Britannia Engineering Ltd, Kolkata V. D.C.I.T Cir - 1,kolkata, Kolkata

CO 45/KOL/2013

• Counselvise Citation: [2016] 119 COUNSELVISE.COM (IT) 3268 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 11 month(s) 11 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 06-04-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 25-08-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 25-04-2013
• Court: TRIBUNAL
• Department Lawyers: SANJIT DASJCIT
• Assessee Lawyers: A K TIBREWAL
• Keywords: Business income; Rule of consistency
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C, KO LKATA [BEFORE HONBLE SHRI N.V.VASUDEVAN, JM & SHRI WAS EEM AHMED, AM] ITA NO.475/KOL/2013 ASSESSMENT YEAR : 2009-10 D.C.I.T., CIRCLE-1, . -VERSUS- M/S.BRITANNIA ENGINEERING LTD. KOLKATA KOLKATA (PAN:AABCB4796J) (APPELLANT ) (RESPONDENT) C.O.NO.45/KOL/2013 A/O ITA NO.475KOL/2013 ASSESSMENT YEAR : 2009-10 M/S. BRITANNIA ENGINEERING LTD. -VERSUS- D.C.I.T., CIRCLE-1, KOLKATA KOLKATA (PAN AABCB4796J) (CROSS OBJECTOR) (RESPONDENT) FOR THE DEPARTMENT : SHRI SANJIT DAS,JCIT, SR.DR FOR THE ASSESSEE : SHRI A.K.TIBREWAL, FCA DATE OF HEARING : 14.03.2016. DATE OF PRONOUNCEMENT : 6.4.2016 ORDER PER SHRI N.V.VASUDEVAN, JM ITA NO.475/KOL/2013 IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 17.12.2012 OF CIT(A)-XXIV, KOLKATA RELATING TO A.Y. 2009-10. 2. GROUNDS OF APPEAL RAISED BY THE REVENUE READ AS FOLLOWS :- 1. THE LD. CIT(A) HAS ERRED AND NOT JUSTIFIED IN T REATING THE FD INTEREST AS BUSINESS INCOME INSTEAD OF INCOME FROM OTHER SOURCES TO THE TUNE OF RS.87,54,636/-. 2. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER/OR AMEND ANY OF THE GROUNDS OF APPEAL DURING THE COURSE OF HEARING. 3. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINE SS OF MANUFACTURING OF VARIOUS MACHINERIES. IN THE COURSE OF ASSESSMENT PR OCEEDINGS AO NOTICED THAT THE ITA NO.475/KOL/2013 & C.O.NO.45/KO L/2013 M/S.BRITANNIA ENGINE ERING LTD. A.YR.2009-10 2 ASSESSEE HAS EARNED A SUM OF RS.87,54,636/- AS INTE REST ON BANK FIXED DEPOSITS. AO WAS OF THE VIEW THAT SINCE THE BUSINESS OF THE ASSE SSEE COMPANY WAS MANUFACTURING OF MACHINERY, THE SAID INTEREST INCOME CANNOT SAID TO BE CONNECTED WITH THE BUSINESS OF THE ASSESSEE AND THEREFORE HAD TO BE ASSESSED AS IN COME FROM OTHER SOURCES. ACCORDINGLY THE INCOME OF ASSESSEE WAS DETERMINED B Y THE AO AS FOLLOWS :- PROFIT AS DECLARED IN THE RETURN RS.2,41,90,237 /- LESS : INCOME FOR SEPARATE CONSIDERATION INTEREST ON BANK FDS RS. 87,54,636/- RS.1,54,35,601/- ADD: LEGAL EXPENSES AS DISCUSSED ABOVE RS. 61,00, 500/- INCOME FROM BUSINESS RS.2,15,36,101/- LESS:BROUGHT FORWARD BUSINESS LOSSES RS.2,15,36,101 /- NET BUSINESS INCOME NIL INCOME FROM OTHER SOURCES RS. 87,54,636/- TOTAL INCOME RS. 87,54,636//- 4. THE ASSESSEE SUBMITTED BEFORE CIT(A) THAT IT HA S TO MAINTAIN FIXED DEPOSITS WITH THE BANKS AND THOSE FIXED DEPOSITS WERE GIVEN AS SE CURITY FOR THE OVERDRAFT FACILITY UTILIZED BY THE ASSESSEE FOR THE PURPOSE OF ITS BUS INESS. HENCE, THE INCOME IS INEXTRICABLY CONNECTED WITH THE BUSINESS OF THE ASS ESSEE. THE ASSESSEE PLACED RELIANCE ON THE FOLLOWING JUDICIAL PRECEDENTS, IN S UPPORT OF HIS CONTENTION THAT INTEREST INCOME WHICH HAS CONNECTION WITH THE BUSINESS OF TH E ASSESSEE HAS TO BE ASSESSED AS BUSINESS INCOME NOT UNDER THE HEAD INCOME FROM OTH ER SOURCES. (1) CIT VS. LOK HOLDINGS (308 ITR 356)(BOM) (2) CIT VS. INDO SWISS JEWELS LTD. (284 ITR 389)(B OM) (3) CIT VS. VIDYUT STEEL LTD. (219 ITR 30)(AP) (4) CIT VS. KOSHIKA TELECOM LTD. (DEL) (5) CIT VS. CHINA NACHIMUTHU CONSTRUCTIONS 297 ITR 70 (KARN.) 5. THE CIT(A) AGREED WITH THE CONTENTION OF THE ASS ESSEE AND HE HELD AS FOLLOWS: 2.3 I HAVE CONSIDERED THE ABOVE SUBMISSION OF THE A PPELLANT AND ALSO GONE THROUGH THE ASSESSMENT ORDER. THE APPELLANT COMPANY IS AN ENTER PRISE WHOLLY OWNED BY THE GOVERNMENT OF WEST BENGAL. THE APPELLANT HAS MADE F IXED DEPOSITS WHICH HAVE BEEN USED FOR BANK OVERDRAFT FACILITIES FOR RUNNING VARI OUS BUSINESS ACTIVITIES. THE LD. A/R HAS EXPLAINED THAT THE PRESENT APPEAL IS DISTINGUIS HABLE FROM THE FACTS IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. VS. V IT [1997] 227 ITR 172 (SQ. IN THAT CASE, THE HON'BLE SUPREME COURT HAS DECIDED THAT TH ERE COULD BE NO INCOME FROM ITA NO.475/KOL/2013 & C.O.NO.45/KO L/2013 M/S.BRITANNIA ENGINE ERING LTD. A.YR.2009-10 3 BUSINESS AS THE BUSINESS OF THE ASSESSEE-COMPANY DI D NOT COMMENCE. THE LD. A/R HAS RELIED ON THE DECISION IN THE CASE CHINNA NACHIMUTH A CONSTRUCTIONS (SUPRA) AND VARIOUS OTHER DECISIONS. THE LD. A/R HAS ALSO EXPLAINED THA T WHEN DEPOSITS ARE MADE IN CONNECTION TO BUSINESS ACTIVITIES, INTEREST EARNED FROM SUCH DEPOSITS CONSTITUTES BUSINESS INCOME. IN THE PRESENT CASE, THE APPELLANT COMPANY HAS MADE FIXED DEPOSITS WHICH HAVE BEEN USED FOR BANK OVERDRAFT FACILITIES FOR RU NNING VARIOUS BUSINESS ACTIVITIES. THE DECISION 'OF THE HON 'BLE KARNATAKA HIGH COURT IN C HINNA NACHIMUTTHA CONSTRUCTIONS (SUPRA) IS SQUARELY APPLICABLE TO THE FACTS OF THE CASE. ACCORDINGLY, THE A.O. IS DIRECTED TO TREAT THE INTEREST INCOME OF RS. 87,54,636/- AS BUSINESS INCOME INSTEAD OF INCOME FROM OTHER SOURCES AFTER NECESSARY VERIFICATIONS. F OR STATISTICAL PURPOSE, THIS GROUND OF APPEAL IS ALLOWED.' 6. AGGRIEVED BY THE ORDER OF CIT(A) THE REVENUE HA S PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 7. THE LEARNED DR SUBMITTED BEFORE US THAT THE CIT( A) HAS PLACED RELIANCE ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT CIT VS CHINNA NACHIMUTTHA CONSTRUCTIONS 297 ITR 70(KAR). HE POINTED OUT THAT IN THAT CASE THE ASSESSEE WAS A CONTRACTOR AND IN ORDER TO SECURE CONTRACT WORK OFF ERED BANK GUARANTEE TO M/S.KPTCL. THE ASSESSEE IN ORDER TO AVAIL BANK GUARANTEE INVES TED FUNDS IN FIXED DEPOSITS AND INTEREST ACCRUED ON SUCH FIXED DEPOSITS WAS HELD TO BE BUSINESS INCOME. ACCORDING TO HIM IN THE PRESENT CASE THERE IS NO BUSINESS COMPUL SION AND THE ASSESSEE HAD MADE FIXED DEPOSITS ON HIS OWN AND OFFERED THE SAME AS S ECURITY FOR BANK OVER DRAFT FACILITIES AND THEREFORE THE INTEREST INCOME WAS TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. 8. WE HAVE CONSIDERED SUBMISSIONS OF THE LEARNED DR . IN OUR VIEW THE INCOME IN QUESTION HAS TO BE ASSESSED UNDER THE HEAD INCOME F ROM BUSINESS. IN THIS REGARD WE FIND THAT IT IS NOT IN DISPUTE THAT THE ASSESSEE HA D TO INVEST FUNDS IN FIXED DEPOSITS AND OFFERED THEM AS SECURITY FOR THE OVERDRAFT FACILITI ES IT RECEIVED FROM BANKS. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF INDO SWISS JEWELS LTD.(SUPRA) HAD HELD THAT WHERE INTEREST IS EARNED ON INTER CORPORATE DE POSITS MADE FROM SURPLUS FUNDS WHICH ARE SET APART FOR PAYMENT OF IMPORTED MACHIN ERY, THE SAID INTEREST INCOME HAS TO BE ASSESSED AS BUSINESS INCOME. IN THE CASE OF KOSHIKA TELECOM LTD.(SUPRA) THE HONBLE DELHI HIGH COURT HAS TAKEN THE VIEW THAT WH ERE DEPOSIT OF MARGIN MONEY BY ITA NO.475/KOL/2013 & C.O.NO.45/KO L/2013 M/S.BRITANNIA ENGINE ERING LTD. A.YR.2009-10 4 AN ASSESSEE WITH A BANK WAS LINKED WITH THE FURNIS HING OF BANK GUARANTEE TO BE GIVEN TO THE DEPARTMENT OF TELECOMMUNICATIONS, FOR OBTA INING A LICENCE BY AN ASSESSEE WHO WAS IN THE BUSINESS OF TELECOMMUNICATION, THE S AME HAS TO BE TREATED AS BUSINESS INCOME. IN THE CASE OF CIT VS. LOK HOLDINGS(SUPRA) THE HONBLE BOMBAY HIGH COURT HAS TAKEN THE VIEW THAT MONEY RECEIVED BY A PROPERT Y DEVELOPER FROM PROSPECTIVE PURCHASES DURING THE PROGRESS OF CONSTRUCTION AND W HERE SUCH FUNDS WERE DEPOSITED BY AN ASSESSEE WITH THE BANK, INTEREST EARNED ON SUCH DEPOSITS WAS HELD TO HAVE ARISEN OUT OF BUSINESS ACTIVITY AND, THEREFORE, THE SAME HAD T O BE CONSTRUED AS INCOME FROM BUSINESS. IN VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT THE ORDER OF CIT(A) HOLDING THAT THE INTEREST INCOME IS INCOME FROM BUSINESS HA S TO BE UPHELD. ACCORDINGLY, WE UPHOLD THE ORDER OF CIT(A) AND DISMISS THE APPEAL O F THE REVENUE. 9. WE MAY ALSO ADD THAT IN A.Y.2006-07, 2008-09 AND 2010-11 IDENTICAL INTEREST INCOME HAS BEEN CONSIDERED AS BUSINESS INCOME BY TH E AO. COPIES OF THE RELEVANT ASSESSMENT ORDERS PASSED FOR THE AFORESAID ASSESSME NT YEARS U/S 143(3) OF THE ACT WERE FILED BEFORE US. IT WAS CONTENDED BY THE LEARN ED COUNSEL FOR THE ASSESSEE THAT FOLLOWING THE RULE OF CONSISTENCY, THE INTEREST INC OME IN THE PRESENT ASSESSMENT YEAR SHOULD ALSO BE CONSIDERED AS INCOME FROM BUSINESS. IN THIS REGARD OUR ATTENTION WAS DRAWN TO THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF MUKTI PROPERTIES PVT. LTD. VS CIT (2011) 12 TAXMANN. 2001 (CAL). WE ARE OF THE VIEW THAT IN THE LIGHT OF THE SUBMISSIONS MADE BY THE LEARNED COUNSEL FOR THE ASSESSE ORDER OF CIT(A) HAS TO BE UPHELD EVEN ON THE BASIS OF APPLIC ATION OF RULE OF CONSISTENCY. ACCORDINGLY WE DO NOT FIND ANY MERITS IN THE APPEAL OF THE REVENUE AND THE SAME IS DISMISSED. 10. AS FAR AS THE CROSS OBJECTION FILED BY THE ASSE SSEE IS CONCERNED THE SAME WAS NOT PRESSED AT THE TIME OF HEARING AND IS THEREFORE DISMISSED AS NOT PRESSED. ITA NO.475/KOL/2013 & C.O.NO.45/KO L/2013 M/S.BRITANNIA ENGINE ERING LTD. A.YR.2009-10 5 11. IN THE RESULT THE APPEAL OF THE REVENUE AND CRO SS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 6.4.2016. SD/- SD/- [WASEEM AHMED] [N.V.VASUDEVAN] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE:.6.4.2016. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO: 1. M/S.BRITANNIA ENGINEERING LTD., A-11, 8 TH FLOOR, CHATTERJEE INTERNATIONAL CENTRE, 33A, J.L.NEHRU ROAD, KOLKATA-71. 2 THE D.C.I.T., CIRCLE-1, KOLKATA. 3. THE CIT-I, KOLKATA. 4. THE CIT(A)-XXIV, KOLKATA. 5. DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES