TaxTMI 
TaxTMI 
2020 (4) TMI 538
X X X X Extracts X X X X
X X X X Extracts X X X X
....323/JP/2018 was taken lead case with the consent of both the parties, wherein the assessee has taken following grounds of appeal:- "1. The assessment order passed u/s 143(2) is bad in law as well as on facts and hence, the same may please be quashed. 2. Rs. 1,00,000/- The ld. AO erred in law as well as on the facts of the present case in making ad-hoc addition after rejecting the books of account of the assessee and the ld. CIT(A) erred in sustaining the same. 3. Rs. 1878448/- The ld. AO erred in law as well as on the facts of the present case in making addition of interest on FDR separately under the head 'Income from other source' and the ld. CIT(A) erred in sustaining the same. The same is prayed to be deleted. 3. At the outset, t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....trinsically connected with the execution of the contract being awarded to the assessee and hence, the interest so received on such FDRs was only incidental to the very execution of the contract. It was submitted that furnishing of bank guarantee was the sine qua non for initiation of the project and only on furnishing the bank guarantee, could the assessee enter into the contract for the construction of the project. It was submitted that it is not a case where surplus funds have been deployed to earn the interest income rather the activity of depositing money was incidental to the business of the assessee. It was accordingly submitted that the interest received/accrued on these deposits is not a separate income which is dehors the main busi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tted that the observation of the ld. CIT(A) that the assessee has not proved that the deposits were intrinsically linked to earning of contract income is not correct as the Department is consistently making assessment while treating interest income as business income of the assessee and further, the detailed written submissions were filed before the ld. CIT(A) which have not been properly appreciated. It was further submitted that the matter is squarely covered by the decision of the Hon'ble Rajasthan High Court in case of M/s Choudhary and Brothers vs. DCIT (DB. ITA No. 355/2017 dated 31.08.2018). It was further submitted that the Coordinate Benches are also taking a consistent view that where the interest on FDR is inextricably linked wit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....year is a separate assessment year and the principles of res judicata doesn't apply in the income tax proceedings. It was further submitted that the assessee has earned interest on FDR receipts and interest so received has been rightly brought to tax under the head "Income from other sources". 9. We have heard the rival contentions and perused the material available on record. We find that the matter is covered in favour of the assessee by the decision of Hon'ble Rajasthan High Court in case of M/s Choudhary and Brothers vs. DCIT (supra) wherein the Hon'ble High Court has held as under:- "In the present case also, on the facts of the present case, we find that appellant being a civil contractor was required to provide a performance guara....
X X X X Extracts X X X X
X X X X Extracts X X X X
....instant case, we find that FDR's were placed with PNB under its lien for providing necessary margins for the purposes of obtaining the bank guarantees which were required to be placed with the awarder of the contracts to the assessee and issued by the PNB. There thus exist a direct nexus between pledging of FDRs with bank and seeking bank guarantee for the purposes of assessee's business. Further, some of the FDRs were directly placed with Chief Engineer, PWD, Jaipur by way of security towards performance of contract obligations. Following the ratio laid down by the Hon'ble Rajasthan High Court in case of M/s Choudhary & Brothers (supra), obtaining and pledging the FDR for the purposes of obtaining bank guarantee for the purposes of its bus....