TaxTMI 
TaxTMI 
2006 (1) TMI 57
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....s in June 1989. Pursuant to the said agreements the assessee had received a sum of Rs. 5 crores from M/s. Ballarpur Industries Ltd. and Rs. 2 crores from M/s. Ashoka Builders, subject to certain conditions, stipulated in the agreements. The assessee-company, it is common ground, follows the project completion method of accounting, accepted in the course of the preceding assessments. For the assessment year 1993-94, the Assessing Officer called upon the assessee to explain why interest income of Rs. 38,62,419, including interest amount of Rs. 37,46,448 earned on fixed deposits be not treated as income earned from other sources. In response, the assessee argued that it was following the same principle of accountancy as were adopted in the earlier years and the interest income shown by the assessee may be taken as its income from business. The Assessing Officer was dissatisfied with that contention as in his view the assessee who was engaged in the business of real estate, could not claim interest earned on funds placed with the banks as business income. Placing reliance upon CIT v. New Central Jute Mills Co. Ltd. [1979] 118 ITR 1005 (Cal); Murli Investment Co. v. CIT [1987] 167 IT....
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.... that the interest income of the appellant is assessable as business income and also following the decision of the Madras High Court in the case of CIT v. Tamil Nadu Dairy Development Corporation Ltd. reported in [1995] 216 ITR 535 the facts of which are similar to those in the case of the appellant. It is, therefore, held that since the source of all the funds on which interest has been earned is attributable to real estate business and the interest received is also directly linked with the same business, the interest income earned in the year under consideration is also liable to be taxed as in earlier years as business income subservient to the business of real estate developers in accordance with the method of accounting followed by the appellant." Aggrieved by the above decision, the Revenue preferred an appeal before the Tribunal, who has, as noticed earlier, dismissed the same primarily on the ground that in the absence of any material change in the facts of the case, the view taken for the earlier years could not be disturbed. The Tribunal has in the process drawn support from the decision of the Supreme Court in Radhasoami Satsang v. CIT [1992] 193 ITR 321 and the decis....
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....aid business, the amount earned towards interest in the year under consideration was, like the amount earned earlier, business income of the assessee. In fairness to Mr. Jolly, we must record that there was no attempt by him to assail the factual basis of the conclusion drawn by the Commissioner of Income-tax (Appeals). It is not the case of the Revenue that the amount which the assessee had received from its co-developers was not related to the business activity of the assessee-company. It is also not the case of the Revenue that the investment of such amounts in fixed deposits was linked to the business of the assessee whether in the form of providing a bank guarantee or keeping the amount readily available payment to for L&DO upon change of land use. It is also not in dispute that for the previous three assessment years, the interest income earned in similar circumstances was held to be business income by the Commissioner of Income-tax (Appeals), which orders had been accepted by the Revenue without demur. The question in the above backdrop is whether the Tribunal was justified in upholding the order passed by the Commissioner on the principles of consistency. In Radhasoam....
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....e an earlier view can be upset or digressed from, one of the two must be demonstrated, namely, a change in the fact situation or a material change in law whether enacted or declared by the Supreme Court. The Commissioner and the Tribunal have in the instant case correctly held that there was no change in the fact situation. The income earned on fixed deposits for the previous three assessment years was, in the context of the very same facts and circumstances as are relevant for the year under consideration, treated as business income of the assessee. In the absence of a change in facts or any additional input there was no compelling reason for taking a different view. The Commissioner and the Tribunal were, therefore, justified in holding that the view taken for the earlier assessment years continued to be applicable even for the year under consideration. Mr. Jolly, strenuously argued that the decision of the Supreme Court in Tuticorin Alkali Chemicals and Fertilizers Ltd. v. CIT [1997] 227 ITR 172, which was reaffirmed in CIT v. Autokast Ltd. [2001] 248 ITR 110 (SC) brought about a material change in the legal position, which would make it impermissible for the authorities belo....