COMMISSIONER OF INCOME-TAX Vs. LOK HOLDINGS

JUDGEMENT

(1.) This appeal has been filed by the Revenue on the footing that there arise three substantial questions of law as set out in paragraph 4(a), (b) and (c) of the appeal memo. The three substantial questions of law, as framed, are as under:

(2.) The brief relevant facts of the case are that the respondent M/s. Lok Holdings was, at the relevant time, a firm involved in the business of development of properties. In the course of its business, the assessee-firm received monies in advance from customers intending to purchase flats in the properties as developed by the assessee. These monies were of the nature of booking/advances. Since these monies received could not be immediately utilised for the business of the firm, the surplus amounts from such money received came to be temporarily invested with banks and other concerns. Such deposits with accrued interest thereon which was received by the assessee-firm was deducted from the work-in-progress till the conclusion of the project. For the assessment year 1992-93, the income from such interest was Rs. 52,28,289. The Assessing Officer assessed this interest income as income from other sources and thus made an addition in this regard under the head "Income from other sources". On an appeal by the assessee, the Commissioner of Income-tax (Appeals), following the decision of the Tribunal dated April 29, 2002, delivered in the case of East Coast Enterprise, deleted the income. The Revenue preferred an appeal against the order passed by the Commissioner of Income-tax (Appeals) and by a judgment and order dated June 14, 2004, the Income-tax Appellate Tribunal dismissed the appeal filed by the Revenue. It is in such circumstances, that the present appeal came to be filed.

(3.) The short and basic issue on which the three substantial questions of law as raised, turn, is whether the interest income earned by the assessee as set out hereinabove would be assessable as "income from business" or as "income from other source".