The Income Tax Appellate Tribunal (ITAT) Ahmedabad bench directed re-adjudication in respect of treatment of interest income /miscellaneous receipts earned from employees of Gujarat Electricity Cor[oration through advancing loan and facilities.
Assessee, Gujarat State Electricity Corporation Limited earned interest income from advances given to its employees as well as provision of electricity and water charges collected from water through its employees and contractors for facilities in the township, receipt from transit hostel, sale of scrap, insurance claim etc. The facilities were given to its employees for better conditions of employment.
During the assessment proceedings, the AO denied the claim of interest income /miscellaneous receipts earned from employees of assessee company through advancing loan and facilities are business income of assessee.
Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax-Appeals [CIT(A)], who held that miscellaneous receipts of Rs. 5648.08 lacs treated as income from business. However, the interest income of Rs. 4.56 crores was treated as “income from other sources”.
Thereafter the revenue filed another appeal before the tribunal.
During the appeal proceedings, Manish J Shah, counsel for assessee submitted that 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.
Kamlesh Makwana, Counsel for the revenue, supported the order of the Assessing officer.
After considering the facts submitted by both parties, the two member bench of Waseem Ahmed (Accountant Member) and T.R. Senthil Kumar (Judicial Member) remanded the matter to the file of the CIT(A) for reconsideration.
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