M/s., M.P.Police Corporation Ltd., Bhopal V. The Asstt. Commissioner of Income Tax Circle 2(1), Bhopal

CO 10/IND/2011

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 6995 (ITAT-INDORE)
• Duration Of Justice: 8 month(s) 16 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 27-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-08-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 11-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KESHAV SAXENA
• Keywords: Business income; Depreciation; Unabsorbed depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AACCM2221L C.O. NO.10/IND/2011 (ARISING OUT OF I.T.A.NO. 392/IND/2010) A.Y. : 2002 - 03 M.P.POLICE HOUSING CORPN.LIMITED, ACIT, CIRCLE 2(1), BHOPAL VS BHOPAL. CROSS OBJECTOR RESPONDENT CROSS OBJECTOR BY : SHRI SUMIT NEMA, ADV. RESPONDENT BY : SHRI KESHAV SAXENA, CIT DR DATE OF HEARING : 15 . 02 .201 2 DATE OF PRONOUNCEMENT : 27 . 0 3 .201 2 O R D E R PER R. C. SHARMA, A.M. THIS IS A CROSS OBJECTION FILED BY THE ASSESSEE IN I.T.A.NO. 392/IND/2010.F OR THE ASSESSMENT YEAR 2002-03. 2. FOLLOWING GROUNDS HAS BEEN TAKEN BY THE ASSESSEE IN THE CROSS OBJECTION :- -: 2: - 2 1. BECAUSE THE DEPARTMENT APPEAL IS BAD IN LAW AS WELL AS ON THE FACTS AND IS LIABLE TO BE DISMISSED. 2. BECAUSE THE LD. CIT(A) ERRED IN REJECTING THE RELIE F BY TREATING THE NET INTEREST ACCRUED ON FDR AMOUNTING TO RS. 36,41,971/- AS INCOME FROM OTHER SOURCES INSTEAD OF PROFIT AND GAIN FROM BUSINESS AND PROFESSION AS PER INCOME-TAX ACT. 3. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A M.P.POLI CE HOUSING CORPORATION ENGAGED IN THE ACTIVITY OF CONS TRUCTION OF RESIDENTIAL HOUSES FOR POLICE PERSONNEL. DURING THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER DID NOT ALLOW SET OFF OF UNABSORBED DEPRECIATION FOR THE ASSESSMENT YEAR 199 2-93 TO 2001-02 AGAINST THE INCOME FROM OTHER SOURCES OF AS SESSMENT YEAR 2002-03. AGAINST THIS DISALLOWANCE, THE ASSESS EE APPROACHED TO THE CIT(A), WHO DIRECTED THE ASSESSIN G OFFICER TO ALLOW SET OFF OF UNABSORBED DEPRECIATION. AGAINST T HIS ORDER OF CIT(A), THE REVENUE WAS IN FURTHER APPEAL BEFORE US . HOWEVER, THE ASSESSEE DID NOT FILE ANY CROSS OBJECTION UNDER THE PRESUMPTION THAT THE CIT(A) HAS GIVEN FULL RELIEF. HOWEVER, THE ASSESSEE HAS FILED CROSS OBJECTION ON 11.7.2011, WH ICH WAS -: 3: - 3 DELAYED. THE ASSESSEE IS A STATUTORY CORPORATION LO OKING AFTER WELFARE OF POLICE PERSONNEL BY CONSTRUCTING HOUSES FOR THEM, IT WAS NOT ADVISED PROPERLY ABOUT THE REQUIREMENT OF F ILING CROSS OBJECTION IN THE MATTER. AN AFFIDAVIT WAS ALSO ENCL OSED WITH THE CONDONATION PETITION, WHICH JUSTIFY THE REASONS FOR THE DELAY. A CONDONATION PETITION WAS ALSO FILED ALONGWITH THE CROSS OBJECTION DULY MENTIONING THE REASONS FOR DELAY AND UN- INTENTIONAL AND BONA FIDE REASONS FOR THE SAME. WE FOUND THAT THE ISSUE RAISED IN THE CROSS OBJECTION IS A PURELY LEGAL ISSUE, WHICH GOES TO THE ROOT OF THE MATTER, THEREFORE, IN THE SUBSTANTIAL INTEREST OF JUSTICE, WE CONDONE THE DEL AY IN FILING CROSS OBJECTION. 4. IN THE CROSS OBJECTION, THE ASSESSEE HAS RAISED ISS UE REGARDING TREATMENT OF INTEREST INCOME RECEIVED ON FDRS AS INCOME FROM OTHER SOURCES INSTEAD OF INCOME FROM BUSINESS AND PROFESSION. FROM THE RECORD, WE FOUND THAT THE STATE GOVERNMENT IS A CUSTOMER OF M.P. HOUSING BOARD AND RELEASES ADVANCES FOR CONSTRUCTION OF HOUSE ETC. FOR POLICE PERSONNEL OF THE STATE GOVERNMENT POLICE DEPARTMENT. THE ASSESSE E HAD SHOWN THESE ADVANCES UNDER THE HEAD ADVANCE RECEIV ED FROM -: 4: - 4 OTHER WORK UNDER THE SCHEDULE OF CURRENT LIABILITY . OUT OF THESE ADVANCES RECEIVED FROM STATE GOVERNMENT FOR CONSTRUCTION PURPOSES, MONEY WAS DEPOSITED IN THE F ORM OF FDR ON WHICH THE ASSESSEE WAS EARNING INTEREST INCO ME. AS PER ASSESSEE, THIS INTEREST INCOME IS LIABLE TO BE TAXED UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION, SIN CE IT IS NOT A SURPLUS FUND BUT ARE THE ADVANCES FOR CONSTRU CTION, WHICH HAVE BEEN KEPT IN F. D. IT WAS ALSO BROUGHT T O OUR NOTICE THAT A REVISED COMPUTATION WAS FILED BEFORE THE ASSESSING OFFICER CLAIMING EXPENSES OF INTEREST PAI D TO HUDCO & OTHER FINANCIAL INSTITUTIONS AND BANKS AND THIS D EDUCTION WAS CLAIMED OUT OF BUSINESS INCOME. THE ASSESSING O FFICER HAS INCORRECTLY TREATED THE SAID CLAIM TO BE TAKEN AGAI NST INCOME FROM OTHER SOURCES. IT WAS FURTHER SUBMITTED THAT T HE ENTRIES IN BOOKS OF ACCOUNT ARE NOT DETERMINATIVE OF THE AL LOWABILITY OF EXPENDITURE. RELIANCE IS PLACED ON FOLLOWING JUDGME NTS : (1) CIT VS. ASAHI INDIA SAFETY GLASS LIMITED DATED 4 TH OCTOBER, 2011. (2) KEDARNATH JUTE MFG. CO.LTD. VS. CIT, (1971) 82 ITR 363 ( S.C.) -: 5: - 5 (3) SUTLEG COTTON MILLS LIMITED VS. CIT, 116 ITR 1 (S.C.). 5. THERE IS NO DISPUTE TO THE WELL SETTLED LEGAL PROPOSITION THAT INTEREST INCOME ARISING OUT OF BAN K DEPOSITS ARE LIABLE TO BE TAXED AS INCOME FROM OTHER SOURCE S, IF SUCH DEPOSITS ARE OUT OF SURPLUS FUND OF THE ASSESSEE. H OWEVER, WHERE SUCH FDRS ARE MADE AS A BUSINESS COMPULSION, THEN SUCH INTEREST INCOME IS LIABLE TO BE SET OFF AGAINS T INTEREST EXPENDITURE INCURRED BY THE ASSESSEE FOR THE PURPOS E OF BUSINESS. IN THE INSTANT CASE, LOWER AUTHORITIES HA VE NOT CONSIDERED AND THE ASSESSEE HAS ALSO NOT BROUGHT ON RECORD FULL FACTS WITH REGARD TO THE BUSINESS COMPULSION O F MAKING FDRS AND THE CONSEQUENTIAL INTEREST EARNED THEREON. THEREFORE, IN THE INTEREST OF JUSTICE, WE RESTORE T HE ISSUE BACK TO THE FILE OF ASSESSING OFFICER FOR DECIDING AFRES H IN TERMS OF OUR ABOVE OBSERVATION. THE ASSESSEE IS FURTHER DIRE CTED TO BRING ON RECORD COMPLETE FACTS OF SOURCE OF FDRS AN D THE PURPOSE FOR SUCH FDR WAS REQUIRED TO BE MADE OUT OF BUSINESS COMPULSION. ASSESSEES CLAIM OF DEDUCTION OF INTEREST -: 6: - 6 EXPENDITURE U/S 36(1)(III) IS TO BE ADJUDICATED AFR ESH IN TERMS OF ASSESSEES OBJECT CLAUSE AND PURPOSE FOR WHICH L OAN WAS TAKEN FROM FINANCIAL INSTITUTION AND BANKS. WE DIRE CT ACCORDINGLY. 6. GROUND TAKEN WITH REGARD TO DISALLOWANCE OF P. F CONTRIBUTION WHICH WAS ALLEGED TO BE PAID PRIOR TO DUE DATE OF FILING RETURN OF INCOME IS ALSO RESTORED BACK TO TH E FILE OF ASSESSING OFFICER FOR DECIDING IN TERMS OF DECISION OF HON'BLE SUPREME COURT IN THE CASE OF ATOM EXTRUSIONS LIMITE D, 185 TAXMAN 416. 7. IN THE RESULT, THE CROSS OBJECTION IS ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 27 TH MARCH, 2012. SD/ - SD/ - (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 27 TH MARCH, 2012. CPU* 273