High Court Of Delhi
CIT vs. Koshika Telecom Ltd.
Section 28(i)
Asst. Year 1996-97
T.S. Thakur & B.N. Chaturvedi, JJ.
IT Appeal No. 182 of 2006
13th February, 2006
Counsel Appeared
R.D. Jolly with Ajay Jha, for the Appellant : None, for the Respondent
JUDGMENT
By the court :
The respondent-assessee is engaged in the business of operating cellular mobile telephone services. In terms of a license awarded in its favour for operation of the said services in the States of Uttar Pradesh, Bihar, Orissa and West Bengal, the assessee was required to provide finance and performance (of) bank guarantees to the Department of Telecommunications. The assessee appears to have arranged these bank guarantees from IFCL, NICL and Lord Krishna Bank. These institutions had in connection with the furnishing of the guarantees required deposit of margin money by the assessee. Interest earned/accrued on these margin money deposits became the subject-matter of a dispute in the asst. yr. 1996-97. The AO was of the view that interest on such deposits had to be taxed as income from other sources. Reliance was in support of that view placed by the AO on a Supreme Court decision in Tuticorin Alkali Chemicals & Fertilizers Ltd. vs. CIT (1997) 141 CTR (SC) 387 : (1997) 227 ITR 172 (SC). In appeal, the view taken by the AO was reversed by the CIT(A) who held that the deposit of margin money with the banks was inextricably linked to the requirement of furnishing bank guarantees by the assessee. The deposits could not therefore be deemed to be parking of surplus funds so as to render any income earned on the same exigible to tax as income from other sources. Reliance in support of that view was placed upon two decisions of Supreme Court in CIT vs. Bokaro Steel Ltd. (1999) 151 CTR (SC) 276 : (1999) 236 ITR 315 (SC) and CIT vs. Karnal Cooperative Sugar Mills Ltd. (2000) 161 CTR (SC) 241 : (2000) 243 ITR 2 (SC). A further appeal by the Revenue filed before the Tribunal having failed, the former is in appeal before us under s. 260A of the IT Act.
We have heard Mr. Jolly, learned counsel for the Revenue, and perused the record. The finding of fact recorded by the CIT(A) and affirmed by the Tribunal is to the effect that the deposit of the margin money by the assessee with the banks was inextricably linked to the furnishing of the bank guarantees by the assessee to the Department of Telecommunications for obtaining a license. That finding in our view concludes the controversy inasmuch as if the deposits were indeed inextricably linked to the business of the assessee, the question whether the income accruing on the said deposits would constitute business income stands answered by the decisions of Supreme Court in Bokaro Steel (supra) and Karnal Co-operative Sugar Mills’ case (supra). Both these decisions are in our view sufficient authority for the proposition that where the income in the nature of interest flows from deposits made by the assessee which deposits are in turn inextricably linked to the business of the assessee, the income derived on such deposits cannot be treated as income from other sources.
5. In that light of what is said above no question of law much less a substantial question of law arises for our consideration in this appeal, which fails and is hereby dismissed.
[Citation : 286 ITR 479]
