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Case Law Details

Case Name : Dy. CIT Vs West Gujarat Expressway Ltd. (ITAT Mumbai)
Appeal Number : ITA Nos. 634 & 664/Mum/2015
Date of Judgement/Order : 26/05/2017
Related Assessment Year :

At the outset, the learned Counsel for the assessee stated that immediately preceding year i.e. assessment year 2009-10, the Tribunal in Assessee’s own case in ITA No. 5904/Mum/2012, dt. 15-4-2015 on the very same issue dismissed Revenue’s appeal by holding that the interest income earned by assessee on the security deposits with the bank as per the common loan agreement is to be assessed as income from profits and gains of business or profession and not under the head income from other sources. The Tribunal in Para 7 of the order held as under :–

“7. The learned Authorised Representative of the assessee has further submitted that the assessee has entered into an agreement dated 22-3-2005 with ‘National Highways Authority of India (in short NHAI) vide which the assessee has been granted rights/license to collect toll for the period of 20 years for up gradation, operation, maintenance and implementation of Jetpur-Rajkot Road Project. The said project has been assigned to the assessee as a concessionaire on ‘Built-Operate-Transfer (BOT) basis. The Learned Authorised Representative of the assessee has further brought our attention to the ‘Common Loan Agreement’ dated 20-6-2005, entered between the assessee and the lender banks namely 1. Punjab National Bank, 2. Corporation Bank, 3. Indian Overseas Bank, 4. Oriental bank of Commerce, 5. Union bank of India, 6. United Bank of India, 7. Indian Bank and 8. Uco bank, vide which the above stated banks have agreed to provide loan to the assessee to part finance the said Project. As per ‘clause 7.13’ of the said loan agreement, it has been agreed that out of the net revenue generations of the said project, the borrower (assessee) would open with the Lead bank a Debit Service Reserve Account equivalent to 12 months of Debt Service or Rs. 1800 lakh. The Learned Authorised Representative of the assessee has further relied upon the copy of the letter dated 31-12-2011 of the Relationship Manager of the Punjab National Bank certifying that all the original FD receipts were physically lying with the said Bank (PNB) and there was lien on the same under the Debt Service Reserve Account’. The learned Authorised Representative has further submitted that interest income from the FDRs kept with the bank as required under the ‘Common Loan Agreement’ upon which the bank has lien has been accepted as ‘business income’ in the earlier assessment years 2007-08 & 2008-09 by the learned Commissioner (Appeals) which findings have been further upheld by the Tribunal vide orders dated 27-2-2013 for assessment year 2007-08 (supra) and order dated 5-4-2013 for assessment year 2008-09. From the above submissions of the assessee, it is apparent on the record that the interest income has been earned by the assessee on the security deposits with the bank as per the Common Loan Agreement as discussed above. The said interest income had been earned by the assessee out of business compulsions of deposits in the ‘Debit Service Reserve Account’, hence the said interest income is linked to the business activities of the assessee. The issue is covered with the decisions of the Tribunal in the own case of the assessee for earlier assessment years. Hence, the interest income of the assessee is ordered to be assessed as Business Income. Ground No. 1 of the Revenue’s appeal is therefore dismissed.”

The facts and circumstances of the case are exactly identical in this year also and interest income earned by the assessee is on the same security deposits with the bank as per the common loan agreement in earlier years. Respectfully, following the co-ordinate Bench decision and taking a consistent view, we uphold the order of Commissioner (Appeals) and this issue of Revenue’s appeal is dismissed.

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