Interest accrued on fixed deposits made to secure a bank guarantee for a contract work should be treated as business income, not income from other sources.

K.L. Manjunath, J.— This appeal is by the Revenue challenging the order passed by the Income Tax Appellate Tribunal, Bangalore dated March 28, 2002, whereunder, the Tribunal has confirmed the order passed by the Assessing Officer.

2. 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.

3. 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 Assessing Officer 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 Income Tax Appellate Tribunal. This appear is filed against the concurrent findings of the courts below.

4. 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 Commissioner of Income Tax, Orissa Vs. Govinda Choudhury and Sons, Gosaninuagaon, Orissa, (1993) 203 ITR 881 SC.

5. In the result the appeal is dismissed. The question of law is answered against the Revenue.