Interest earned on Escrow Account shall be treated as income from business not from other sources.

Issue before Tribunal:

Whether interest income earned on amount in Escrow Account can be treated as Income from other sources instead of income from business.

Brief facts:

• Assessee filed the return of income on 29.09.2008 declaring nil income which was processed u/s 143(1).
• During the course of assessment proceedings, the AO noticed that the assessee earned interest income of Rs. 32,36,296/- which included interest on the amount deposited in Escrow Account amounting to Rs. 13,42,311/-.
• The said amount was considered by the AO as “income from other sources” instead of “income from business” claimed by the assessee.
• On appeal CIT (A) considered two assessment orders for AYs 2003-04 & 2006-07 filed by assessee where similar facts were involved. ITAT had set aside those matter to AO and interest in Escrow Account was treated as business income.

Contention of the revenue:

• DR supported the assessment order.

Contention of the assessee:

• AO in AYs 2003-04 & 2006-07 assessed interest on Escrow Account as business income after getting directions from Hon’ble ITAT.

Held by the Court:

• On the directions of the ITAT the assessment years 2003-04 and 2006-07, the AO himself had considered the interest earned on the amount deposited in “Escrow Account” as “income from business” and the facts for the year under consideration are identical to the facts involved in the earlier years i.e. the assessment years 2003-04 and 2006-07.
• In this situation CIT (A) rightly treated interest on Escrow Account as business income instead of income from other sources.

Conclusion:

Revenue cannot take advantage of any doubt of claim in a particular assessment year when the same issue is already decided in favour of assessee in previous years with identical issues.