PATNA, India, Nov. 21 -- Patna High Court issued the following judgment on Oct. 30:

The unsuccessful assessee has filed the instant appeal challenging the order of the Income Tax Tribunal, Patna in I.T.A. No. 251/PAT/2019 delivered on 05th September 2022.

2. The Tribunal found the above-mentioned appeal not maintainable under the law and accordingly dismissed the appeal.

3. It is also held by the Appellate Tribunal that the appellant ought to have filed two separate appeals, and the relief claimed by the appellant cannot be granted by the Tribunal in the above-mentioned Tax Appeal.

4. In order to dispose of the instant appeal, it is necessary to state the following facts:-

Income Tax file of the appellant/assessee for the assessment year 2012-13 was examined and checked under Section 143(3) read with Section 144 by the assessing officer after serving notice to the assessee and the assessing officer came to the following finding:-

"It was judicially held by Hon'ble Supreme Court in the case of Pandian Chemicals Ltd. Vs Commissioner of Income Tax on 24th April 2003 that the legislature intended to cover receipts from sources other than the actual conduct of the business. Further the derivation of profits on the deposit made with electricity board cannot be said to flow directly from the industrial undertaking. In this decision the case of Cambay Electric Supply Industrial Co. ltd. Vs. CIT (1978) was also discussed that the expression "derived from" had a narrower connotation than the expression "attributable to". Thus interest income cannot be said to be derived directly from eligible business of contract.

It is also relevant to mention here that all the funds used for making the investments in FDRs and NSC were surplus funds of the assessee and the assessee was free to utilize these funds in any manner. Source of interest income is FDR and NSC which is different and separate from contract receipts. Even if contract business is stopped, the assessee can continue to receive interest and vice versa. Thus interest received from NSC and FDR cannot be considered as part of the contract receipts while estimating income from the business of civil construction contracts. (DCIT vs Allied construction (2006).

As such audit observed that as the legislature intended to cover receipts from the business of civil construction work only, the matter was required to be examined keeping in view the decision given by the Hon'ble Supreme Court.

In the circumstances determination of income of the assessee from contract receipt of Rs. 9,19,22,462/- only was required to be estimated @10% and interest income (Net) amounting to Rs. 13,86,304/- should have been added separately treating it as income from sources other than civil construction work.

Further, it is stated that time extension charge should be shown in the balance sheet as the recovery of time extension is refundable if work is completed in stipulated time or delay is justified with suitable reasons otherwise it is treated as penalty if delay is not justified. In both the situation, it cannot be debited in P&L account. Any deduction of penalty as an expense is not allowable u/s 30 to 43 of 1.T. Act and as the case was assessed on estimation basis, hence, time extension could not be deduced from estimated income. Hence, time extension of Rs.28,79,229/- should be added back to assessed income.

The rest of the document can be viewed at https://patnahighcourt.gov.in/viewjudgment/MiMyMzgjMjAyMyMxI04=-99WWRSgNQ7E=

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