2016 (7) TMI 697 - AT - Income Tax

Appellate Tribunal Upholds Assessee's Deletion of Interest Income on ICDs

The Appellate Tribunal dismissed the Assessing Officer's appeal challenging the addition of interest income on Inter Corporate Deposits (ICD) by the ... Interest income - taxability on Accrual or Receipt basis- Addition of interest income on the Inter Corporate Deposits (ICD) - company had filed winding up petitions - Held that:- After considering the submission of the assessee and the assessment order the FAA held that it was a recurring issue which had been dealt with during the assessment proceedings during 143(3)as well as in the assessment proceedings u/s. 153A r. w. s. 143(3) of the Act in respect of AY. s 2001-02 to 2007-08, that the assessee had filed winding up petition before the Court, that in the notes on account year after year the assessee had mentioned that the interest receivable on ICDs would be accounted for on receipt basis, that the AO had been ignoring the stand taken by the assessee, that the FAA and the Tribunal had deleted the additions made by the AO, that the Hon'ble High Court had dismissed the 260A application filed by the department. Finally, he allowed the appeal filed by the assessee. - Decided in favour of assessee. Issues:1. Addition of interest income on Inter Corporate Deposits (ICD) by the Assessing Officer.2. Appeal against the order of the Assessing Officer by the Assessee.3. Decision of the First Appellate Authority (FAA) and Tribunal.4. Arguments presented before the Appellate Tribunal.5. Decision of the Appellate Tribunal.Analysis:1. The Assessing Officer (AO) challenged the order of the Commissioner of Income Tax (Appeals) regarding the addition of interest income on Inter Corporate Deposits (ICD) amounting to Rs. 25.22 lakhs. The AO contended that the interest accrued on ICD should be added to the income of the assessee, citing provisions of section 145(3) of the Income Tax Act. The AO questioned the reliability of the assessee's books of accounts and relied on previous judicial decisions to support the addition.2. The Assessee, a company engaged in manufacturing, appealed against the AO's decision before the First Appellate Authority (FAA). The Assessee argued that the ICDs given to certain parties had become doubtful, leading to non-recognition of interest income. The FAA considered the recurring nature of the issue, the stand taken by the Assessee in its accounts, and previous decisions by the Tribunal and High Court. The FAA upheld the Assessee's appeal, emphasizing the consistent deletion of similar additions in previous assessment years.3. The Appellate Tribunal reviewed the submissions and materials before it, noting the decisions of the Tribunal and the High Court in previous years where similar additions were deleted. The Tribunal, following the precedent set by the High Court, decided the ground of appeal against the AO. Consequently, the appeal filed by the AO was dismissed, affirming the decision in favor of the Assessee.4. During the proceedings before the Appellate Tribunal, the Departmental Representative (DR) emphasized the need to decide the matter on its merits, while no representation was made on behalf of the Assessee. The Tribunal considered the previous judgments and the lack of appearance by the Assessee, leading to the dismissal of the AO's appeal based on the consistent decisions in favor of the Assessee by the Tribunal and the High Court.5. In conclusion, the Appellate Tribunal dismissed the appeal filed by the AO, pronouncing the order in open court on 13th July 2016. The Tribunal's decision was based on the consistent rulings in favor of the Assessee in similar cases, as upheld by the High Court, thereby affirming the deletion of the addition of interest income on ICDs in this particular case.