Case Law Details
ACIT Vs National Film Development Corporation Ltd. (ITAT Mumbai)
We are of the opinion that considering the facts that assessee’s business -production of films for Ministries of Government of India and various government departments-and the durations for which the amounts were kept with banks the income earned by it has to held as business income. The FAA had allowed the claim made by the assessee on the grounds that it was in the business of production of films, that the completion of films would take time, that during the intervening period the advances were deposited with bank resulting in accrual of interest income. We find that these basic finding of the FAA have not been challenged by the Department. It is also a fact that Government of India was 100% shareholder of the assessee-company and the deposit of advances with the banks was directly and inextricably linked with the business of the assessee, so the interest earned by it had to be treated as income earned from business and cannot not be treated as income from other sources. In other words, it can safely be held that the interest earned by the assessee was obviously attributable and incidental to the business carried on by it, that it would not be correct to say that this interest was totally de hors the business carried on by it. It is well-settled that interest can be assessed under the head Income from other sources, only if it cannot be brought within one or the other of the specific heads of charge. In the case before us the interest income is clearly and justifiably assessed as business income. In short, the case under consideration is not a case of depositing unutilized and surplus money by the assessee to earn interest and, therefore, the interest earned by the assessee cannot be assessed as Income from other sources.
Here, we would like to refer to the case of Lok Holdings(supra).Facts of the case are that the assessee was engaged in construction business and received monies from the purchasers of flats which it deposited with the bank. The AO assessed the interest income earned on money deposited with the bank as income from other sources. The FAA deleted the addition. The Tribunal on finding that the entire interest sprang from the business activity of the assessee and not out of any independent activity, held that the interest income received by the assessee was business income.
Ground raised by the revenue is dismissed.
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