M/s. Merlin Projects Ltd. Vs. DCIT (ITAT Kolkata)
The sole ground of appeal is against the action of the Ld. CIT(A) in confirming the AO’s action in assessing the income from interest amounting to Rs. 11,84,781/- as income from other sources and not treating the same as business income. At the outset itself, it was brought to our notice by the Ld. Counsel that assessee is engaged in the business of construction and development of residential and commercial building and had received advances from property booking from its customers in the ordinary course of construction and the same were used in the business. According to assessee, these advances from the customers which are not utilized temporarily in the business and lying idle with the company was parked for a short duration in fixed deposit or given as unsecured loans which yielded interest income. According to the Ld. AR, the interest income has been offered as business income by the assessee throughout from AY 2005-06 to 2014-15.
In AY 2005-06, the AO has assessed the interest income as income from business and drew our attention to the assessment order of AY 2005-06 wherein we note that there is no income under the head from other sources, so we can presume that interest income was accepted as business income by the AO. Thereafter, the Ld. AR drew our attention to the assessment order passed in AY 2012-13 wherein also the AO has not treated the interest income from other sources.
On a query from the Bench as to how the AO treated the assessee’s interest income in other assessment years, the Ld. AR brought to our knowledge that in AY 2006-07, the AO treated it as income from other sources, but since there was no tax impact the assessee did not contest such a treatment. Likewise, in AY 2007-08, there was 143(1) only and so, there was no grievance for the assessee.
Likewise, in AY 2008-09 though the AO treated the interest income as income from other sources, since there was no tax effect because the assessee claimed deduction u/s. 80IB of the Act which was fully allowed so there was no impact even though the treatment was given differently. Then, the Ld. AR drew our attention to the fact that in AY 2010-11, though the AO treated interest income as income from other sources, however, no tax effect was there because full deduction u/s. 80IB of the Act was allowed.
In AY 2011-12, no scrutiny was done so the AO accepted the ROI as such; and in AY 20 12-13 to AY 2014-15 the AO has accepted the treatment given by the assessee that interest income is to be treated as business income and drew our attention to the assessment order for AY 20 12-13 and we find that the AO has not treated the interest income as income from other sources. In the light of the aforesaid factual matrix the contention of the Ld. AR is that since in AY 2005-06 and AYs 2012-13 to 2014-15 the AO has accepted the treatment given by the assessee in respect to the interest income yielded from the advances collected from the customers for the property which the assessee had undertaken construction for the customers, and in the process when idle fund is parked for short duration in the fixed deposit, it needs to be treated as income incidental to the activities of business of the assessee and need to be upheld on the principles of consistency as laid by the Hon’ble Supreme Court in the case of Radhasoami Satsang vs CIT reported in 193 ITR 321 (SC), when the issues permeating in the assessment years are the same and the facts and law has not changed then the consistent view need to be taken.
So, taking note of the facts narrated above and the AO accepting the view of the assessee in assessment years as stated above, a consistent view need to have been taken by the AO and, therefore, we allow the appeal of the assessee and direct the AO to treat the interest income temporarily parked in the banks and given as unsecured loan which yielded income and which has been offered to tax by the assessee should be treated as income from business and not from other sources.