Income Tax Appellate Tribunal - Kolkata
Value & Worth, Kolkata vs Assessee on 15 February, 2010
आयकर अपीलीय अधीकरण, Ûयायपीठ - " A" कोलकाता,
IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH: KOLKATA
(सम¢) ौी महावी
महावीर
वीर िसंह, Ûयायीक सदःय एवं ौी,
ौी आकबर बाशा, लेखा सदःय)
[Before Hon'ble Sri Mahavir Singh, JM & Hon'ble Shri Akber Basha, AM]
आयकर अपील संÉया / I.T.A No. 956/Kol/2010
िनधॉरण वषॅ/Assessment Year: 2007-08
M/s. Value & Worth Vs. Deputy Commissioner of Income-tax
(PAN-AAFFV 5756 K) Circle-36, Kolkata.
(अपीलाथȸ/Appellant) (ू×यथȸ/Respondent)
For the Appellant: Shri R. Salarpuria
For the Respondent: Shri A. K. Pramanick
आदे श/ORDER
Per Shri Mahavir Singh/ ौी महावीर िसंह:
This appeal by assessee is arising out of the order of CIT(A)-XX, Kolkata in Appeal No. 86/CIT(A)-XX/DC.Cir-36/09-10/Kol dated 15.02.2010. The assessment was framed by DCIT, Circle-36, Kolkata, u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for Assessment Year 2007-08 vide his order dated 10.09.2009.
2. The first issue in this appeal of the assessee is against the order of CIT(A) in challenging the jurisdiction of Assessing Officer. For this, the assessee has raised the following ground no.1.
"1. For that in view of the facts and circumstances of the case the Ld. CIT(A) was wholly wrong and unjustified in dismissing the appeal of the assessee firm and confirming the A.O's order u/s 143(3) dt. 10.09.2009 without properly considering the relevant facts of the case and also the provision of law. The decision of the Ld. CIT(A) was wholly unreasonable and bad in law."
3. At the outset, Ld. Counsel for the assessee specifically stated that he is not interested in arguing this issue and accordingly, the same is dismissed as not pressed.
4. The next issue in this appeal of the assesssee is against the order of CIT(A) in confirming action of Assessing Officer in assessing interest income as 'Income from Other Sources' instead of income declared by assessee under the head 'Business and Profession'. For this, the assessee has raised following ground nos. 2 and 3:
2 ITA 956/K/2010 Value & Worth A.Y. 07-08 "2. For that in view of the facts and circumstances of the case the A.O was wholly wrong and unjustified in deviating from his stand taken in the preceding year's assessment and wrongly treating the interest income of Rs. 18,05,204/- earned this year on the two fixed deposits as income from other source instead of under the head "
business & profession" as business income . The Ld. CIT(A) was also wholly wrong and unjustified in confirming the wrongfull auction of the A.O.
3. For that in view of the facts and circumstances of the A.O was wholly wrong and unjustified in deviating from his correct stand taken in the preceding year's assessment and wrongly treating the interest income on Mutual Fund also as income from other source instead of under the head "business & profession", completely ignoring or otherwise overlooking the accounts and the facts. The Ld. CIT(A) was also wholly wrong and unjustified in confirming the wrongfull action of the A.O without any basis.
5. We have heard rival contentions and gone through facts and circumstances of the case. We find from the assessment order that Assessing Officer has noted on page 3 of his order that 'It is further found that assessee has taken interest on fixed deposit & income from mutual fund as business income but as the nature of business or profession of the assessee is trading in stock and in derivatives, the income from fixed deposit and mutual funds is treated as income from other sources'. Aggrieved, assessee preferred appeal before CIT(A) stating that this amount of Rs.18,05,204/- earned is business income as the assessee is in the business of stock market transactions and for that it has provided margin deposit to the Stock Exchange. CIT(A) confirmed the action of the Assessing Officer by stating "The Ld. AR of the assessee appeared for the appellant and reiterated the submission already made before the A.O. In find no substance in the submission. The A.O. has rightly assessed the interest on fixed deposits as income from other sources." Aggrieved, now assessee is in appeal before us.
6. Before us assessee contended that it is engaged in the business of dealing in stock market and for that purpose, for carrying on this business, it was required to provide margin money in the form of fixed deposits and as such on fixed deposits it had earned interest of Rs.18,05,204/- and according to it, making of fixed deposits is interlinked with business and there was no intention to earn interest by making fixed deposits. Accordingly, assessee contended that this interest income from fixed deposits should be treated as business income as treated by the assessee in its accounts. We find that the assessee has relied on the decision of Hon'ble Apex Court in the case of CIT Vs. M/s. A.P. Fashions (P) Ltd. in Civil Appeal No.1527 of 2009 dated 4th March, 2009, wherein the issue of 80HHC was under consideration and the Hon'ble Apex Court has considered the issue as under:
"There is a clear distinction between interest earned on investment, interest earned on trading and interest earned on Margin Money, Fixed Deposit Receipt(s). Whenever 3 ITA 956/K/2010 Value & Worth A.Y. 07-08 the question arises before the Assessing Officer as to whether the interest income is taxable under Section 28 or under section 56 of the Income Tax Act, the Assessing Officer is required to consider the facts of each case and ascertain whether such income arises on investment or on trading or in the course of business. In the present case, the assessee is an exporter. Assessee had earned foreign exchange. In order to carry on its business assessee had borrowed monies from its bankers. The bankers lent monies against collaterals. In the circumstances, we are of the view that the interest income fell in the category of "business income" and it was taxable under Section 28 and not under Section 56 of the 1961 Act. Further, it may be mentioned that in Explanation (baa), 90 cent of the interest undoubtedly is deductible provided it is an interest arising from non-operational activity The word 'interest' has to be read with other worth occurring in explanation (baa) viz., commission, interest, rent etc. These items of income, rent, commission, interest fall either under Section 28 or Section 56. Therefore, in each case the Assessing Officer has to ascertain as to what is the business of the assessee, what are its activities, whether the receipt comes in the category of operational income or other income and thereafter decide the head of income under which the receipt would fall. In the present case, the interest of Margin Money Fixed Deposit Receipt(s) was c1arly business income under Section 28 of the Income Tax Act and, therefore, 90 per cent of Rs.3,81,427/- was not deductible."
7. We find that none of the authorities below have considered the issue. The Assessing Officer simply in one line stated that this interest income is income from other sources and CIT(A) is simply confirmed the same in one line. None of the authorities below passed any order giving reasons despite the fact that the assessee has filed complete written submissions vide dated 12.1.2010. As none of the authorities below have passed a speaking order and it seems that the assessee is engaged in the stock market doing stock market transaction and the fixed deposit are given as margin money to the Stock Exchange as per rules and regulations of Stock Exchange. The ratio laid down by Hon'ble Apex Court in the case of A. P. Fashions (P) Ltd. (supra) that the AO should examine as to whether interest income is taxable u/s. 28 of the Act or u/s. 56 of the Act. Hon'ble Apex court ruled that AO is required to consider the fact of each and ascertain whether such income arises on investment or on trading or in the course of the business of the assessee. We direct the AO to decide the issue accordingly. Hence, we, in the interest of justice, set aside this issue to the file of the CIT(A) to pass a speaking order, whether the assessee has earned this fixed deposit interest as income from other sources or it is a business income. The CIT(A) will also consider the decision of Hon'ble Apex Court in the case of M/s. A. P. Fashions (P) Ltd. (supra). Accordingly, this issue of the assessee's appeal is set aside to the file of the CIT(A) and allowed for statistical purposes.
8. The next issue in this appeal of the assessee is consequential regarding allowance of STT rebate u/s. 88E of the Act. For this, the assessee has raised the following ground No.4:
4 ITA 956/K/2010 Value & Worth A.Y. 07-08 "4. For that in view of the facts and circumstances of the case the A.O. was wholly wrong and unjustified in arbitrarily disallowing without any basis the STT rebate from income-tax u/s. 88E of the Act on the entire business income, including the aforesaid interest income of Rs.18,05,204/- earned on the two fixed deposits pledged with National Stock Exchange for availing Trading Facilities and therefore, the said income is arising from the taxable securities transactions made in its trading business and which are chargeable under the head 'business & profession". The Ld. CIT(A) was also wholly wrong and unjustified in confirming the wrongful action of the A.O."
9. We are of the view that this being a consequential issue to the first issue, whether the assessee's income is business income or interest income, the CIT(A) will decide afresh after deciding the first issue. This issue is also set aside to the file of the CIT(A).
10. In the result, appeal of the assessee is partly allowed for statistical purposes.
11. Order is pronounced in the open court on 13.5.2011 Sd/- Sd/-
आकबर बाशा, लेखा सदःय महावीर िसंह, Ûयायीक सदःय
(Akber Basha) (Mahavir Singh)
Accountant Member Judicial Member
तारȣख)
तारȣख) Dated 13th May 2011
(तारȣख
वǐरƵ िनǔज सिचव Jd.(Sr.P.S.)
आदे श कȧ ूितिलǒप अमेǒषतः- Copy of the order forwarded to:
1. अपीलाथȸ/APPELLANT - M/s. Value & Worth, C/o Salarpuria Jajodia & Co., 7, C.R. Avenue, Kolkata-72.
2 ू×यथȸ/ Respondent - DCIT, Circle-36, Kolkata.
3. आयकर किमशनर (अपील)/ The CIT(A), Kolkata
4. आयकर किमशनर/ CIT Kolkata
5. ǒवभािगय ूितनीधी / DR, Kolkata Benches, Kolkata स×याǒपत ूित/True Copy, आदे शानुसार/ By order, सहायक पंजीकार/Asstt. Registrar.