TaxTMI 
TaxTMI 
TaxTMI 
2014 (9) TMI 1195
X X X X Extracts X X X X
X X X X Extracts X X X X
....rned on Bank deposit, Intercorporate deposit, call money deposit, debentures and interest received from Income Tax Department, as business income for the purpose of computing deduction u/s 80HHC?" 2. The present appeals are pertaining to Assessment Years 1991-1992 to 1995-1996 of the Respondent/Assessee Company. The Respondent/ Assessee Company is engaged in the business of export of iron ore, cashew kernels and marine products and also deals in auto accessories and general merchandise. As per the record, the company's Memorandum and Articles of Association in its object clauses (55) and (82) permit the Company to lend, advance or deposit the money as part of the business activities. The Assessee contended that, in pursuance to the object clauses of the Memorandum and Articles of Association, the Assessee carries out money market operation as one of its business activities. 3. The record discloses that, the Assessment Officer by its orders of different dates relating to the Assessment Years 1991-1992 to 1995-1996 has held that the interest income earned by the Assessee as the "income from other sources" and not as "income from business" and thereby declined to give benefit fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... said investment should be treated as the "income from other sources" and not as "business income". She further submitted that it is the Assessee who has utterly failed to show any nexus about the said investments made by it with its business activities and, therefore, the Assessee is not entitled to claim deduction under Section 80 HHC of the Income Tax Act. She urged before this Court that the present appeals may be allowed. 8. The learned counsel appearing for the appellant i.e. Revenue Department relied on the following judgments. (i) Godavari Sugar Mills Ltd. v. CIT [1991] 191 ITR 359/57 Taxman 47 (Bom.) (ii) Bharti Televentures Ltd. v. Addl./Jt. CIT [2013] 213 Taxman 320/29 taxmann.com 326 (Delhi) (iii) Collis Line (P.) Ltd. v. ITO [1982] 135 ITR 390/9 Taxman 129 (Ker.). 9. Shri Naniwadekar, learned counsel appearing for the Respondent/Assessee submitted that there is no error at all either on facts or on law, committed by the ITAT and whatever has been argued by the learned counsel appearing for the appellant constitute only the question of fact and does not involve any question of law. While supporting the orders passed by the Income Tax Appellate Tribunal, he submi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....189 Taxman 452 (Bom.) (ii) Radhasoami Satsang v. CIT [1992] 193 ITR 321/60 Taxman 248 (SC) (iii) CIT v. Dalmia Promoters Developers (P.) Ltd. [2006] 281 ITR 346/151 Taxman 202 (Delhi) (iv) CIT v. Tamil Nadu Dairy Development Corpn. Ltd. [1995] 216 ITR 535/87 Taxman 1 (Mad.) and (v) CIT v. Paramount Premises (P.) Ltd. [1991] 190 ITR 259 (Bom.). 11. The record reveals that the Assessee has received interest in the respective previous years on FDR in the banks and inter-corporate deposits. The Assessing Officer treated the interest income under the head "income from other sources" and excluded from the head " profits and gains of business or profession". The Assessing Officer was of the view that the Assessee is having surplus funds available which Assessee was investing in the call money deposit/short term deposit in various banks and only as and when it is required for providing security, the Assessee is availing/furnishing the said deposit as security for obtaining short term loans or as a deposit towards LC opening. That the entire deposits to a large extent were being renewed period after period and year after year and the Assessee is earning interest for years together ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ticulated in Tuticorin Alkali Chemicals & Fertilizers Ltd., v. CIT., [1997] 227 ITR 172" (iii) The last judgment relied upon by the learned counsel for the appellant Revenue Department is in the case of Collis Line (P.) Ltd. (supra) wherein the learned Single Judge of the Kerala High Court has observed that, "That investment, as found by the Commissioner, was only to secure the money which was lying idle. An income earned from that source is, therefore, not an income earned in the course of business so as to make it a part of the profits and gains of the assessees business. That is an income which has been found to be traceable to other sources". And, therefore, it was held by the Kerala High Court that the interest earned from such deposit was assessable as income from other sources and not as business income. On the facts of the said case, the Kerala High Court has held that the amount was deposited because money was lying idle and it was safer and wiser to put it in the bank. The interest thereby earned was incidental to the main purpose of the deposit, which was safe keeping and not earning profits. Therefore, it was held that such income was rightly found to be income from....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... for rejecting the view taken for the earlier assessment years, there must be a material change in the fact situation. There is no gainsaying that the previous view will have no applicable even in cases where the law itself has undergone a change but before 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 Delhi High Court has therefore, held that the amount received from the co-developers and investments of such amount in fixed deposit is directly related to business activities and the interest income earned on deposits held to be the business income for earlier Assessment Years. The Revenue accepting the Appellate orders and there was no material change in facts in subsequent years, the view taken for earlier years would continue on principles of consistency. (iv) Next judgment relied upon by Shri Naniwadekar is in the case of Tamil Nadu Dairy Development Corpn. Ltd. (supra) wherein the Division Bench of Madras High Court has held that the interest accrued on short term deposits of the assessee -company which were made out o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ase that the said interest has been spent for any other purpose except the business purpose. The important aspect which is to be considered here is that the Respondent/Assessee is earning this interest income for last many years and it was always treated as business income. In view of the ratio laid down by the Supreme Court in the case of Radhasoami Satsang (supra) and by applying the said rule of consistency, we hold that, in the absence of any material change justifying the Department/Assessing Officer to take a different view from that taken in earlier proceedings, the question of the exemption of Respondent/Assessee should not have been reopened. 15. The Respondent/Assessee has utilized the surplus money for making investments in the bank deposits or call money market or inter-corporate deposits and it always retained its character as business assets. In our opinion the interest income earned by the Assessee has direct nexus with its business activity, as the said amounts were invested by the Respondent/Assessee for availing short term loans or for taking out LC opening. The object clauses of the Memorandum and Articles of Association particularly clauses (55) and (82) permit....