JUDGMENT
T.S. Thakur, J.
Page 393
1. Income-tax Appellate Tribunal has dismissed the appeal filed by the Revenue, inter alia, holding that in the absence of any material change in the facts, the view taken by the authorities for the earlier assessment years would continue to hold good on the principles of consistency. The Revenue has assailed the correctness of that finding in the present appeal.
2. The assessed-company was incorporated on 24th February, 1989 with the object of carrying on business in the development of real estate. It appears to have entered into an agreement in February, 1989 with Edward Keventer Pvt. Ltd. and taken over the responsibility of re-development of land owned by the said company. It also entered into an agreement with M/s.Ballarpur Industries Ltd. in March, 1989 and with M/s.Ashoka Builders in June 1989. Pursuant to the said agreements the assessed had received a sum of Rs. 5 crores from M/s.Ballapur Industries Ltd. and Rs. 2 crores from M/s.Ashoka Builders, subject to certain conditions, stipulated in the agreements.
3. The assessed-company, it is common ground, follows the project completion method of accounting, accepted in the course of the preceding assessments. For the assessment year 1993-94, the Assessing Officer called upon the assessed to explain why interest income of Rs. 38,62,419/-, including interest amount of Rs. 37,46,448/-, earned on fixed deposits be not treated as income earned from other sources. In response, the assessed argued that it was following the same principle of accountancy as were adopted in earlier years and the interest income shown by the assessed may be taken as its income from business. The Assessing Officer was dissatisfied with that contention as in his view the assessed who was engaged in the business of real estate, could not claim interest earned on funds placed with the banks as business income. Placing reliance upon Commissioner of Income-tax v. New Central Jute Mills Co. Ltd. 118 ITR 1005, Commissioner of Income-tax v. Ananda Bazar Patrika Pvt. Ltd. 167 ITR 368 and Collis Line Pvt. Ltd. v. Income-tax Officer 135 ITR 390, the Assessing Officer held that interest income could not be said to be incidental to the real estate business, since it arose out of investment of surplus funds and could be brought to tax as income from other sources. A sum of Rs. 37,46,448/- earned on FDRs was accordingly added to the income of the assessed. Aggrieved by the said addition, the assessed appealed to the CIT (Appeals) before whom it was, inter alia, argued that although income for the previous assessment years 1990-91 to 1992-93 had been treated as income from other sources by the Assessing Officer, the Commissioner (Appeals) had, while allowing the appeals, filed by the assessed for all the three years, held that the interest income was directly linked with the assessed’s business and had to be treated as business income. Relying Page 394 upon the order passed for the previous assessment years, the Commissioner deleted the addition holding that the interest income earned on the fixed deposit receipts was income earned from business. The Commissioner observed:
I have carefully considered the above submissions. I find that the facts relating to the interest income are not different in this year than in earlier years, in which the plea of the appellant that interest income arose out of its main business of real estate and was subservient to it had been accepted. The DC has not given materials to warrant a departure in this year from the above accepted position. The foregoing discussion would show that the funds had been received by the appellant from its co-developers for its business activity and the interest. Out of the total interest of Rs. 37,46,448, Rs. 5,26,439/- was received from SILT as per agreement entered into with the above co-developers and was thus directly linked to its real estate business the interest of Rs. 15,18,199 accruing on fixed deposits represented the margin money for bank guarantee. It is noted that the fixed deposits representing margin money for bank guarantee was i.e. The interest of Rs. 15,18,199 was also directly linked with business of real estate. Similarly, interest of Rs. 16,39,818 had been earned on fixed deposits of less than one year and was intended for payment to L&DO. Keeping in view the above mentioned facts which are identical to those in earlier years in which I have held that the interest income of the appellant is assessable as business income and also following the decision of the Madras High Court in the case of CIT v. Tamilnadu Diary Corporation Ltd. reported in 216 ITR 535 (supra) the facts of which are similar to those in the case of the appellant. It is therefore held that since the source of all the funds on which interest has been earned is attributable to real estate business and the interest received is also directly linked with the same business, the interest income earned in the year under consideration is also liable to be taxed as in earlier years as business income subservient to the business of real estate developers in accordance with the method of accounting followed by the appellant.
(emphasis supplied)
4. Aggrieved by the above decision, the Revenue preferred an appeal before the Tribunal, who has, as noticed earlier, dismissed the same primarily on the ground that in the absence of any material change in the facts of the case, the view taken for the earlier years could not be disturbed. The Tribunal has in the process drawn support from the decision of the Supreme Court in Radhasoami Satsang v. Commissioner of Income-tax 193 ITR 321 and the decisions of this Court in Director of Income-tax and Anr. v. Apparel Export Promotion Council 244 ITR 734 and Commissioner of Income-tax v. A.R.J. Security Printers 264 ITR 276.
Page 395
5. We have heard, learned counsel for the parties and perused the record. The material facts are not in dispute. It is not in dispute that interest income for the assessment years 1990-91 to 1992-93 was upon proper consideration of the circumstances in which the same was earned held to be business income. The CIT (Appeals) had, while allowing the appeals, preferred by the assessed come to the conclusion that the funds which the assessed had placed in fixed deposit had been received by it for its business activity and that interest earned on the said investments arose in connection with the said activity. Taking note of the said finding recorded by the Commissioner for the earlier years, the question whether there was any material change in the fact situation was examined by the Commissioner even for the period under consideration. The Commissioner has, in that connection, recorded a clear finding of fact that out of the total interest of Rs. 37,46,448, a sum of Rs. 5,26,439 was received from one of its co-developers, in terms of the agreement entered between the two and was thus directly linked with the assessed’s real estate business. The Commissioner also recorded a clear finding that the interest amount of Rs. 15,18,199 had accrued on the fixed deposits, representing the margin money provided by the assessed for the issue of bank guarantee. The Commissioner observed that the said amount was also directly linked with the real estate business of the assessed. Similarly, the interest amount of Rs. 16,39,818 had been earned by the assessed on fixed deposit receipts of less than year as the amount so invested was needed for payment to L&DO in connection with the change of land use. The Commissioner has, on the above findings, observed that the facts relevant to the year under consideration were identical to those of the earlier years on the basis whereof interest income accruing during the said years was held to be business income of the assessed. The Commissioner has further held that since the source of all the funds on which interest has been earned is attributable to the real estate business and the interest income earned is directly linked with the said business, the amount earned towards interest in the year under consideration was like the amount earned earlier, business income of the assessed.
6. In fairness to Mr.Jolly, we must record that there was no attempt by him to assail the factual basis of the conclusion drawn by the CIT(Appeals). It is not the case of the Revenue that the amount which the assessed had received from its co-developers was not related to the business activity of the assessed company. It is also not the case of the Revenue that the investment of such amounts in fixed deposits was linked to the business of the assessed whether in the form of providing a bank guarantee or keeping the amount readily available for payment to L&DO upon change of land use. It is also not in dispute that for the previous three assessment years, the interest income earned in similar circumstances was held to be business income by the Commissioner of Income-tax (Appeals), which orders had been accepted by the Revenue without demur.
7. The question in the above backdrop is whether the Tribunal was justified in upholding the order passed by the Commissioner on the principles of consistency. In Radhasoami Satsang’s case (supra), the Apex Court declared Page 396 that although the principles of res judicata do not apply to income-tax proceedings, each assessment year being a unit by itself, yet in cases, where a fundamental aspect permeating through different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it may not be appropriate to allow that position to be changed in a subsequent year. Their Lordships extracted with approval the following passage from Hoystead v. Commissioner of Taxation [1926] AC 155 (PC) :
Parties are not permitted to begin fresh litigations because of the view they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted, and there is abundant authority reiterating that principle.
8. The Court reiterated the following observation made by it in Parashuram Pottery Works Co. Ltd. v. ITO :
At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity.
9. Following the above decisions, this Court has in A.R.J. Security Printers’ case (supra) and Commissioner of Income-tax v. Neo Poly Pack P. Ltd. 245 ITR 492, held that even when the doctrine of res judicata does not apply to income-tax proceedings, where an issue has been decided consistently in a particular manner for earlier assessment years, the same view should prevail even during the subsequent years unless there is a material change in the facts. The law is therefore fairly well settled. For rejecting the view taken for the earlier assessment years, there must be a material change in the fact situation. There is no gainsaying that the previous view will have no application even in cases where the law itself has undergone a change but before an earlier view can be upset or digressed from one of the two must be demonstrated namely a change in the fact situation or a material change in law whether enacted or declared by the Supreme Court. The Commissioner and the Tribunal have in the instant case correctly held that there was no change in the fact situation. The income earned on fixed deposits for the previous three assessment years was, in the context of the very same facts and circumstances as are relevant for the year under consideration, treated as business income of the assessed. In the absence of a change in facts or any additional input there was no compelling reason for taking a different view. The Commissioner and the Tribunal were, therefore justified in holding that the view taken for the earlier assessment years continued to be applicable even for the year under consideration.
Page 397
10. Mr. Jolly, strenuously, argued that the decision of the Supreme Court in Tuticorin Alkali Chemicals & Fertilizers Ltd. v. Commissioner of Income-tax 227 ITR 172, which was re-affirmed in Commissioner of Income-tax v. Autokast Ltd. 248 ITR 110 brought about a material change in the legal position, which would make it impermissible for the authorities below to continue following the view for the previous years in the name of consistency.
11. We regret our inability to accept that submission. As observed by the Supreme Court in Tuticorin’s case (supra) the computation of income under each of the heads classified under Section 14 of the Income-tax Act has to be done independently and separately. Specific rules of deduction and allowance under each head of income have to be given effect to, keeping in mind the fact, that no deduction or adjustment can be made except as provided by the Act. It is also to be borne in mind that it is possible for a company to have six different sources of income, each one of which will be chargeable to Income-tax. Their Lordships held that if a company has not commenced its business, there cannot be any question of assessment of its profits and gains. That does not mean that until and unless the company commences its business, its income from any other sources cannot be taxed. The Court further observed that if a company before it commences business invests the surplus funds in its hand for purchase of land for house property and later sells it at profit, the same will be taxable under the head “Capital Gains”. Similarly a company may have income from other sources. It can also keep its surplus fund in a short term deposit to earn interest which would then be chargeable under Section 56 of the Act.
12. There is no quarrel with above propositions in the present case. The question, however, is whether the income from investment made in fixed deposits was in the instant case an income that was related to the business of the company which as seen above was incorporated to do business in development of real estate. For the assessment years 1990-91 to 1992-93 and even for the assessment year under consideration such income was held to be business income upon proper appreciation of the circumstances in which the amounts invested in term deposits were received by the assessed from the co-developers. In the light of the said finding it is not open to the Revenue to argue that the amounts received were surplus funds invested in term deposits in anticipation of the commencement of the business. Whether or not the business of an assessed has started would depend upon the facts and circumstances of each case as much as the nature of the business that the assessed is carrying on or proposes to do so. Suffice it to say that the decision of the Supreme Court in Tuticorin’s case does not affect the legal basis on which the income of the assessed for the previous years was held to be its business income. The ratio decidendi in Tuticorins’ case will have to be applied to each case having regard to the fact and circumstances in which the same arises.
13. In the result, this appeal fails and is hereby dismissed but in the circumstances without any order as to costs.