Case Law Details
Brief of the case
ITAT Mumbai held In the case of DCIT v. The Indian Hotels Co. Pvt. Ltd. that principle of consistency should be followed when there were similar issues and the similar principal was laid down in the case of Assessee’s Sister Concern.
Facts of the Case
The assessee, is engaged in the business of hoteliering, catering etc., filed a revised return claiming deduction u/s 80HHD. AO assessed income at Rs. 1,05,85,36,899/-, which was subsequently enhanced to Rs. 1,06,27,47,646/- vide order passed u/s 154 of the Act. Meanwhile, notice u/s 148 of the Act was issued and served on the assessee to reopen the impugned assessment. Accordingly, the re-assessment order was passed u/s 143(3) r/w 147 of the Act on 25.3.2004 and the assessed income was determined at Rs. 1,07,74,26,410/- after treating the said interest income amounting to Rs. 3,51,91,070/- under the head ‘income from other sources’.
Order of the Ld. CIT(A)
The Ld. CIT (A) following the orders of his predecessors for the earlier assessment years 1998-99 to 2001-2002, wherein on identical facts the interest income earned on the security deposits kept with the sister concerns are treated as business income and no appeal was filed by the Revenue on such decision of the CIT (A) for the above mentioned earlier AYs, treated the interest income as business income of the assessee.
Contention of the Revenue
The ld. Counsel for the Revenue contended that the decision taken by the AO is in tune with the judgment of the Hon’ble Bombay High Court in the case of Ravi Ratna Exports Pvt Ltd (246 ITR 443) wherein it has been held that the ‘interest income’ is not a ‘business income’ and the same should be treated as ‘income from other sources’.
Contention of the Assessee
The ld. Counsel for the assessee heavily relied on the order of the CIT (A) and reiterated the submissions made before the lower authorities. Further, he cited ACIT vs. M/s. Piem Hotels Ltd (which is the assessee’s sister concern). Ld Counsel for the assessee mentioned that an identical issue was decided by the Tribunal in favour of the assessee vide para 23 of its order.
Judgment of the Hon’ble Tribunal
The Hon’ble Tribunal relied on ACIT vs. M/s. Piem Hotels Ltd (supra), where it was held that in the modern days of advanced technology, business can be conducted through phone, fax or email etc. It is not necessary that for considering an income as business, substantial, systematic organised and continuous activity involving application of labour and skill is always required. The assessee has earned the same in the normal course of conduct of business. Similarly, the Revenue could not controvert the findings given by the CIT (A) that the AO herself while excluding the management fees and interest income from the profits of the business included the same in the total receipt of business which is self contradictory.
Therefore, in the present case the Hon’ble Tribunal observed that CIT (A) followed the ‘principle of consistency’ and relied the decision taken by his predecessors in earlier AYs. Therefore, by following the decision of the Tribunal in the assessee’s sister concerns case in the case of M/s. Piem Hotels Ltd (supra), the Hon’ble Tribunal came to the conclusion that the ‘interest income’ earned on business advances kept with the sister concerns should be treated as ‘business income’ instead of ‘income from other sources’. Considering the same, the order of the ld. CIT (A) was upheld. Accordingly, grounds raised by the Revenue were dismissed.
