Deposits cannot be treated as Income of assessee engaged in running financial schemes

CA Sandeep Kanoi

Recently In the case of CIT Vs. Sahara India (Firm) Hon’ble Allahabad High Court has held that amount received from deposits from the public under different finance schemes cannot be treated as Income of the Assessee as Assessee is a mere custodian of the deposit. The income arises from the deposits i.e. dividend, interest etc.

Brief Facts :- Assessee is a partnership firm. During the assessment year under consideration, the assessee was engaged in running some financial schemes in which deposits were collected from the Public. In his order, the A.O. has treated the amount of Rs.14,82,727/- as the revenue receipt in nature. Being aggrieved, the assessee has filed an appeal before the CIT (A) and claimed that the said amount is a part of the deposit received as per the schemes run by the assessee and is capital in nature and no amount, therefore, was liable to be taxed. The CIT (A) has allowed the claim of the assessee by observing that the deposits are capital receipts. The same was confirmed by the Tribunal vide its impugned order. Still not being satisfied, the department has filed the present appeal.

Held by High Court

On Appeal HC has relied on the judgment of his court in the case of  Commissioner of Income Tax vs. Sahara Investment India Limited; 266 ITR 641 where it was observed that –

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