High Court Of Karnataka
CIT & Anr. vs. Chinna Nachimuthu Constructions
Section 28(i), 56
K.L. Manjunath & Arali Nagaraj, JJ.
IT Appeal No. 306 of 2002
12th November, 2007
Counsel Appeared :
M.V. Seshachala, for the Appellants : S. Ganesh Rao & K. Venugopala Raja, for the Respondent
JUDGMENT
K.L. Manjunath, J. :
This appeal is by the Revenue challenging the order passed by the Tribunal, Bangalore, dt. 28th March, 2002, whereunder, the Tribunal has confirmed the order passed by the AO. The question of law raised by the Revenue in this appeal is whether the interest accrued on the deposit made by the assessee to avail of the bank guarantee has to be treated as income from the business or from other sources. Heard learned counsel for both the parties. It is not in dispute that the assessee being a contractor in order to secure a contract work was required to offer a bank guarantee to the KPTCL. It is not in dispute that in order to avail of the bank guarantee, certain amounts were invested in fixed deposits, which had accrued interest. The assessee has shown the interest accrued on the fixed deposits as business interest. But the AO treated the interest, considering the same as income from other sources and called upon the assessee to show-cause, which order has been further confirmed by the Tribunal. This appeal is filed against the concurrent findings of the Courts below. Having heard counsel for both sides, we have noticed that the investment of amount in fixed deposits by the assessee was only to secure a bank guarantee to be offered to M/s KPTCL in order to acquire a contract work. Therefore, it cannot be treated as an income from other sources and interest accrued on such fixed deposits has to be treated as business income only. Our view is also supported by the judgment of the Supreme Court in the case of CIT vs. Govinda Choudhury & Sons (1994) 116 CTR (SC) 61 (1993) 203 ITR 881 (SC). In the result the appeal is dismissed. The question of law is answered against the Revenue.
[Citation : 297 ITR 70]
