2013 (5) TMI 919

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....2/PN/2009 is an app2e al by the assessee which is directed against the order of the Commissioner of Income Tax (Appeals), Kolhapur dated 30.07.2008 which, in turn, has arisen from an assessment order dated 03.12.2007 passed by the Assessing Officer, under Section 143(3) of the Income Tax Act, 1961 (in short "the Act"), for the assessment year 2005-06. 3. In this appeal, primary dispute relates to the nature of interest income earned from bank FDs amounting to Rs. 7,59,984/-. In the return of income, assessee had declared such interest income as income derived from its business activities and therefore the same was also claimed to be eligible for deduction under Section 80P(2)(a)(vi) of the Act. The Assessing Officer held that the interes....

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.... judgements of (i) Hon'ble Patna High Court in the case of Shyam Bihari vs. CIT (2012) 345 ITR 283 (Patna); and, (ii) Hon'ble Karnataka High Court in the case of CIT vs. Chinna Nachimuthu Constructions (2008) 297 ITR 70 (Kar.). Thus, it was pointed out that interest income would be eligible for deduction under Section 80P(2)(a)(vi) of the Act. 6. On the other hand, the learned Departmental Representative appearing for the Revenue has referred to para 6 of the order of the CIT(A) to point out that an FD kept in bank is akin to an investment made and therefore income from such deposit is in the nature of the 'investment income' as not 'business income'. The learned Departmental Representative also submitted that in this case assessee faile....

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....the same to the contractee. On such facts, the interest income earned on the FDs was sought to be treated by the assessee as 'business income'. The Revenue resisted the claim of the assessee but Hon'ble Karnataka High Court upheld the stand of the assessee and ruled that such income should be treated as business income only. A similar question was raised before the Hon'ble Patna High Court in the case of Shyam Bihari vs. CIT (supra) wherein also it was held that the interest earned on security deposits to the extent used for the purposes of securing contract work would be assessable as business income. 9. In the face of the aforesaid legal position laid down by the Hon'ble Karnataka High Court as well as the Hon'ble Patna High Court, the....

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....n order afresh taking into consideration the material and submissions putforth by the assessee. Thus, we set-aside the matter to the Assessing Officer for passing an order afresh in the aforesaid manner as per law. 10. Resultantly, the appeal of the assessee in ITA No. 212/PN/2009 is treated as allowed for the statistical purposes. 11. ITA No.171/PN/2011 is an appeal by the Revenue which is directed against the order of the Commissioner of Income Tax (Appeals), Kolhapur dated 27.10.2010 which, in turn, has arisen from an order dated 20.01.2009 passed by the Assessing Officer, under Section 271(1)(c) of the Act, for the assessment year 2005-06. 12. In this appeal, the grievance of the Revenue is that the CIT(A) erred in cancelling t....