TaxTMI 
TaxTMI 
TaxTMI 
2017 (5) TMI 716
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....siness is assessable under the head 'Income from Business' instead of under the head 'Income from other sources' as held by the assessing officer. 2. That without prejudice to the ground No. (1) above the Ld. CIT(A) is further wrong and has erred in law in confirming action of the assessing officer is not allowing set off interest paid against interest income by allegedly holding that there is no nexus between these two." Grounds of Appeal in ITA No. 357/JP/2014 for AY 2009-10 (Revenue) 1. On the facts and in the circumstances of the case the CIT(A) has erred in directing to allow the set-off of unabsorbed depreciation of A.Y. 2000-01 and A.Y. 2001-02 from "Income from other Sources" though the sub section 2 of section 32 of the Act, has been amended by the Finance Act 2001, w.e.f 1.4.2002 and this could be allowed from A.Y. 2002-03 only, not in A.Y 2001-02 Grounds of Appeal in CO. No. 16/JP/2014 for AY 2009-10 (Assessee) 1. That the CIT(A) is wrong and has erred in law in not accepting plea of the appellant that interest income Rs. 4975203/- earned by the appellant during the course of carrying on business is assessable under the head 'Income from Business' instead ....
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....ors India Pvt. Ltd. 354 ITR 244 wherein the question for consideration before the Hon'ble High Court was "whether unabsorbed depreciation pertaining to the A.Y 1997-98 could be allowed to be carried forward and set off after a period of 8 years or would it be governed by the provisions of section 32(2) as amended by the Finance Act 2001. The relevant finding of the Hon'ble High Court of Gujarat are contained at para 35 to 38 of its order which reads as under:- "35. Section 32 (2) of the Act was amended by Finance Act, 2001 and the provision so amended reads as under:- "Where, in the assessment of the assessee, full effect cannot be given to any allowance under sub-section (1) in any previous year, owing to there being no profits or gains chargeable for that previous year, or owing to the profits or gains chargeable for that previous year, owing to the profits or gains chargeable being less than the allowance, then, subject to the provisions of sub-section (2) of section 72 and sub-section (3) of section 73, the allowance or the part of the allowance to which effect has not been given, as the case may be, shall be added to the amount of the allowance for depreciation for the fo....
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....sequent assessment years even after the amendment of section 32(2) of the Act, a purposive and harmonious interpretation has to be taken. While construing taxing statutes, rule of strict interpretation has to be applied, giving fair and reasonable construction to the language of the section without leaning to the side of assessee or the revenue. But if the legislature fails to express clearly and the assessee becomes entitled for a benefit within the ambit of the section by the clear words used in the section, the benefit accruing to the assessee cannot be denied. However, Circular No. 14 of 2001 had clarified that under section 32(2), in computing the profits and gains of business or profession for any previous year, deduction of depreciation u/s 32 shall be mandatory. Therefore, the provisions of section 32(2) as amended by Finance Act, 2001 would allow the unabsorbed depreciation allowance available in the A.Y. 1997-98, 1999-2000, 2000-01 and 2001-02 to be carried forward to the succeeding years, and if any unabsorbed depreciation or part thereof could not be set off till the A.Y. 2002-03 then it would be carried forward till the time it is set off against the profits and gains ....
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....off against the profit gains of subsequently years. Following the said decision of the Hon'ble High Court, a similar view has been reiterated by various Coordinate Benches as referred by the assessee in its submissions before us. 3.4. In view of subsequent decision of the Hon'ble Gujarat High Court in case of General Motors (supra), the decision of Special Bench in case of Times Guaranty (Supra) is no more a binding precedent. A similar view has been taken by the various coordinate Benches. Further, no contrary jurisdictional or other authority has been quoted before the Bench. In view of the above and respectfully following the decision of the Hon'ble Gujarat High Court, we are unable to agree to the contention of the Revenue. In our view, it is the amended section 32(2) of the Act that shall apply in relation to unabsorbed depreciation pertaining to A.Y. 2000-01 and A.Y 2001-02 and the restriction of 8 years which was in force till the law was amended by the Finance Act 2001 does not apply. In the instant case, it is not in dispute that the unabsorbed depreciation pertaining to A.Ys 2000-01 and 2001-02 have not been set off in the earlier years and the same is being carried forw....
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....re capital and Reserves and Surplus are deployed in fixed assets of business, inventories and trade debtors and there is no surplus fund with the company at any time. The copy of A/c of each party to whom loan was advanced along with copy of Bank A/c (s) of assessee company showing that loans were advanced from funds of cc limit of bank and thus business funds were advanced are placed. In Tirupati Woolen Mills Ltd. (1992) 193 ITR 252 (Cal.) it was held that interest earned from utilization of commercial asset would be income from business. The Supreme Court in CIT Vs. Calcutta National Bank Ltd. (1959) 37 ITR 171 held that "business" is a word of very wise connotation with the result that income of interest in course of carrying on business should ordinarily be treated as business income, except where the investment are independent of business made out of surplus funds in long term deposits. The Ld. A.O has referred a few judgments in its order but they pertain to investment of surplus funds or idle funds in business of short term loans, interest on fixed deposits etc. where interest income was held to be assessable under the head 'other sources'. The judgment in case of Tuticorin ....
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.... failed to show any business transaction. Hence, as held by the Hon'ble Bombay High Court in the case of Godavari Sugar Mills (191 ITR 359), interest received on loans and advances where there was no evidence that the loans were advanced in the course of assessee's business has to be taxed as income from other sources. In the present case, the appellant has failed to establish that the loans were given for business purposes. It is, however, noted from the details that the interest received by the appellant also includes an amount of Rs. 42,170/- from Dena Bank CC a/c 563. Since, this amount has been received by the appellant is connected with its business activity, this amount is treated as business income. The treatment of the rest of the interest received by the appellant as income from other sources is confirmed. Coming to the issue of set off of interest expenses against interest income, it is noted that the appellant has shown total outgo of Rs. 2,31,04,322/- on account of interest which includes Rs. 1,83,93,641/- paid to banks and Rs. 12,92,976/- to others. The interest paid to banks was clearly for business purposes and, hence, it cannot be set off against the interest in....