Income derived out of the Fixed Deposits - Business income or income from other sources - Held that: - the investment of amounts in Fixed Deposits by the assessee, was only to secure a bank guarantee in order to acquire a contract work, and therefore it cannot be treated as income from other sources and interest accrued on such Fixed Deposits has to be treated as business income only in view of the Judgment of the Apex Court in the case of CIT v. Govinda Choudhury & Sons.
|No. - IT APPEAL NO. 615 OF 2007|
|Dated - January 18, 2011|
N. KUMAR AND RAVI MALIMATH, JJ.K.V. Aravind and M.V. Seshachala for the Appellant.
Kumar, J. –
The revenue has preferred this appeal challenging the order passed by the Tribunal holding that the income derived out of the Fixed Deposits kept in the bank to obtain a bank guarantee, constitutes business income and not income from other sources. Aggrieved by the said order the revenue is in appeal.
2. The assessee is a partnership firm carrying on electrical business. In the course of their business activity with the KPTCL, they were called upon to furnish the bank guarantee. In order to furnish a bank guarantee they had deposited certain amounts with the bank which were kept in a Fixed Deposit which in turn was earning some interest. The assessee firm furnished its return showing that the income from such deposits as business income. The Assessing Officer treated the said income as income from other sources and did not accept the case of the assessee that it is a business income. Accordingly he passed the assessment order.
Challenging the said order the assessee preferred an appeal which came to be dismissed. Aggrieved by the same, the assessee preferred an appeal to the Tribunal. The Tribunal held that the Fixed Deposits kept in the Bank to obtain bank guarantees to furnish the same to the K.P.T.C.L to obtain advance to carry on construction work, are integral part of business activity and therefore the bank interest cannot be treated in isolation from the business income and it is part and parcel of business income only. The Tribunal dismissed the appeal. Aggrieved by the same, the revenue is in appeal.
3. The learned counsel appearing for the appellant submitted that in ITA No. 306/2002 preferred by the revenue against the very same assessee, for a subsequent year, this Court has held that the investment of amounts in Fixed Deposits by the assessee, was only to secure a bank guarantee to offer it to M/s. KPTCL in order to acquire a contract work, and therefore it cannot be treated as income from other sources and interest accrued on such Fixed Deposits has to be treated as business income only in view of the Judgment of the Apex Court in the case of CIT v. Govinda Choudhury & Sons  203 ITR 881/ 74 Taxman 331. In view of the aforesaid decision of this Court which is based on the Apex Court Judgment, which has also attained finality, the ratio therein equally applies to the facts of this case which is between the same parties. We do not see any merits to entertain this appeal. Accordingly, the appeal is dismissed.