INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH ‘SMC’ : NEW DELHI

ITA No.252/Del/2014
Assessment Year : 2009-10

M/s S.S. Gas Lab Asia P.Ltd (Appellant) vs Income Tax Officer (Respondent)
Date of Order: 11-08-2015
Coram: SHRI G.C. GUPTA, VICE PRESIDENT

ORDER

This appeal by the assessee for the assessment year 2009-10 is directed against the order of learned CIT(A)-X, New Delhi dated 29 ^th October, 2013.

2. The grounds of appeal of the assessee are as under:-

“1. On the facts and in the circumstances of the case and in law the ld. Commissioner of Income Tax (Appeals) has erred in confirming the treatment of the interest income on FDRs amounting to `2,74,124/- as income from other sources instead of income from business & profession. The action of authorities below is wrong, illegal, misconceived, unjustified and bad at law therefore it should be quashed.

2. On the facts and in the circumstances of the case and in law the action of the authority of disallowance of exemption under section 10B in respect of such interest income is wrong, illegal, misconceived, unjustified and bad at law therefore it should be quashed.

3. The ld. Commissioner of Income Tax (Appeals) and the ld. Assessing Officer has erred completely in interpreting the nature of income which is to be exempt u/s 10B of the Income Tax Act, 1961.

4. The action of ld. Authority is not justified in the eyes of law of applying the case law of M/s Shri Ram Honda Power Equipment Ltd. As the facts and circumstances of the said case are irrelevant.”

3. Learned counsel for the assessee submitted that the interest income on FDRs amounting to `2.74 lakhs was claimed by the assessee as assessable under the head income from business and profession.

He submitted that the learned CIT(A) has wrongly confirmed the order of the Assessing Officer in treating the interest income from FDRs as income from other sources instead of income from business and profession. He submitted that the action of the Revenue authorities in disallowing the exemption under Section 10B in respect of such interest income was wrong. He submitted that the decision of M/s Shri Ram Honda does not apply to the facts of the case of the assessee and is distinguishable. He submitted that these FDRs were made as security to the banks for obtaining overdraft facilities and, therefore, related to the business activities of the assessee. He referred to the sanction letter of the UCO Bank, copy filed in the compilation before the Tribunal which certifies that the assessee is operating a cash credit account and availing a limit of Rs. 52.65 lakhs secured against fixed deposits of the assessee company. He relied on the decision of Hon’ble Karnataka High Court dated 11th December, 2013 in the case of CIT Vs. Motorola India Electronics (P) Ltd. in Income Tax Appeal No.428 of 2007 and 447 of 2007, of Hon’ble Rajasthan High Court at Jodhpur dated 20th August, 2008 in the case of CIT Vs. Hycon India Ltd., Udaipur and another in Income Tax Appeal No.45 of 2006 and 111 of 2007 and of ITAT, Mumbai Bench dated 19th July, 2013 in the case of DCIT Vs. Hikal Ltd. in ITA No.45/Mum/2011.

4. Learned DR has relied on the order of the learned CIT(A).

5. I have considered the rival submissions and have perused the order of the Assessing Officer and the learned CIT(A). I find that the basic facts of the case are not in dispute in this case. The assessee is operating a cash credit account with UCO Bank and availing a limit of Rs. 52.65 lakhs secured against fixed deposits of the assessee company and this fact has been certified by UCO Bank in their certificate dated 8th February, 2010, a copy filed in the compilation before the Tribunal.

The Revenue could not controvert the submission of the assessee that the FDRs were made as security to the banks for obtaining overdraft facilities and were related to the business activities of the assessee company. In the peculiar facts and circumstances of the case, I find that the assessee was able to establish the nexus between the FDRs on which interest has been earned to the business activities of the assessee. In this view of the matter, I find that no case of disallowance of interest and exemption under Section 10B could be made out by the Department and, accordingly, the grounds of appeal of the assessee are allowed.

6. In the result, the appeal of the assessee is allowed.

Decision pronounced in the open Court on 11th August, 2015.