PCIT Vs Paschim Gujarat Vij Company Limited (Gujarat High Court)
The Revenue filed an appeal under Section 260A of the Income Tax Act, 1961, challenging the order dated 19 September 2023 of the Income Tax Appellate Tribunal (ITAT), Ahmedabad, for Assessment Year 2014–15. The appeal raised three questions concerning whether certain interest income and miscellaneous receipts should be assessed as “income from other sources” or as “business income.”
The assessee, a company engaged in electricity distribution, filed its return declaring NIL income after set-off of past losses and unabsorbed depreciation. It also reported book profit under Section 115JB. The case was selected for scrutiny, and the Assessing Officer (AO) passed an order under Section 143(3), treating interest income of ₹2,45,50,000 from staff loans, advances, fixed deposits, and other advances, along with miscellaneous receipts of ₹25,02,07,000, as “income from other sources.” The AO held that the assessee was not in the business of money-lending and that these receipts did not arise from its day-to-day business of electricity distribution.
On appeal, the Commissioner of Income Tax (Appeals) partly allowed the assessee’s plea. The CIT(A) upheld the AO’s view that interest income from staff loans and advances should be classified as “income from other sources.” However, with respect to miscellaneous receipts—such as excess stock identified during physical verification, sale of tender forms, registration fees from suppliers and contractors, and rebates for prompt payment—CIT(A) held that these items constituted business income because of their connection with business operations. Other items lacking direct nexus with business activity were treated as income from other sources.
