Ruby Mills Limited Vs ACIT (ITAT Mumbai)
The Mumbai Bench of the Income Tax Appellate Tribunal partly allowed the appeal filed by Ruby Mills Limited for AY 2007-08 against the order dated 30.12.2025 passed by the CIT(A)-50, Mumbai. The assessee, a public listed company engaged in textile manufacturing and letting out commercial property, challenged several additions and disallowances made in assessment under section 143(3) of the Income-tax Act, 1961.
The Tribunal deleted the ad-hoc additions relating to alleged undervaluation of closing stock and alleged unaccounted consumption of raw material/production. The Assessing Officer had made an addition of Rs. 1,72,64,110, being 10% of closing stock stated at Rs. 17,26,41,098, and a further addition of Rs. 2,61,70,000 under section 69C, being 10% of the stated raw-material cost. The assessee had furnished quantitative details, reconciliations and explanations concerning inventory valuation, consumption, production, work-in-progress and normal process losses. The assessee also contended that the valuation method had been consistently followed and was based on recognised accounting principles.
The Tribunal held that section 69C, concerning unexplained expenditure, could be invoked only where a finding regarding the incurring of expenditure was first brought on record. In the present case, the Assessing Officer had not identified any specific instance of unaccounted consumption, the corresponding vendor from whom alleged purchases were made, or the customer to whom alleged unaccounted production was sold. The Tribunal therefore found that the section 69C addition was based on conjectures and surmises and was not sustainable.
On the closing-stock issue, the Tribunal noted that the assessee had produced explanations and reconciliations and had followed its regular method of valuation consistently. It observed that if there was clear undervaluation of any specific item, the extent could have been accurately determined. Instead, the Assessing Officer rejected the books by invoking section 145 without issuing a show-cause notice and made an ad-hoc 10% addition. The Tribunal also observed that, if rejection of books under section 145(3) were sustained, assessment would have to proceed under section 144, while the Assessing Officer had not demonstrated the basis for the ad-hoc 10% addition. The Tribunal’s discussion is consistent with the statutory framework and judicial material concerning section 69C additions and the requirements surrounding rejection of books and best-judgment assessment. :contentReference[oaicite:0]{index=0}
Accordingly, the Tribunal held that both ad-hoc additions were not sustainable in law and directed their deletion. The order records the amounts in paragraph 14 as Rs. 17,26,41,098 and Rs. 2,61,70,000, although the earlier discussion identifies the first addition as Rs. 1,72,64,110, representing 10% of Rs. 17,26,41,098. This source inconsistency is retained rather than silently corrected.
On the Rs. 20,000 excise penalty for wrong availment of CENVAT credit, the assessee argued that the amount had been incurred in the course of business and should therefore be deductible under section 37(1). The Tribunal rejected the contention, holding that the excise penalty paid for wrong availment of CENVAT credit, even though stated to have occurred through oversight, was not allowable under section 37(1) read with its Explanation. The ground was accordingly dismissed. The treatment is consistent with the statutory principle that expenditure incurred for an offence or something prohibited by law is not eligible under section 37(1). :contentReference[oaicite:1]{index=1}
The Tribunal next deleted the Rs. 15,60,000 disallowance concerning alleged expenses relating to the rented premises. The Assessing Officer had made an ad-hoc disallowance after noting that a substantial portion of the building had been rented and that maintenance expenses were not separately identifiable. The Tribunal accepted the assessee’s explanation that the building-repair expenditure of Rs. 20,49,037 related to its two factory buildings at Dadar and Dhamni and was not incurred on the rented building. Since the Assessing Officer had not identified any particular repair expenditure attributable to the rental income, the Tribunal deleted the Rs. 15,60,000 addition.
Finally, the Tribunal considered the treatment of Rs. 5,93,982 interest received on margin money placed with banks for opening letters of credit for import of machinery. The assessee had offered the interest under the head “Profits and Gains from Business or Profession”, whereas the Assessing Officer had assessed it under “Income from Other Sources”. The Tribunal found that the interest had been earned on margin money placed in connection with the assessee’s business and held that it was correctly offered as business income. Ground No. 7 was therefore allowed.
Thus, the appeal was partly allowed. The Tribunal deleted the disputed ad-hoc additions concerning closing-stock valuation and section 69C, deleted the Rs. 15,60,000 rented-property disallowance, and accepted business treatment of Rs. 5,93,982 interest on LC margin money. However, it upheld the Rs. 20,000 disallowance of excise penalty for wrong availment of CENVAT credit under section 37(1). The order was pronounced in the open court on 27.07.2026.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The present appeal has been filed by the assessee challenging the impugned order dated 30.12.2025 passed u/s 250 of the Income Tax Act, 1961 (‘the Act’), by the Office of the Commissioner of Income-tax (Appeals) 50, Mumbai for the assessment year 2007-08. The following grounds are raised by the assessee are reproduced below:
“1. On the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) erred on facts and in law in sustaining the order of assessment passed by the Ld. Assessing Officer u/s 143(3) of the Income Tax Act, 1961, when the same is clearly outside the sanction of law, illegal, unjust, invalid, bad-in-law and therefore liable to be quashed.
2. On the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) erred on facts and in law in upholding the assessment order passed by the Ld. Assessing Officer u/s 143(3), without providing reasonable opportunity of being heard and thus in violation of the principles of natural justice.
3. On the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) erred on facts and in law in confirming the addition of Rs 1,72,64,110 made u/s 145 of the Income Tax Act, 1961 when the appellant has consistently valued its inventory in accordance with the accounting principles prescribed under Accounting Standard – 2 “Valuation of Inventories” (AS-2) issued by the Institute of Chartered Accountants of India (ICAI), and there has been no undervaluation of the closing stock, either in terms of quantity or value.
4. Without prejudice, on the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) erred on facts and in law in confirming the additions Rs. 261.7 Lakhs u/s 69C of the Income Tax Act, 1961 on account of alleged unaccounted consumption of raw materials and for unaccounted production. There were no material discrepancies in the consumption of raw materials or in the production of semi-finished/finished goods. In textile manufacturing, normal process and shrinkage losses must be considered. Consumption and production cannot be correctly determined without accounting for normal and abnormal production losses.
5. On the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) erred on facts and in law in confirming the addition of Rs 20,000/-u/s 37(1) of the Income Tax Act, 1961 made by the Ld. Assessing Officer in respect of penalty paid by the Appellant for wrong availment of CENVAT credit.
6. On the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) erred on facts and in law in upholding the addition of Rs 15.6 Lakhs u/s 37(1) of the Income Tax Act, 1961 as made by the Ld. Assessing Officer in respect of expenses allegedly incurred for the upkeep and maintenance of the rented premises.
7. On the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) erred on facts and in law in confirming the assessment of Rs 5,93,982/- under Income from other sources instead of Profit and Gains from Business & Profession even when the appellant has earned this income from margin money, LC interest etc., in regular conduct of his business.
8. The appellant craves leave to add to, alter, amend, modify and/or delete all or any of the foregoing grounds of appeal.
The appellant prays before the Hon’ble Tribunal to delete the additions made by the AO and confirmed by the Ld. CIT (A) on merits and/or any other relief as the Hon’ble Tribunal may deem fit.”
2. Brief facts of the case are that assessee is a public listed company engaged in the business of Textile manufacturing and letting out commercial property etc. For the year under consideration assessee filed its return of income u/s 139(1) of the Income-tax Act, however, the case of the assessee was selected for scrutiny and subsequently after serving statutory notices order of assessment u/s 143(3) of the Act was passed thereby computing the total income of the assessee at Rs. 14,10,20,290/-after making following additions:
“i. Addition @ 10% of closing stock of Rs 17,26,41,098/- amounting to Rs 1,72,64,110/- on account of undervaluation of closing stock.
ii. Addition @ 10% of cost of material i.e. an amount of Rs 2,61,70,000/-u/s 69C for unaccounted consumption of raw material and for unaccounted production of finished goods.
iii. Disallowance of administrative expenses amounting to Rs. 2,06,178/-.
iv. Disallowance of penalty paid u/s 37(1) amounting to Rs. 20,000/-.
v. Disallowance of interest expense as capital in nature amounting to Rs. 39,00,000/-.
vi. Disallowance of expenditure allegedly incurred on Rented Property amounting to Rs. 15,60,000/-.”
3. Aggrieved by the order of A.O., although assessee preferred appeal but Ld. CIT(A) partly allowed the appeal of the assessee. Against this order of Ld. CIT(A) assessee has preferred the present appeal before us on the grounds mentioned hereinabove.
4. Ground No. 1 & 2, raised by the assessee are general in nature and requires no adjudication.
5. Ground No. 3 & 4, raised by the assessee are inter related and inter connected and relates to challenging the order of Ld. CIT(A) in upholding the additions made by A.O. u/s 145 of the Income-tax Act of Rs. 1,72,64,110/- and also upholding the additions u/s 69C of the Act of Rs. 261.7 lakhs. Therefore, we have decided to adjudicate these grounds through the consolidated order.
6. Ld. A.R. appearing on behalf of the assessee reiterated same arguments as were raised by him before the revenue authorities and also upon written submissions filed before the Ist Appellate Authority. It was submitted that A.O. at para 5 to 15.3 of the assessment order has alleged that the quantitative details furnished by the assessee in Audited Accounts, tax Audit report and during the assessment proceedings are neither correct nor complete. Thus, the AO highlighted various discrepancies in quantities of various raw materials and made an addition @10% of closing stock of Rs 17,26,41,098/-amounting to Rs 1,72,64,110/- on account of under valuation of closing stock and a further addition @10% of cost of material i.e. an addition of Rs 261.7 lakhs u/s 69C of the Act, on account of consumption of raw material and unaccounted production of finished goods. It was further submitted that the assessee had furnished all quantitative details called for by the AO during the course of assessment proceedings, including details of opening stock, purchases, consumption, production, sales and closing stock, through various submissions made from time to time. It was submitted that whenever the AO sought information in a revised format or required further particulars regarding consumption of grey cloth, the assessee promptly complied and furnished the requisite details. Throughout the assessment proceedings, the AO neither pointed out any discrepancy in the quantitative records nor sought any clarification regarding the manufacturing process and the normal loss/shrinkage is inherent in Textile manufacturing. It was argued that the AO accepted the details furnished by the assessee and raised no adverse observations, until the assessment order was passed.
7. With regard to costing records and financial accounts and Inventory Valuation, the Ld. AR submitted that, pursuant to the AO’s requisition, the assessee furnished a reconciliation between the financial accounts and cost records regarding inventory valuation and also provided detailed explanations of the valuation methodology adopted in both sets of records. It was explained that inventory in the financial statements was valued in accordance with the applicable Accounting Standards notified under the Companies Act, 1956, and that taxable income was computed on the basis of profits disclosed in such statutory financial accounts. The assessee further clarified that cost records are maintained for regulatory and managerial purposes and that the valuation reflected therein is not used for determining taxable income. Despite these explanations, the AO erroneously concluded that there was undervaluation of closing stock by relying upon figures appearing in the cost records. It was argued that the AO neither addressed nor rebutted the assessee’s submissions and failed to provide any justification for disregarding the settled principle that inventory valuation as reflected in the audited financial statements, prepared in accordance with the Companies Act and prescribed Accounting Standards, that forms the basis for computation of taxable income. Accordingly, it was submitted that the finding of undervaluation based on cost records was factually and legally unsustainable. The addition on account of alleged undervaluation of closing stock was based entirely on arbitrary comparisons made by the AO between average purchase/consumption costs and average values of inventory reflected in the books. It was contended that the AO compared the average cost of yarn and grey cloth purchases and consumption with the average value of opening and closing work-in-progress and, on that basis alone, concluded that either the stock quantities or the valuation methodology adopted by the assessee were incorrect without giving any categorical specific factual finding on either of the allegations. The A.O. failed to appreciate the assessee’s manufacturing process and inventory valuation methodology. It was explained that cotton and man-made fibres constituted raw materials, yarn and grey cloth formed part of work-in-progress, and finished fabric constituted finished goods. The assessee consistently valued inventory at cost or net realizable value, whichever was lower, based on detailed cost sheets, budgeted costing, stage-wise cost allocation, ageing analysis and recognized accounting principles. The AO, however, merely compared average production and purchase rates with average inventory values and concluded that stock was undervalued without examining the composition of inventory, different grades and qualities of products, work-in-progress stages, cost sheets, ageing adjustments or the established valuation methodology followed by the assessee. It was therefore contended that the finding of undervaluation was based on arbitrary averages and lacked any factual or technical foundation.
8. As regards the allegation of short production of yarn and finished fabric, the Ld. AR submitted that the A.O. misunderstood the manufacturing process and treated yearn both as a raw material and as a finished product. The quantity alleged to represent short production of yarn had in fact been utilized in the manufacture of grey cloth and therefore could not be regarded as unaccounted production. Similarly, in respect of finished fabric, the AO failed to account for work-in-progress and normal process losses inherent in textile manufacturing. Reliance was placed on industry benchmarks certified by the Bombay Textile Research Association (BTRA), according to which process loss and shrinkage of the magnitude reflected in the assessee’s records were within accepted industry norms. It was submitted that the alleged short production was merely the result of erroneous calculations and incorrect treatment of work-in-progress and process losses. The AO also compared the average production value of yarn and the average purchase value of finished fabric with the average value of the corresponding closing stock and inferred undervaluation of inventory. According to the assessee, these conclusions were drawn solely on the basis of mathematical averages without examining the manufacturing process, composition of inventory, stages of work-in-progress, valuation methodology, cost allocation principles, or the actual items constituting the stock. No independent verification or factual inquiry was undertaken by the AO and no finding has been arrived that the method consistently adopted by the assessee has not been followed in this very assessment year. It was argued that the assessee had, vide its submission dated 04.12.2009, explained the principles governing stock valuation, consumption and production and had also expressed its willingness to furnish detailed stock sheets and supporting records for verification. However, the AO neither examined the explanations furnished nor called for any record for further verification. Instead, he proceeded to make an ad-hoc addition of Rs. 1,72,64,110/-, being 10% of the value of closing stock, based solely on the aforesaid comparisons which is unsustainable and liable to be deleted.
9. In regard to the alleged discrepancies in raw material consumption, it was submitted that the differences noted by the AO were either typographical errors or arose from comparing figures having different bases and classifications. In the case of cotton, the quantitative difference was insignificant and arose due to a clerical error in the Tax Audit Report, while the consumption value fully reconciled with the audited accounts. In respect of yarn, there was no discrepancy as the figures in the audited accounts represented purchased yarn consumption, whereas the Tax Audit Report and subsequent submissions included both purchased and captively consumed yarn. Similarly, in the case of grey cloth, the figures compared by the AO related to purchased and self-manufactured quantities respectively and were therefore not comparable. It was argued that the alleged discrepancies had no bearing on the correctness of the accounts or the profits disclosed by the assessee. As regards the allegation of short production of yarn and finished fabric, the Ld. AR submitted that the AO misunderstood the manufacturing process and treated yarn both as a raw material and as a finished product. The quantity alleged to represent short production of yarn had in fact been utilized in the manufacture of grey cloth and therefore could not be regarded as unaccounted production. Similarly, in respect of finished fabric, the AO failed to account for work-in-progress and normal process losses inherent in textile manufacturing. Reliance was placed on industry benchmarks certified by the Bombay Textile Research Association (BTRA), according to which process loss and shrinkage of the magnitude reflected in the assessee’s records were within accepted industry norms. It was submitted that the alleged short production was merely the result of erroneous calculations and incorrect treatment of work-in-progress and process losses. According to the assessee, the AO erroneously compared unrelated figures appearing in different records and, based on such incorrect comparison, alleged a shortfall in production vis-à-vis raw material consumption. It was contended that no opportunity was afforded to the assessee to explain the alleged discrepancies, before the assessment order was passed. The rejection of books of account and the consequent ad-hoc addition of Rs. 261.7 lakh under section 69C, being 10% of raw material consumption, were therefore challenged as arbitrary, unsupported by evidence, and made without establishing even a single instance relating to actual unaccounted consumption of raw materials or unaccounted production/sales. Further, The Ld. AR submitted that the rejection of books of account under section 145 of the Act was based on incorrect appreciation of facts and erroneous assumptions regarding quantitative records, stock valuation and production figures and without affording any specific opportunity of being heard in this regard. The Ld. AR further contended that no specific defect had been identified in the books of account, stock records or accounting system regularly followed by the assessee. The method of accounting and inventory valuation had been consistently followed and was in accordance with recognized accounting principles. It was therefore argued that the conditions prescribed for invoking section 145 were not satisfied and that the rejection of books of account and consequential additions were unsustainable in law. Reliance was placed on settled legal position as per the case-laws compiled in the Legal paper-book to contend that regularly maintained books cannot be rejected on account of insignificant discrepancies, typographical errors or subjective disagreement with the method of valuation adopted by the assessee. Thus, the assessee concluded that the ad-hoc addition of Rs.1,72,64,110 on account of undervaluation of closing stock and ad-hoc addition of Rs. 261.70 lakhs made u/s 69C of the Act be deleted.
10. On the other hand, ld. D.R. appearing on behalf of department relied upon the orders passed by the revenue authorities.
11. We have heard the counsels for both the parties, perused the material placed on record, judgment cited before us and also the orders passed by the revenue authorities. From the records we noticed that the Ld. CIT(A) in the beginning of his order has mentioned that ITNS-51 in prescribed form on the system calling for requisite report was issued to the AO by the Ld. CIT(A). Since, the AO did not furnish the desired report/particulars, it was inferred that the AO had nothing adverse to report on the issues involved and accordingly, the appeal was disposed-off based on the details available on record, albeit confirming most of the additions of the AO.
12. After having considered the facts of the present case we are of the view that regarding the addition u/s 69C, the said section titled as “Unexplained expenditure, etc.” starts with words “Where in any financial years an assessee has incurred any expenditure…”. The section can be invoked only in cases a finding on incurring of some expenditure is first brought on record. However, in this case, no such finding has been placed on record. The Ld. AR has rightly contended that not a single instance of alleged unaccounted consumption by way of identifying corresponding vendor from whom alleged purchases have been made and also the customer to who the alleged unaccounted production has been sold are brought on record by the AO. The addition, which is merely based on conjectures and surmises cannot be sustained. Further, the provision of Section 69C of the Act is not applicable to the facts of the case.
13. We also find that the assessee has produced necessary explanations and reconciliations before the AO regarding valuation of closing stock. The valuation has been made according to the regular method of valuation consistently adopted by the assessee over the years. If there was any clear undervaluation for any specific item, the extent of undervaluation could have been accurately worked out and corresponding addition could have been made. Failing to find the specific items, the AO ventured into the rejection of books of accounts by invoking Section 145 of the Act without a show cause notice, which is not sustainable on facts of the case and aguments made before us. The closing stock of this year becomes opening stock of next year. However, the necessary adjustments, which have cascading effect in all future years have not been done by the revenue. Even for the academic discussion, if rejection of books of accounts is sustained, the Section 145(3) the assessment has to be made under Section 144 of the Act i.e. the best judgment assessment. The AO has not demonstrated as to what is the basis of adoption of the ad-hoc 10% disallowance/addition under the two heads.
14. Therefore, considering the totality of the facts and circumstances as discussed above and also considering the legal positions we are of the view that under the facts and circumstances of the present case, both the ad-hoc additions of Rs. 17,26,41,098/- and Rs. 2,61,70,000/- are not sustainable in law and thus, directed to be deleted. These grounds raised by the assessee stands allowed.
15. Ground No. 5, this ground raised by the assessee relates to challenging the order of Ld. CIT(A) in confirming the addition of Rs. 20,000/- u/s 37(1) of the Act. In this regard, it was submitted by Ld. A.R. that the excise penalty of Rs. 20,000/- paid during the year under consideration was for wrong availment of Cenvat Credit through an oversight. It was submitted that since the said expenditure was incurred in the course of the business of the assessee, therefore, it is an allowable expenditure u/s 37(1) of the Act.
16. On the other hand, Ld. D.R. relied upon the orders passed by the revenue authorities.
17. We have heard the counsels for both the parties, perused the material placed on record and we noticed that the excise penalty of Rs. 20,000/- was paid during the year under consideration for wrong availment of Cenvat Credit even through an oversight is not an allowable expenditure u/s 37(1) of the Act read with explanation thereof. Thus, we find no merits and the ground raised by the assessee and dismissed the same.
18. Ground No. 6, raised by the assessee relates to challenging the order of Ld. CIT(A) in upholding the addition of Rs. 15,60,000/- under Section 37(1) of the Income-tax Act.
19. In this regard, Ld. A.R. submitted that AO has noted that the assessee has given a portion of its building on rent. The AO noted that as per the submissions of the assessee dated 19.11.2009, the building was capitalized in AY 2006-07 only. The assessee has reduced a value of Rs 1,62,20,000/- in the depreciation chart. The tax auditors have mentioned in the foot note that “the company is in the process of compiling the relevant details”. A part i.e. 76096 sq ft out of total area of 111520 sq fts, i.e. 68% area, has been given on rent. The rent received in Rs 5.52 crores. Against which deduction u/s 24 @ 30% pf Rs 1.56 crores has been claimed. As per unregistered rent agreements only electricity and water charges are to be reimbursed by tenants and repairs is the liability of the assessee. The AO submitted that only 4 out of 10 floors are in self-use. However, the assessee has not given any details of expenses on maintenance of rented building. Further, the assessee has provided Air Conditioning in the building. Various other expenses related to maintenance of building could not be segregated as no separate account of the same is kept. Therefore, the AO disallowed an expenditure of 3% of ALV i.e. 10% of deduction for repairs and maintenance expenses allowed after deduction of municipal taxed i.e. Rs 15.6 lakhs were disallowed out of various expenses debited in P & L account u/s 37(1). The Ld AR submitted that the assessee has two factory buildings at Dadar and Dhamni and that the P&L debit in building repairs of Rs 20,49,037/-, is with regard to those two buildings and the same was not incurred on the rented building as per ill-conceived notions of the AO as above. Further, the AO has not specified any item of such repairs that is attributed to the rental income received and has erroneously made an ad-hoc addition of Rs 15.6 lakhs being 10% of 1.56 crores.
20. On the other hand ld. D.R. relied upon the order passed by the revenue authorities.
21. We have heard the counsels for both the parties, perused the materials placed on record and judgment cited before us and also the orders passed by the revenue authorities. From the records we find that the disallowance of building repairs of Rs 20,49,037/- has been made by the AO under ill-conceived wrong appreciation of facts. We are inclined to agree with the contention of the Ld. AR that the assessee had two factory buildings at Dadar and Dhamni and that the P&L debit in building repairs of Rs 20,49,037/-, is with regard to those two buildings and the same was not incurred on the rented building for which legally permissible separate notional deduction @30% of ALV has been correctly made. The AO has not specified any item of such repairs that is attributed to the rental income received and has been separately claimed by the assessee under the head Business Income. Therefore, the ad-hoc addition of Rs 15,60,000/- is hereby deleted and Ground 6 is accordingly allowed.
22. Ground No. 7, this ground raised by the assessee relates to challenging the order of Ld. CIT(A) in confirming the assessment of Rs. 5,93,982/- under income from other sources instead of profit and gains from business and profession.
23. Ld. A.R. appearing on behalf of assessee submitted that AO has assessed the interest receipt of Rs 5,93,982/- under the head other sources. During the appellate proceedings, the assessee has submitted that the assessee earned an aggregate interest of Rs. 5,93,982/- on Margin Money placed with banks for opening LC for import of machineries. Since the interest is earned in the course of its business, it is offered for tax under the head Business Income. Further, the assessee submitted that interest on fixed deposit placed as margin money for obtaining LC and bank guarantee is intrinsically linked with the manufacturing process of textile business and therefore the interest earned is to be treated as business income and cannot be treated as income from other sources. Further, by merely changing the heads there is no benefit to the AO and therefore the treatment of interest should not have been changed without any factual error in classification of head of income.
24. On the other hand, ld. D.R. relied upon the assessment order and contended that the AO pointed out serious irregularities in the books of accounts, audit reports and irreconcilable differences in various statements and thus the AO was correct and justified in rejecting the books of accounts and making estimated additions on account of unaccounted consumption and production u/s 69C and on account of undervaluation of stock. The Ld. DR supported the orders of lower authorities on other additions as well.
25. We have heard the counsels for both the parties, perused the material placed on record and judgment cited before us as well as the orders passed by the revenue authorities. We find that that the interest receipt of Rs 5,93,982/- has been incorrectly taxed under the head income from other sources as against the Business head as per return of income. The assessee earned an aggregate interest of Rs. 5,93,982/- on Margin Money placed with banks for opening LC for import of machineries. Since the interest is earned in the course of its business, it is rightly offered for tax under the head Business Income. Therefore, the Ground No. 7 is accordingly allowed.
26. In the result, appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 27.07.2026.
