ORDER
Pranav Trivedi, J.- Heard learned Senior Standing Counsel Mr. Karan Sanghani for the appellant and learned advocate Mr. Manish J Shah for the respondent.
2. As both the tax appeals arise of the same issue, the facts of Tax Appeal No. 380 of 2024 are taken as a lead matter.
3. The appeals are filed under Section 260A of the Income Tax Act, 1961, (hereinafter referred to as “the Act” for short) by the appellant – revenue arising out of the common Judgement and Order dated 18.08.2023 passed by the Income Tax Appellate Tribunal (for short “the Tribunal”) for the Assessment Year 2011-12. The proposed question of law framed in this appeal is as under:
“(A) Whether on the facts and circumstances of the case and in law, the Appellate Tribunal is justified in setting aside the addition of Rs.93,90,000/- made by the AO on account of treating interest income earned from loans to staff and other loans as “Income from other sources” without appreciating the fact that the assessee is not in the business of advance loans to the staff?”
4. Brief facts of the appeal are as follows:-
4.1 The assessee – Company E-filed its original Return of Income on 30.09.2011 declaring total income at Rs. ‘Nil’, after claiming set off of brought forward business loss and unabsorbed depreciation. Subsequently, the respondent – assessee revised its Return of Income on 28.03.2013. The assessee had shown book profit of Rs.38,20,27,827/- under the provision of Section 115JB of the Act. The return was processed under Section 143(1) of the Act. The case was selected for scrutiny assessment under Section 143(3) of the Act. Thereafter, notice under Sec.143(2) of the Act was issued to the assessee on 30.08.2012. Subsequently, notice under Sec.142(1) dated 04.12.2012 was issued calling upon the assessee to furnish basic details such as audited profit and loss account, balance sheet, Tax Audit Report etc. The assessee furnished the details and documents vide letter dated 12.12.2012. Subsequent hearings were attended by duly authorized Chartered Accountant of the assessee.
4.2 The Assessing Officer, while finalizing the assessment, passed Assessment Order on 11.02.2014, wherein he treated interest income of Rs.1,10,91,000/- earned from staff loans and advances as income from other sources instead of income from business profession as the assessee company was engaged in the business of distribution of electricity and the income was not generated from day to day business of the assessee – company. The Assessing Officer treated such income as income from other sources.
4.3 Being aggrieved with the order of assessment under Section 143(3) of the Act, the respondent filed an appeal before the Commissioner of Income Tax (Appeals), Vadodara. The Appellate Authority, vide order dated 27.03.2014, partly allowed the appeal of the respondent and partly dismissed the appeal and upheld the action of the Assessing Officer of treating interest income from staff loan and advances as income from other sources.
4.4 Being aggrieved by the order of the Commissioner of Income Tax (Appeals) dated 27.03.2014 the respondent as well as the revenue preferred the appeals before the Tribunal. The Tribunal, vide order dated 18.08.2023, allowed the appeal of the respondent- assessee on the ground that for the earlier Assessment Years of the respondent, the Tribunal had come on the finding that the interest received on advances and loans given to its employees are receipts in normal course of carrying its business and should be considered as income derived from its essential business activities. Being aggrieved by the order passed by the Tribunal, the revenue – appellant has preferred the present tax appeals.
5. Learned Senior Standing Counsel Mr. Karan Sanghani for the appellant – revenue submitted that though the issue is no more res integra, in view of the decision of this Court in Pr. CIT v. Gujarat Urja Vikas Nigam Limited [Tax Appeal No. 63 of 2020, dated 13-11-2020], the judgment rendered by this Court in the said Tax Appeal is pending for adjudication before the Apex Court and therefore, the question may be admitted to keep the issue alive.
6. On the other hand, learned advocate Mr. Manish Shah for the respondent submitted that the issue is squarely covered by the decision of this Court in case of the The Gujarat Urja Vikas Nigam Limited (supra) which was later on considered by this Court in Uttar Gujarat Vij Co. Ltd. v. ITO ITR 729 (Gujarat)/Special Civil Application No.20400 of 2023 and other allied matters while considering the order passed by the Tribunal rejecting the application for rectification of mistake filed by the petitioner. Learned advocate Mr. Manish Shah therefore submitted that following the decision of this Court, these Appeals are liable to be dismissed.
7. Heard learned advocates for both the sides. In case of Gujarat Urja Vikas Nigam Limited (supra), this Court has held as under :
“13. With regard to question No.2[d], the Assessing Officer noticed that as per Schedule 14, the assessee has shown other income consisting of interest on loan and and advances, incentives from CPSU, etc. The Assessing Officer was of the view that this income was to be assessed as income from other sources instead of business income shown by the assessee.
14. On appeal, the CIT(A) as well as the Tribunal held that the interest income is required to be treated as business income instead of income from other sources. The Tribunal in its order observed as under:
“10 We have heard the rival contentions and perused the material on record on this issue. The assessing Officer has treated the aforesaid income under the head income from other sources without controverting the submission of the assessee on the basis of which it was claimed that these income were of the nature of business income as elaborated in para seven of this order. The ld. CIT(A) has decided the issue in favour of the assessees taking that this issue was decided in favour of the assessee for assessment year 2009-10. During the course of appellate proceedings, the Revenue has failed to controvert the aforesaid contention and the findings of the ld. CIT (A), therefore after considering the material fact that interest earned on loan and advances from deposit placed with Mega Power Project toward sits sharing of power and interest of UL pool account received from M/s.Power Grid Corporation India Ltd were directly related to the business of the assessee,therefore, this ground of appeal of the Revenue stands dismissed.
15. In view of above findings of acts arrived at by the Tribunal that interest earned by the assessee was directly related to the business of the assessee, no question of law much less substantial question of law arises. Therefore, appeal stands dismissed qua question No.2[d].”
8. Considering the above decision, while rendering the oral judgment in case of Uttar Gujarat Vij Co. Ltd (supra), it was observed as under :
“8. Having heard learned advocates for the parties it appears that it is not in dispute that the petitioner has relied upon the decision of this court in case of Gutarat Urja Vikas Nigam Itd v. DCIT in Tax Appeal No. 63/2020 wherein, the Tax Appeal was preferred by the Revenue on the aspect as to whether interest received on staff loan is business income or not for the purpose of consideration of disallowance under section 14A of the Act. The facts of the case of Gujarat Urja Vikas Nigam Ltd v. DCIT and the facts of the case of the petitioner are identical and not different and as such, the Tribunal could not have relied upon the decision of Orissa High Court while distinguishing the facts of the case of the petitioner by ignoring the decision of the Jurisdictional High Court. More particularly, when the CIT and the Tribunal in case of the Guiarat Urja Vikas Nigam Ltd v. DCIT have held that interest income on staff loans is required to be treated as ‘business income’ instead of ‘income from other sources’ which is confirmed by this court in the aforesaid Tax Appeal.
9. In case of Gujarat Energy Transmission Corporation Ltd supra) in ITA No. 633/2013, the Coordinate Bench of the Tribunal, after considering the decision of this Court, has held that the interest on staff loans and advances are part of the ‘business income’ only. In such circumstances, the decision of the co-ordinate Bench of the Tribunal as well as this court were binding upon the Tribunal resulting into the mistake apparent on record.”
9. In view of the above view taken by this Court, we do not find any merit in these Appeals as no question of law much less any substantial question of law can be said to have arisen in the impugned order passed by the Tribunal so far as the proposed question of law is concerned. The Appeals therefore, being devoid of any merit are accordingly dismissed.