Ltd.- Pandian Chemicals Ltd. Vs. CITIssue 2: Deduction for Write-off of Stores and Spares The assessee also raised a ground regarding the denial of a deduction of Rs. 7,00,000 for the write-off of stores and spares. However, this ground was not pressed by the assessee and was dismissed as not pressed.Issue 3: Depreciation Claim on Stores and Spares In an alternative argument, the assessee contended that depreciation claim on stores and spares treated as capital assets should be allowed. However, this issue was not specifically addressed in the judgment, as the primary focus was on the classification of interest income.In conclusion, the Appellate Tribunal upheld the decision to classify the interest income as 'Income from Other Sources,' dismissing the appeal by the assessee. The issues regarding the deduction for write-off of stores and spares and the depreciation claim on stores and spares were not extensively discussed in the judgment due to the primary dispute over the classification of interest income.