M/s Shalimar Synthetics P.Ltd., Mumbai V. The ACIT, 3(1), Bhopal

CO 7/IND/2011

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 5752 (ITAT-INDORE)
• Duration Of Justice: 8 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 29-03-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2000-2001
• Appeal Filed On: 21-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DARSHAN SINGH
• Keywords: Capital receipt; Capital expenditure

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER C.O.NO.7/IND/2011 ARISING OUT OF ITA NO. 464/IND/2006 A.Y. 2000-01 M/S SHALIMAR SYNTHETICS PVT.LTD. BHOPAL PAN AAFCS 463R :: APPELLANT VS ASSISTANT COMMISSIONER OF INCOME TAX 3(1) BHOPAL :: RESPONDENT APPELLANT BY SHRI JITENDRA JAIN RESPONDENT BY SHRI DARSHAN SINGH DATE OF HEARING 8.11.2012 DATE OF PRONOUNCEMENT 18.12 .2012 O R D E R PER SHRI R.C. SHARMA AM THIS CROSS OBJECTION FILED BY THE ASSESSEE, ARISES OUT OF THE APPEAL FILED BY THE DEPARTMENT IN ITA NO. 464/I ND/2006 IN RESPECT OF THE ORDER PASSED BY THE LEARNED CIT(A) D ATED 28.3.2006 FOR THE A.Y. 2000-01. 2 2. THE TRIBUNAL PASSED THE ORDER DATED 29 TH MARCH, 2011 DISPOSING OF THE APPEAL FILED BY THE REVENUE IN ITA NO. 464/IND/2006 WHEREIN THE CROSS OBJECTION FILED BY T HE ASSESSEE WAS DISMISSED ON THE GROUND OF DELAY OF FOUR YEARS AND 120 DAYS. AGAINST THIS ORDER OF REJECTION OF CROSS OBJECTION, THE ASSESSEE APPROACHED THE HONBLE HIGH COURT AND THE HONBLE H IGH COURT VIDE ORDER DATED 21.7.2011 DIRECTED THE TRIBUNAL TO HEAR THE APPEAL ON MERITS. THUS, IN PURSUANCE OF THE ORDER OF THE H ONBLE HIGH COURT, THE CROSS OBJECTION WAS AGAIN PLACED FOR HEA RING BEFORE US. 3. IN THE CROSS OBJECTION, THE ASSESSEE IS AGGRIEVE D WITH THE ACTION OF THE LEARNED CIT(A) IN DISALLOWING THE INT EREST RECEIVED ON SHARE APPLICATION MONEY WHICH WAS TREATED AS REVENU E IN NATURE. 4. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE DEPOS ITED THE MONEY RECEIVED ON SHARE APPLICATION IN BANK ACCOUNT AS PE R THE DIRECTIONS OF SEBI. AS THE INTEREST WAS ACCRUED PRIOR TO COMME NCEMENT OF BUSINESS, A LEGAL GROUND WAS RAISED BEFORE THE CIT( A) AN IT WAS CONTENDED THAT SUCH INTEREST INCOME IS TO BE SET OF F AGAINST CAPITAL EXPENDITURE. HOWEVER, THE LEARNED CIT(A) DECLINED THE CLAIM OF THE 3 ASSESSEE ON THE PLEA THAT INTEREST ON SHARE APPLICA TION MONEY DEPOSITED IN BANK WAS RECEIVED DURING THE YEAR AND THERE WAS NO DETAIL AS TO WHICH YEAR THE INTEREST INCOME PERTAIN S TO. ACCORDINGLY, THE CIT(A) HELD THAT THE INTEREST EARNED AND RECEIV ED DURING THE YEAR IS A REVENUE RECEIPT. 4. THE CONTENTION OF THE LEARNED COUNSEL FOR THE AS SESSEE WAS THAT THE INTEREST OF RS.85,00,172/- WAS RECEIVED FR OM SBI, FRANKFURT BRANCH ON DEPOSIT OF SHARE APPLICATION MO NEY AND THE ASSESSING OFFICER HAS ACCEPTED THE FACT THAT THE AS SESSEE HAS RECEIVED SHARE APPLICATION MONEY WHICH WAS KEPT IN SBI, FRANKFURT BRANCH AS PER DIRECTION OF SEBI. RELIANCE WAS PLAC ED BY THE LEARNED COUNSEL FOR THE ASSESSEE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF SUTLAJ COTTON MILLS LIMITED; 1 16 ITR 1. 5. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FROM RECORD WE FIND THAT THE ASSESSEE HAS CLAIMED SET OF F OF INTEREST EARNED FROM THE BANK IN RESPECT OF SHARE APPLICATIO N MONEY DEPOSITED THEREIN. THE SHARE APPLICATION MONEY WAS KEPT UNDER THE DIRECTION AND PERMISSION OF RBI TO KEEP THE SHARE A PPLICATION 4 MONEY WITH SBI, FRANKFURT BRANCH, VIDE LETTER DATED 16.8.1989 RBI CONVEYED THE PERMISSION FOR OPENING AN ACCOUNT WITH SBI, FRANKFURT BRANCH FOR UTILIZATION OF SHARE CAPITAL S UBSCRIPTION OF FOREIGN COLLABORATORS TOWARDS IMPORT AGAINST IMPORT LICENCE FOR PURCHASE OF PLANT AND MACHINERY. THE AMOUNT OF INT EREST WAS RETAINED IN USA FOR CAPITAL PURPOSES AFTER OBTAININ G SANCTION OF RBI. IT APPEARS TO BE A TRANSACTION OF ACCUMULATIN G DOLLARS TO PAY FOR CAPITAL GOODS. THUS, THE SAME WAS EARMARKED FO R PURCHASE OF CAPITAL GOODS. ANY CAPITAL APPRECIATION THEREON DU E TO RATE FLUCTUATION SHOULD BE TREATED AS CAPITAL RECEIPT. HONBLE SUPREME COURT IN THE CASE OF SUTLEJ COTTON MILLS LIMITED (S UPRA) HAS CLEARLY HELD THAT IF THE FOREIGN CURRENCY IS HELD AS CAPIT AL ASSET OR AS FIXED CAPITAL, SUCH PROFIT OR LOSS WOULD BE OF CAPITAL NA TURE. IT APPEARS THAT THE ASSESSING OFFICER HAS NOT EXAMINED THE NAT URE OF DEPOSIT AND CONSEQUENT ACCRUAL OF INTEREST THEREON IN THE L IGHT OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F SUTLAJ COTTON MILLS LIMITED (SUPRA). THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY, THE MATTER IS RESTORED TO THE FILE OF THE ASS ESSING OFFICER FOR 5 DECIDING AFRESH IN TERMS OF OUR ABOVE DISCUSSION. W E DIRECT ACCORDINGLY. 6. IN THE RESULT, CROSS OBJECTION FILED BY THE ASSE SSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 18 TH DECEMBER, 2012. (JOGINDER SINGH) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED 18.12.2012 COPY TO APPELLANT/RESPONDENT/CIT/CIT(A)/DR DN/-3030.11.17.12/17.12/18