Full Judgment
2. The issue in appeal lies in a very narrow compass of undisputed material facts. This is second round of proceedings. In the first round of assessment proceedings, the interest income earned by the assessee was held to be taxable under the head 'Income from other sources'. The assessee's claim that it should be adjusted against the expenditure to be capitalized. The dispute travelled upto the Tribunal. The assessee's contention was that this income is incidental to the business of real estate development, and, therefore, it should be set off against the expenses to be capitalized. The Tribunal remitted the matter back to the file of the AO with the direction that this aspect of the matter should be examined and in case income is found to be incidental to the business of the real estate development, the same may be adjusted against the capital expenditure incurred and only the balance amount to be capitalized. However, when the AO came to be in seisin of the matter again, while he did not give any categorical finding whether or not the same is incidental to the business of the assessee, he held that this interest on staff loans' is to be taxed as income from other sources.
Reliance was placed on the Hon'ble Supreme Court's judgment in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd. v. CIT (1997) 141 CTR (SC) 387 : (1997) 227 TYR 172 (SC). The claim of the assessee was declined again. Aggrieved, assessee carried the matter in appeal but without any success. The CIT(A) observed that in view, inter alia, of Hon'ble Madras High Court's judgment in the case of South India Shipping Corporation Ltd. v. CTT (2000) 163 CTR (Mad) 617 : (1999) 240 ITR 24 (Mad), interest on staff loans is to be taxed as income from other sources, The assessee is not satisfied and is in appeal before us.
3. We have heard the rival contentions, perused the material on record and duly considered factual matrix of the case as also the applicable legal position.
4. It is important to bear in mind the fact that the present appeal is in the matter of giving effect to the Tribunal's order. All that is to be required to be seen, therefore, is whether or not the directions of the Tribunal have been properly implemented. At this stage, it is not open to go into merits of the matter afresh. In case the grievance is against the stand taken by the Tribunal in the original order, the forum is the higher appellate authority. The direction of the Tribunal was, as admitted in the assessment order itself, quite categorical in the sense that in case the AO was required to examine whether or not interest on staff loan was incidental to carrying on of the real estate development business, and in the event of the AO's coming to the conclusion that it was incidental to the business as such, the interest income was to be set off against the expenditure to be capitalized. No effort was made in this direction by any of the authorities below; instead, an effort is made to go into merits of the stand of the AO afresh. That is not permissible at this stage, and such an action cannot be construed as giving effect to the Tribunal's order properly.
In any event, there is no dispute that staff loans are given only to the bona fide employees of the company, and since these employees are working for assessee's business of real estate development, the earning of this interest, which is admittedly not for the motive of earning interest but only with a view to grant an employee benefit, has to be considered as incidental to the assessee's business of real estate development. The stand of the authorities below is therefore indeed not sustainable in law. We disapprove the same, and direct the AO to grant relief on the basis that the interest on staff loans is to be adjusted against the expenditure to be capitalized. The assessee gets relief accordingly.
5. In the result, both the appeals are allowed in the terms indicated above.