M/s Emta Steel & Energy Limited, Kolkata V. DCIT, Central Circle - XVI, Kolkata, Kolkata

ITA 1018/KOL/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9594 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 23-11-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 03-07-2012
• Court: TRIBUNAL
• Department Lawyers: R S BISWAS
• Assessee Lawyers: N O N E
• Keywords: Capital asset; Search and seizure
• Section: 153A; 56

Judgement Text

I.T.A. NO. 1018/KOL./2012 ASSESSMENT YEAR: 2007-2008 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI N.V. VASUDEVAN, JUDICIAL MEMBER I.T.A. NO. 1018/KOL/ 2012 ASSESSMENT YEAR: 2007-2008 M/S. EMTA STEEL & ENERGY LIMITED,.................. ..........................APPELLANT 5B, NANDULAL BASU SARANI, KOLKATA-700 071 [PAN: AABCE 5630 J] -VS.- DEPUTY COMMISSIONER OF INCOME TAX,................. ....................RESPONDENT CENTRAL CIRCLE-XVI, KOLKATA APPEARANCES BY: N O N E, FOR THE ASSESSEE SHRI R.S. BISWAS, CIT, D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : NOVEMBER 23, 2016 DATE OF PRONOUNCING THE ORDER : JANUARY 06, 2017 O R D E R PER SHRI P.M. JAGTAP, A.M .: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS), CENTRAL-II, K OLKATA DATED 15.05.2012 AND THE SOLITARY ISSUE INVOLVED THEREIN RELATES TO THE TREATMENT TO BE GIVEN TO THE INTEREST OF RS.5,30,24 7/- RECEIVED BY THE ASSESSEE ON FDRS IN THE YEAR UNDER CONSIDERATION PR IOR TO THE COMMENCEMENT OF ITS BUSINESS. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH WAS INCORPORATED ON 02.09.2005 WITH THE OBJECT OF MANUF ACTURING OF AND DEALING IN THE STEEL & IRON AS WELL AS ELECTRICAL P OWER GENERATION AND SUPPLY. DURING THE YEAR UNDER CONSIDERATION, IT HAD INITIATED PLANNING AND SURVEY FOR SETTING UP 500 MW THERMAL POWER PROJECT IN BURDWAN DISTRICT IN WEST BENGAL BUT THERE WAS NO COMMENCEMENT OF BUS INESS ACTIVITY. PURSUANT TO A SEARCH AND SEIZURE ACTION CONDUCTED I N THE CASE OF THE ASSESSEE ON 15.01.2009, A NOTICE UNDER SECTION 153A WAS ISSUED BY THE I.T.A. NO. 1018/KOL./2012 ASSESSMENT YEAR: 2007-2008 PAGE 2 OF 6 ASSESSING OFFICER ON 29.09.2009 AND ASSESSMENT WAS COMPLETED VIDE AN ORDER DATED 31.12.2010 PASSED UNDER SECTION 153A/14 3(3) OF THE ACT. IN THE ASSESSMENT SO MADE, THE TREATMENT GIVEN BY THE ASSESSEE TO THE INTEREST INCOME OF RS.5,30,247/- EARNED ON FDR WITH ICICI BANK DURING THE YEAR UNDER CONSIDERATION BY ADJUSTING THE SAME AGAINST THE PRE- OPERATIVE/PROJECT EXPENSES WAS NOT ACCEPTED BY THE ASSESSING OFFICER AND THE SAME WAS BROUGHT TO TAX BY HIM IN THE HANDS OF THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOURCES BY RELYING ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF TUTICORIN ALKA LI CHEMICALS AND FERTILIZERS LIMITED VS.- CIT [227 ITR 172]. ON APP EAL, THE LD. CIT(APPEALS) UPHELD THE ORDER OF THE ASSESSING OFFI CER ON THIS ISSUE ON THE GROUND THAT THE FACTS INVOLVED IN THE CASE OF T HE ASSESSEE WERE MORE SIMILAR TO THE FACTS INVOLVED IN THE CASE OF TUTICO RIN ALKALI CHEMICALS AND FERTILIZERS LIMITED (SUPRA) RELIED UPON BY THE ASSE SSING OFFICER RATHER THAN THE FACTS INVOLVED IN THE CASE OF CIT VS.- B OKARO STEEL LIMITED [236 ITR 315 (SC)] ON WHICH RELIANCE WAS PLACED BY THE A SSESSEE IN SUPPORT OF ITS CASE ON THIS ISSUE. AGGRIEVED BY THE ORDER OF T HE LD. CIT(APPEALS), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBU NAL. 3. AT THE TIME OF HEARING BEFORE US, THE LD. AUTHOR IZED REPRESENTATIVE OF THE ASSESSEE HAS MOVED AN APPLICATION SEEKING AD JOURNMENT. HOWEVER, KEEPING IN VIEW THAT THE ASSESSEE HAS ALREADY TAKEN MANY ADJOURNMENTS IN THIS CASE ON ONE PRETEXT OR THE OTHER AND WHILE GRANTING SUCH ADJOURNMENT EARLIER, THE LAST OPPORTUNITY WAS ALREA DY GIVEN TO THE ASSESSEE, THE REQUEST OF THE ASSESSEE FOR ADJOURNME NT IS NOT ACCEDED TO. THIS APPEAL IS ACCORDINGLY BEING DISPOSED OF EX-PAR TE ON MERIT AFTER HEARING THE ARGUMENTS OF THE LD. D.R. AND PERUSING THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT THE ONLY I SSUE INVOLVED IN THIS APPEAL IS REGARDING THE TREATMENT TO BE GIVEN TO TH E INTEREST INCOME OF RS.5,30,247/- EARNED BY THE ASSESSEE ON FDRS DURING THE PRE-OPERATIVE PERIOD AND THE RELEVANT ASPECT THAT IS TO BE CONSID ERED IN THIS CONTEXT IS WHETHER THE DECISION OF THE HONBLE SUPREME COURT I N THE CASE OF TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LIMITED (SUPRA) IS APPLICABLE IN I.T.A. NO. 1018/KOL./2012 ASSESSMENT YEAR: 2007-2008 PAGE 3 OF 6 THE FACTS OF THE ASSESSEES CASE AS HELD BY THE ASS ESSING OFFICER AS WELL AS BY THE LD. CIT(APPEALS) OR THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF BOKARO STEEL LIMITED CITED BY THE ASSES SEE BEFORE THE LD. CIT(APPEALS). IN THIS REGARD, IT IS OBSERVED THAT T HE FACTS INVOLVED IN THE CASE OF THE ASSESSEE ARE MORE AKIN TO THE FACTS INV OLVED IN THE CASE OF TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LIMITED (SUPRA), INASMUCH AS, THE ASSESSEE IN THE SAID CASE HAD TAKEN TERM LOANS FROM VARIOUS BANKS AND FINANCIAL INSTITUTIONS FOR THE PURPOSE OF SETTI NG OFF OF ITS FACTORIES AND THE PART OF SUCH BORROWED FUNDS, WHICH WAS NOT IMMEDIATELY REQUIRED BY THE COMPANY, WAS KEPT INVESTED IN SHORT-TERM DEP OSIT WITH BANK. DURING THE RELEVANT PERIOD, WHICH WAS PRIOR TO THE COMMENCEMENT OF THE TRIAL PRODUCTION OF THE FACTORIES, THE ASSESSEE HAD RECEIVED INTEREST INCOME ON THE SHORT-TERM DEPOSIT KEPT WITH BANKS AN D SUCH INTEREST INCOME WAS HELD TO BE CHARGEABLE TO TAX BY THE HON BLE SUPREME COURT IN THE HANDS OF THE ASSESSEE UNDER THE HEAD INCOME FR OM OTHER SOURCES BY OBSERVING THAT INTEREST INCOME IS ALWAYS OF A REVEN UE NATURE, UNLESS IT IS RECEIVED BY WAY OF DAMAGES OR COMPENSATION. IT WAS HELD BY THE HONBLE SUPREME COURT THAT INCOME-TAX IS ATTRACTED AT THE P OINT WHEN THE INCOME IS EARNED AND TAXABILITY OF INCOME IS NOT DEPENDENT UPON ITS DESTINATION OR THE MANNER OF ITS UTILISATION. IT WAS HELD THAT IT HAS TO BE SEEN WHETHER AT THE POINT OF ACCRUAL, THE AMOUNT IS OF A REVENUE NATURE AND IF IT IS SO, THE AMOUNT WILL HAVE TO BE TAXED. IT WAS ALSO HELD BY THE HONBLE SUPREME COURT THAT THE QUESTION AS TO WHETHER A RECEIPT OF MONEY IS TAXABLE OR NOT HAS TO BE DECIDED ACCORDING TO THE PRINCIPLES OF LA W, AND NOT IN ACCORDANCE WITH ACCOUNTANCY PRACTICE, WHICH CANNOT OVERRIDE SECTION 56 OR ANY OTHER PROVISION OF THE INCOME TAX ACT, 1961. 4. IN THE CASE OF BOKARO STEEL LIMITED (SUPRA), THE NATURE OF INCOME RECEIVED BY THE ASSESSEE BEFORE COMMENCEMENT OF ITS BUSINESS, ON THE OTHER HAND, WAS ENTIRELY DIFFERENT AS IS EVIDENT FR OM THE RELEVANT PORTION OF THE JUDGEMENT OF THE HONBLE SUPREME COURT PASSE D IN THE SAID CASE, WHICH IS EXTRACTED HEREUNDER:- I.T.A. NO. 1018/KOL./2012 ASSESSMENT YEAR: 2007-2008 PAGE 4 OF 6 (1) DURING THIS PERIOD THE COMPANY HAD GIVEN TO TH E CONTRACTORS QUARTERS FOR THE RESIDENCE OF THE STAFF AND WORKERS EMPLOYED BY THE CONTRACTORS WHO HAD BEEN ENGAGED BY THE ASSESSEE-RESPONDENT FOR CAR RYING OUT THE WORK OF CONSTRUCTION. THE ASSESSEE CHARGED THE CONTRACTORS FOR THE USE OF THE QUARTERS SO GIVEN TO THE CONTRACTORS FOR THE RESIDE NCE OF HIS WORKMEN WHO WERE ENGAGED IN THE CONSTRUCTION ACTIVITY OF THE AS SESSEE'S PLANT. (2) SECONDLY, DURING THE ASSESSMENT YEARS IN QUESTI ON THE ASSESSEE HAD ENTERED INTO SUPPLEMENTARY AGREEMENTS WITH ITS CONT RACTORS UNDER WHICH THE ASSESSEE HAD MADE CERTAIN ADVANCES TO THE CONTR ACTORS TO ENABLE THEM TO EXECUTE THE LARGE SCALE CONSTRUCTION WORK SMOOTH LY. THE ASSESSEE HAD AGREED TO ADVANCE THESE ADVANCES TO THE CONTRACTORS ON PAYMENT OF INTEREST. THE CONTRACTORS THUS DID NOT HAVE TO RAIS E FUNDS FROM OUTSIDE AGENCIES. FOR THE ASSESSEE-COMPANY, THIS ARRANGEMEN T PRIMARILY MEANT PAYMENT IN ADVANCE OF THE AMOUNTS OF THE CONTRACTOR S' BILLS FOR WHICH THE ASSEESSEE-COMPANY HAD CHARGED INTEREST. THIS INTERE ST WAS LATER ADJUSTED AGAINST THE DUES OF THE CONTRACTORS. (3) FOR THE PURPOSE OF THE CONSTRUCTION WORK THE AS SESSEE HAD GIVEN ON HIRE CERTAIN PLANT AND MACHINERY TO THE CONTRACTORS. AGA INST THE LETTING OF PLANT AND MACHINERY THE ASSESSEE RECEIVED FROM THE CONTRA CTORS INCOME IN THE FORM OF HIRE CHARGES. IT WAS NOT THE BUSINESS OF TH E ASSESSEE-COMPANY TO LET OUT PLANT AND MACHINERY TO OTHERS. THE ASSESSEE-COM PANY PERMITTED ITS USE ONLY TO ITS OWN CONTRACTORS FOR THE CONSTRUCTION WO RK DONE BY THE CONTRACTORS FOR THE ASSESSEE-COMPANY. THE TRIBUNAL HAS FOUND THAT THE ASSESSEE-COMPANY CHARGED HIRE CHARGES FOR SUCH USE OF PLANT AND MACHINERY IN ORDER TO COVER THE MAINTENANCE AND WEA R AND TEAR OF THE PLANT AND MACHINERY BELONGING TO THE ASSESSEE. (4) THE ASSESSEE-COMPANY ALLOWED THE CONTRACTORS TO USE THE STONES LYING ON THE ASSESSEE'S LAND FOR CONSTRUCTION WORK. THE S TONES LYING ON THE ASSESSEE'S COMPANY'S LAND WERE THE CAPITAL ASSETS O F THE ASSESSEE-COMPANY. THE ASSESSEE CHARGED THE CONTRACTOR A CERTAIN AMOUN T BY WAY OF ROYALTY FOR EXCAVATION AND USE OF THESE STONES FOR CONSTRUCTION WORK. (5) THE ASSESSEE HAD, DURING THE ASSESSMENT YEAR 19 71-72 SHOWN IN ITS ACCOUNTS AS INCOME FROM INTEREST A CERTAIN SUM SAID TO HAVE BEEN ACCRUED TO THE ASSESSEE FROM M/S HINDUSTAN STEEL LIMITED FO R EIGHT LOCOMOTIVES SUPPLIED BY THE ASSESSEE-COMPANY TO M/S HINDUSTAN S TEEL LIMITED. THE ASSESSEE-COMPANY, HOWEVER, REVERSED THIS ENTRY IN T HE NEXT YEAR BECAUSE EIGHT NEW LOCOMOTIVES WERE SUPPLIED BY M/S HINDUSTA N STEEL LIMITED TO THE ASSESSEE AND NO INTEREST INCOME ACTUALLY ACCRUED TO THE ASSESSEE. 5. IT IS THUS CLEAR THAT THE ISSUE INVOLVED IN THE CASE OF BOKARO STEEL LIMITED BEFORE THE HONBLE SUPREME COURT WAS NOT RE GARDING THE TREATMENT TO BE GIVEN TO THE INTEREST EARNED BY THE ASSESSEE ON SURPLUS FUND KEPT WITH THE BANK BEFORE THE COMMENCEMENT OF THE BUSINESS AS IS INVOLVED IN THE PRESENT CASE AND, THEREFORE, THE RA TIO OF THE DECISION RENDERED IN THE SAID CASE BY THE HONBLE SUPREME CO URT CANNOT BE APPLIED I.T.A. NO. 1018/KOL./2012 ASSESSMENT YEAR: 2007-2008 PAGE 5 OF 6 IN THE CASE OF THE ASSESSEE. AS A MATTER OF FACT, T HE ASSESSEE IN THE SAID CASE HAD ALSO INVESTED THE AMOUNT BORROWED FOR THE CONSTRUCTION WORK, WHICH WAS NOT IMMEDIATELY REQUIRED, IN SHORT-TERM D EPOSIT AND EARNED INTEREST THEREON. THE SAID INTEREST WAS BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE AS INCOME UNDER THE HEAD INCOME FROM OTHE R SOURCES AND THIS TREATMENT GIVEN BY THE REVENUE AUTHORITIES WAS ACCE PTED BY THE ASSESSEE AS SPECIFICALLY NOTED BY THE HONBLE SUPREME COURT IN ITS JUDGMENT. AFTER TAKING NOTE OF THE SAME, IT WAS OBSERVED BY THE HON BLE SUPREME COURT IN ITS JUDGMENT PASSED IN THE CASE OF BOKARO STEEL LIM ITED (SUPRA) THAT THIS ISSUE, IN ANY CASE, STOOD CONCLUDED BY A DECISION O F THE COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LIMITED (SUPRA). IT IS THUS CLEAR THAT THE ISSUE RELATING TO THE TREATMENT TO BE GIVE N TO THE INTEREST INCOME EARNED BY THE ASSESSEE ON FDRS KEPT WITH BANK BEFOR E THE COMMENCEMENT OF BUSINESS IS SQUARELY COVERED AGAINST THE ASSESSE E BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF TUTICORIN ALKA LI CHEMICALS & FERTILIZERS LIMITED (SUPRA) AND RESPECTFULLY FOLLOW ING THE SAME, WE UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) C ONFIRMING THE ACTION OF THE ASSESSING OFFICER IN BRINGING TO TAX INTERES T INCOME IN QUESTION IN THE HANDS OF THE ASSESSEE UNDER THE HEAD INCOME FR OM OTHER SOURCES. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON JANUARY 06, 2 017. SD/- SD/- (N.V. VASUDEVAN) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT ME MBER KOLKATA, THE 6 TH DAY OF JANUARY, 2017 COPIES TO : (1) M/S. EMTA STEEL & ENERGY LIMITED, 5B, NANDULAL BASU SARANI, KOLKATA-700 071 (2) DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-XVI, KOLKATA (3) COMMISSIONER OF INCOME TAX(APPEALS), CENTRAL-I I, KOLKATA; I.T.A. NO. 1018/KOL./2012 ASSESSMENT YEAR: 2007-2008 PAGE 6 OF 6 (4) COMMISSIONER OF INCOME TAX- , KOLKATA, (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.