Addl.CIT, Special Range-9, New Delhi V. Worlds Window Infrastructure and Logistics P.Ltd, New Delhi

ITA 1122/DEL/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 2444 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2013-2014
• Appeal Filed On: 15-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUNESH KUMAR
• Assessee Lawyers: NAND KISHORE BANSAL
• Keywords: Business income; Earning of tax free income; Proportionate interest; Rule 8D; Set aside
• Section: 14A; 80IA; 201; 251; 13; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F : NEW DELHI) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER (THROUGH VIDEO CONFERENCE) ITA NO.1122/DEL./2018 (ASSESSMENT YEAR : 2013-14) ITA NO.1123/DEL./2018 (ASSESSMENT YEAR : 2014-15) ADDL.CIT, SPL. RANGE 9, VS. M/S. WORLD WINDOW INFRA STRUCTURE NEW DELHI. AND LOGISTICS PVT. LTD., 75, KHIRKI VILLAGE, MALVIYA NAGAR, NEW DELHI 110 017. (PAN : AAACW6405E) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI NAND KISHORE BANSAL, CA REVENUE BY : SHRI MUNESH KUMAR, CIT DR DATE OF HEARING : 28.10.2021 DATE OF ORDER : 28.10.2021 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : SINCE COMMON QUESTIONS OF FACTS AND LAW HAVE BEEN R AISED IN BOTH THE INTER-CONNECTED APPEALS, THE SAME ARE B EING DISPOSED OFF BY WAY OF CONSOLIDATED ORDER TO AVOID REPETITIO N OF DISCUSSION. 2. APPELLANT, ADDL. CIT, SPECIAL RANGE 9, NEW DELHI (HEREINAFTER REFERRED TO AS THE REVENUE) BY FILIN G THE PRESENT ITA NO.1122/DEL./2018 ITA NO.1123/DEL./2018 2 APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 22.11.2017 & 28.12.2017 PASSED BY THE CIT (APPEALS)-9, NEW DELHI QUA THE ASSESSMENT YEARS 2013-14 & 2014-15 RESPECTIVELY ON THE GROUNDS INTER ALIA THAT :- ITA NO.1122/DEL/2018 (AY 2013-14) 1. THE LD. CIT (A) HAS ERRED ON THE FACTS AND CIRCUMSTANCES OF THE CASE BY DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF CLAIM OF DEDUCTION U/S 80IA. ITA NO.1123/DEL/2018 (AY 2014-15) 1. THE LD. CIT (A) HAS ERRED ON THE FACTS AND CIRCUMSTANCES OF THE CASE BY DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF CLAIM OF DEDUCTION U/S 80IA. 2. THE LD. CIT (A) HAS ERRED IN NOT APPRECIATION OF THE FACT THAT AO MADE THE DISALLOWANCE IN ACCORDANCE WITH SE C. 14A R.W.R. 8D OF THE IT ACT ONLY. 3. THE LD. CIT (A) HAS ERRED ON THE FACTS AND CIRCUMSTANCES OF THE CASE BY DELETING ADDITION U/S 37 MADE BY THE AO ON ACCOUNT OF ADDITION U/S 37 OF THE I.T. AC T. 4. THE LD. CIT (A) HAS ERRED ON THE FACTS AND CIRCUMSTANCES OF THE CASE BY DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF INTEREST EARNED ON FDR. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : ASSESSEE COMPANY DURING T HE YEAR UNDER CONSIDERATION WAS ENGAGED IN THE BUSINESS OF OPERAT ING AND MAINTAINING DRY PORT (INLAND CONTAINER DEPOT). ASS ESSEE CLAIMED DEDUCTION UNDER SECTION 80IA OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) TO THE TUNE OF RS.10,79,48,177/- & RS.9,64,63,739/- FOR ASSESSMENT YEARS 2013-14 & 201 4-15 ITA NO.1122/DEL./2018 ITA NO.1123/DEL./2018 3 RESPECTIVELY. DECLINING THE CONTENTIONS RAISED BY THE ASSESSEE FOR THE CLAIM OF DEDUCTION UNDER SECTION 80IA OF THE AC T, ASSESSING OFFICER (AO) PROCEEDED TO DISALLOW THE SAME. 3. IN AY 2014-15, AO ALSO MADE DISALLOWANCE TO THE TUNE OF RS.1,42,68,784/- BY INVOKING THE PROVISIONS CONTAIN ED U/S 14A OF THE ACT READ WITH RULE 8D OF THE INCOME-TAX RULES, 1962 (FOR SHORT THE RULES). 4. IN AY 2014-15, AO ALSO CALLED UPON THE ASSESSEE TO SHOW- CAUSE AS TO WHY PROPORTIONATE DISALLOWANCE SHOULD N OT BE MADE IN RESPECT OF ASSESSMENT MADE IN RELATED COMPANIES/SIS TER CONCERNS AS ASSESSEE COMPANY HAS MADE ADVANCE OF RS.35,42,69,40 2/- TO ITS SUBSIDIARY COMPANY AND SISTER CONCERNS FOR NON-COMM ERCIAL PURPOSES. BEING DISSATISFIED FROM THE REPLY FILED BY THE ASSESSEE, AO PROCEEDED TO MADE ADDITION OF RS.3,49,97,305/- U /S 37 OF THE ACT BY MAKING FOLLOWING CALCULATIONS :- I. AMOUNT OF INVESTMENT EXPENSES CLAIMED 598,30,702/- II. AMOUNT OF PAYMENTS MADE TO SISTER CONCERN 35,42,69,402/- SR.NO. PARTICULARS 2014 2013 1. LONG TERM ADVANCES 36,98,71, 872 36,37,05,931 SHORT TERM ADVANCES 26,34,86,449 21,42,39,689 TOTAL 63,33,58,321 57,79,45,620 AVERAGE ADVANCES 60,56,51,971 AMOUNT OF DISALLOWANCE 59830702 X 354269402 605651971 = 34997305 ADDITION/DISALLOWANCE OF DEDUCTION RS.349,97,305/ - ITA NO.1122/DEL./2018 ITA NO.1123/DEL./2018 4 AND THEREBY FRAMED THE ASSESSMENT AT RS.12,62,88,84 7/- & RS.17,12,59,105/- FOR AYS 2013-14 & 2014-15 RESPECT IVELY. 5. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT ( A) BY WAY OF FILING THE APPEALS WHO HAS DELETED THE ADDITION BY ALLOWING THE APPEALS. FEELING AGGRIEVED BY THE ORDER PASSED BY THE LD. CIT(A), THE REVENUE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEALS. 6. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUND NO.1 OF AYS 2013-14 & 2014-15 7. UNDISPUTEDLY, ASSESSEE HAS CLAIMED DEDUCTION U/S 80IA OF THE ACT QUA ITS INCOME ON THE BUSINESS OF RUNNING O F INLAND CONTAINER DEPOT (ICD). IT IS ALSO NOT IN DISPUTE T HAT BUSINESS OF ICD COVERED UNDER THE DEFINITION OF INFRASTRUCTURE FACILITIES. 8. PERUSAL OF THE ORDER PASSED BY THE AO GOES TO PR OVE THAT HE HAS DENIED THE DEDUCTION U/S 80IA OF THE ACT ON THE GROUND THAT INCOME-TAX DEPARTMENT HAVING NOT ACCEPTED THE DECIS ION RENDERED BY HONBLE DELHI HIGH COURT IN CASE OF CONTAINER CORPO RATION ITA NO.1122/DEL./2018 ITA NO.1123/DEL./2018 5 OF INDIA LTD. VS. ACIT 346 ITR 140 (DEL.) AND THEREBY FILED SPECIAL LEAVE PETITION BEFORE HONBLE SUPREME COURT . 9. LD. CIT (A) DELETED THE IMPUGNED DISALLOWANCE ON ACCOUNT OF DEDUCTION U/S 80IA BY FOLLOWING THE DECISION REN DERED BY HONBLE DELHI HIGH COURT IN CASE OF CONTAINER CORPO RATION OF INDIA LTD. (SUPRA). 10. HONBLE DELHI HIGH COURT DECIDED THE IDENTICAL ISSUE IN CASE OF CONTAINER CORPORATION OF INDIA LTD. (SUPRA) BY RETURNING FOLLOWING FINDINGS :- ..IN OUR OPINION HAVING REGARD TO THE PROVISIONS OF THE CUSTOMS ACT, THE COMMUNICATIONS ISSUED BY THE CBEC AS WELL AS THE MINISTRY OF COMMERCE AND INDUSTRY, THE OBJEC T OF INCLUDING INLAND PORT AS AN INFRASTRUCTURE FACILI TY AND ALSO HAVING REGARD TO THE FACT THAT CUSTOMS CLEARANCE AL SO TAKES PLACE IN THE ICD, THE ASSESSEES CLAIM THAT THE ICD S ARE INLAND PORTS UNDER EXPLANATION (D) OF SECTION 80-IA (4) RE QUIRES TO BE UPHELD. 11. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE AR E OF THE CONSIDERED VIEW THAT LD. CIT (A) DELETED THE IMPUGN ED ADDITION MADE BY THE AO BY WAY OF DISALLOWANCE MADE U/S 80IA BY THRASHING THE FACTS AT HAND IN THE LIGHT OF THE DEC ISION RENDERED BY HONBLE DELHI HIGH COURT IN CASE OF CONTAINER CORPORATION OF INDIA LTD. (SUPRA), HENCE WE FIND NO SCOPE TO INTERFERE INTO THE SAME. SO, GROUND NO.1 OF AYS 2013-14 & 2014-15 IS DETERMINED AGAINST THE REVENUE. ITA NO.1122/DEL./2018 ITA NO.1123/DEL./2018 6 GROUND NO.2 OF AY 2014-15 12. AO BY INVOKING THE PROVISIONS CONTAINED U/S 14A READ WITH RULE 8D (II) & 8D (III) MADE DISALLOWANCE OF RS.1,4 2,68,784/- AS UNDER :- WORKING OF DISALLOWANCE U/S 14A R.W.R. 8D 2014 2013 NONCURRENT INVESTMENT 42,91,49,399/ - 40,01,71,001 AVERAGE INVESTMENT 41,46,60,200 / - TOTAL ASSETS 2,11,75,41,363/ - 195,10,81,412 AVERAGE ASSETS 2,03,43,11,388/ - INTEREST EXPENSE 5,98,30,702/ - UNDER RULE 8D (II) INVEST EXPENSE X AVERAGE INVESTM ENT AVERAGE ASSETS 5,98,30,702 X 41,46,60,200/- 203,43,11,388/- = 1,21,95,483 UNDER RULE 8D (III) 0.5% OF AVERAGE INVESTMENT 0.5% X 41,46,60,200/- = 20,73,301/- =142,68,784/- ADDITION/DISALLOWANCE OF DEDUCTION RS.1,42,68,784 /- 13. LD. CIT (A) DELETED THE ADDITION MADE BY THE AO U/S 14A READ WITH RULE 8D (II) & 8D (III) BY RETURNING FOLL OWING FINDINGS :- 5.2.2 IN THE PRESENT CASE, IT HAS BEEN EXPLAINED T HAT APPELLANT HAS NOT EARNED ANY EXEMPT INCOME WHICH DOES NOT FOR M PART OF THE TOTAL INCOME EARNED BY THE ASSESSEE AND ALSO NO INTEREST HAS BEEN INCURRED FOR ACQUIRING THE SAID INVESTMENT. IT IS A FACT AS NOTED FROM THE IMPUGNED ORDER AND SUBMISSION OF THE APPELLANT THAT DURING THE PREVIOUS YEAR RELATING TO ASSESSMENT YEAR 2014-15, AN AMOUNT OF RS.50114766/- HAS BEEN D EBITED AS INTEREST EXPENDITURE TO THE PROFIT AND LOSS ACCOUNT . HOWEVER, NO EXEMPT INCOME MORE PARTICULARLY DIVIDEND FROM TH E INVESTMENT IS FOUND TO BE CLAIMED IN THE TAX COMPUT ATION ITA NO.1122/DEL./2018 ITA NO.1123/DEL./2018 7 5.2.3 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, IT IS AMPLY CLEAR THAT AS FAR AS PROVISIONS OF SECT ION 14A ARE CONCERNED, DISALLOWANCE UNDER THIS SECTION CAN BE M ADE ONLY IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE TO EARN THE EXEMPT INCOME. 14. BARE PERUSAL OF THE IMPUGNED ORDER PASSED BY TH E LD. CIT(A) GOES TO PROVE THAT DISALLOWANCE OF RS.1,42,68,784/- HAS BEEN DELETED ON THE SOLE GROUND THAT ASSESSEE COMPANY HA S NOT EARNED EXEMPT DIVIDEND INCOME FROM THE INVESTMENT DURING T HE YEAR UNDER CONSIDERATION AND AS SUCH, NO DISALLOWANCE CA N BE MADE. 15. HONBLE DELHI HIGH COURT IN CASE OF HOLCIM INDIA PVT. LTD. ITA NO.486/3024 & ITA NO.299/2014 AND HONBLE SUPREME COURT IN CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LTD. VS. DCIT 394 ITR 449 (SC) HAVE CATEGORICALLY HELD THAT, WHEN THE ASSESSEE HAS NOT EARNED ANY DIVIDEND INCO ME FORMING PART OF THE TOTAL INCOME DURING THE YEAR UN DER CONSIDERATION, SECTION 14A READ WITH RULE 8D IS NOT ATTRACTED. CONSEQUENTLY, WE FIND NO SCOPE TO INTERFERE INTO TH E DELETION OF DISALLOWANCE MADE BY THE LD. CIT (A) U/S 14A READ W ITH RULE 8D. SO, GROUND NO.2 OF ASSESSMENT YEAR 2014-15 IS DETER MINED AGAINST THE REVENUE. GROUND NO.3 OF AY 2014-15 16. LD. CIT (A) DELETED THE ADDITION OF RS.3,49,97, 305/- MADE BY THE AO U/S 37 OF THE ACT BY WAY OF PROPORTIONATE DISALLOWANCE ITA NO.1122/DEL./2018 ITA NO.1123/DEL./2018 8 OF INTEREST QUA THE AMOUNT OF RS.35,42,64,402/- MAD E BY THE ASSESSEE TO ITS SUBSIDIARY AND SISTER CONCERN ON TH E GROUND THAT THE SAME WAS NOT FOR BUSINESS PURPOSE BY RETURNING FOLL OWING FINDINGS:- 5.3.2 THE APPELLANT, HOWEVER, CLAIMS THAT ASSESSEE HAS NOT LENT ANY INTEREST FREE FUNDS TO RELATED COMPANIES O UT OF THE INTEREST BEARING FUNDS. DURING THE PREVIOUS YEAR RE LEVANT TO AY 2014-15, LOANS AMOUNTING TO RS. 61,65,581/- ONLY HAS BEEN FRESHLY LENT TO RELATED CONCERNS OUT OF TOTAL RS. 3 5,42,69,402/. THE NET WORTH OF THE APPELLANT IS RS 133,06 CRORE A S ON 31.03.2014 AND HAS EBIDTA OF RS 27,06 CRORE FOR THE YEAR ENDED 31 ST MARCH 2014 AND THEREFORE, ALL THE OTHER LOANS HAVE BEEN GIVEN IN PREVIOUS FINANCIAL YEARS AND HAVE BEE N EITHER GIVEN OUT OF TOTAL FUNDS RECEIVED FROM SHARE CAPITA L' RECEIVED FROM INVESTORS OR FROM INTEREST FREE FUNDS AVAILABL E WITH THE APPELLANT OR FROM INTERNAL ACCRUALS OF THE APPELLAN T. MOREOVER, NO DISALLOWANCE HAS BEEN MADE IN ANY OF THE EARLIER YEARS, IT HAS ALSO BEEN CLAIMED THAT THE ADVANCES HAVE BEEN G IVEN FOR THE PURPOSE OF BUSINESS ACQUIRING FOR LAND IN THE I NTEREST OF APPELLANT ONLY. THE APPELLANT IS IN THE BUSINESS OF RUNNING A DRY PORT WHICH REQUIRES ACRES OF LAND TO KEEP LOADE D AND EMPTY CONTAINERS AND AS PER U,P LAND REVENUE ACT, O NE ENTITY CANNOT ACQUIRE MORE THAN 12 ACRES OF LAND AND THESE SUBSIDIARIES HAVE BEEN MADE TO CONSOLIDATE LAND FOR THE DRY PORT BUSINESS, NO INTEREST HAS BEEN CHARGED FROM TH E SUBSIDIARY COMPANIES. 5.3.3 IT IS NOTED FROM THE BALANCE SHEET OF THE APP ELLANT FOR THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2014- 15, IT IS HAVING A NET WORTH OF RS.133,06 CRORE COMPRISING OF RS.119.3 CRORE ON ACCOUNT OF RESERVE AND SURPLUS AND RS.13.7 CRORE ON ACCOUNT OF SHARE CAPITAL WHEREAS INTEREST FREE ADVA NCE GIVEN TO SUBSIDIARY IS ONLY RA.35.42 CRORE IN WHICH THE CURR ENT YEAR ADVANCE IS ONLY RA.61.65 LAKHS. 5,3.4 LD. AO THOUGH DISALLOWED A PORTION OF INTERES T ON ABOVE ACCOUNT ONLY BECAUSE OF BEING NOT SATISFIED W ITH THE REPLY OF THE APPELLANT, HAS NOT ELABORATED HOW AND WHY AT ALL THE REPLY/EXPLANATION OFFERED BY THE ASSESSEE ADVANCED DURING THE COURSE OF ASSESSMENT PROCEEDINGS WAS NOT ACCEPTABLE . ON CAREFUL CONSIDERATION OF THE SUBMISSION OF THE APPE LLANT VIS-A- VIS IMPUGNED ORDER AND MATERIAL ON RECORD, I FIND I T CONVINCING THAT LD. AO HAS NOT ESTABLISHED NEXUS BE TWEEN THE BORROWED FUNDS AND AMOUNT ADVANCED. IT WAS INCUMBEN T UPON THE AO TO ESTABLISH A REASONABLE NEXUS BETWEEN BORR OWED ITA NO.1122/DEL./2018 ITA NO.1123/DEL./2018 9 FUNDS AND INTEREST FREE ADVANCES, THE SAME IS NOT F OUND TO BE MADE IN THE IMPUGNED ORDER. THE NEXUS BETWEEN BORRO WED FUNDS AND INTEREST FREE ADVANCE HAS TO BE NECESSARI LY ESTABLISHED BEFORE RESORTING TO THE DISALLOWANCE OF INTEREST EXPENDITURE AS HELD IN THE ACIT VS M/S NAMDEV EX OR T RD. JOSHI & CO, V CIT 251 ITR 332 (MP) AS ALSO IN ACIT VS CHANDRA PRAKASH 27 TAX WORLD 328 (JAIPUR BENCH). 5.3,5 IT IS THEREFORE, LOGICAL THAT ADVANCE GIVEN B Y THE APPELLANT TO ITS SUBSIDIARIES OF RS,35.42 CRORES WH ICH INCLUDES CURRENT YEAR FRESH ADVANCE OF RS.61.65 LAKHS BE TAK EN AND CONSTRUED TO BE OUT OF OWN SURPLUS FUND AT RS.133.0 6 CRORE COMPRISING OF RS.119.3 CRORE ON ACCOUNT OF RESERVE AND SURPLUS AND RS.13.7 CRORE ON ACCOUNT OF SHARE CAPITAL. IN V IEW OF FACTS AND JUDICIAL PRONOUNCEMENT NOTED ABOVE, THIS GROUND OF APPEAL RELATING TO DISALLOWANCE OF INTEREST OF RS.3 ,49,97,30S/- IS ALLOWED IN FAVOUR OF APPELLANT. 17. BARE PERUSAL OF THE IMPUGNED ORDER PASSED BY TH E LD. CIT(A) GOES TO PROVE THAT LD. CIT (A) HAS DELETED THE ADDI TION BY THRASHING FACTS IN THE LIGHT OF THE SUBMISSIONS MADE BY THE A SSESSEE ON THE GROUND THAT WHEN THE AO HAS FAILED TO ESTABLISH A R EASONABLE NEXUS BETWEEN THE BORROWING FUND AND INTEREST FREE ADVANC ES, ADDITION IS NOT SUSTAINABLE AND RELIED UPON THE DECISION RENDER ED BY HONBLE MADHYA PRADESH HIGH COURT IN R.D. JOSHI & CO. VS. C IT 251 ITR 332 (MP) AND ORDER PASSED BY THE COORDINATE BEN CH OF THE TRIBUNAL IN ACIT VS. CHANDRA PRAKASH 27 TAX WORLD 3 28 (JAIPUR BENCH) . 18. AT THE SAME TIME, LD. CIT (A) BROUGHT ON RECORD THE FACT THAT THE ASSESSEE WAS HAVING SURPLUS FUND OF RS.133.06 C RORES I.E (RS.119.3 CRORES ON ACCOUNT OF RESERVES & SURPLUS A ND RS.13.7 CRORES ON ACCOUNT OF SHARE CAPITAL) IN ITS KITTY. WHEN THE ASSESSEE ITA NO.1122/DEL./2018 ITA NO.1123/DEL./2018 10 WAS HAVING SURPLUS FUND OF RS.133.06 CRORES DURING THE YEAR UNDER CONSIDERATION, ADVANCING OF INTEREST FREE LOAN OF R S.35.42 CRORES TO ITS SUBSIDIARIES IS NOT TO ATTRACT ANY DISALLOWANCE ON ACCOUNT OF PROPORTIONATE INTEREST ON ADVANCES MADE TO THE SUBS IDIARIES. SO, LD. CIT (A) HAS RIGHTLY DELETED THE ADDITION, HENCE GRO UND NO.3 OF AY 2014-15 IS DETERMINED AGAINST THE REVENUE. GROUND NO.4 OF AY 2014-15 19. THE REVENUE BY RAISING GROUND NO.4 CHALLENGED T HE DELETION OF ADDITION MADE BY THE AO ON ACCOUNT OF D ISALLOWANCE OF INTEREST EARNED BY THE ASSESSEE COMPANY ON FDR. HO WEVER, ON THE OTHER HAND, LD. AR FOR THE ASSESSEE CONTENDED THAT THE ISSUE HAS BEEN DECIDED BY THE LD. CIT (A) IN ACCORDANCE WITH THE LAW APPLICABLE TO THE FACTS AND IN VIEW OF THE LAW LAID DOWN BY HONBLE JURISDICTIONAL HIGH COURT IN CASE OF CIT VS . JAYPEE DSC VENTURES LTD. (2012) 17 TAXMANN.COM 257 (DELHI) . 20. IN SCHEDULE 19, ASSESSEE HAS REDUCED THE INTERE ST INCOME EARNED ON BANK DEPOSITS AMOUNTING TO RS.20,05,747/- FROM THE INTEREST EXPENSES INCURRED DURING THE YEAR. DECLIN ING THE CONTENTIONS RAISED BY THE ASSESSEE, AO CHARGED THE INCOME EARNED FROM DEPOSITS IN THE BANK UNDER THE HEAD INCOME FR OM OTHER SOURCES AND MADE ADDITION THEREOF TO THE INCOME OF THE ASSESSEE. ITA NO.1122/DEL./2018 ITA NO.1123/DEL./2018 11 21. UNDISPUTEDLY, ASSESSEE SUBMITTED A BANK GUARANT EE TO THE CENTRAL WAREHOUSING CORPORATION AS A PRE-CONDITION FOR CONTRACT AND TO SOME CHAIN TRAIN OPERATORS FOR LEASE OF CONT AINERS. IT IS ALSO NOT IN DISPUTE THAT IN CONSIDERATION TO THE AF ORESAID BANK GUARANTEE, ASSESSEE DEPOSITED MARGIN WITH THE BANKS IN THE FORM OF FDR ON WHICH IT HAS EARNED INTEREST AND THEREBY DED UCTED THE SAME FROM THE INTEREST INCOME. 22. ASSESSEES CLAIM IS THAT DEPOSITS HAVE BEEN MAD E FOR THE BUSINESS PURPOSE AND HAVE NOT BEEN MADE OUT OF SURP LUS FUND TO EARN EXTRA INCOME AND AS SUCH, NO DISALLOWANCE IS A DMISSIBLE. 23. AFORESAID CONTENTIONS OF THE ASSESSEE HAVE BEEN CONSIDERED BY THE LD. CIT (A) AND DELETED THE SAME BY RETURNIN G FOLLOWING FINDINGS :- 5.4.4 IN THE LIGHT OF FACTS AS DISCUSSED ABOVE, TH E ISSUE ARISES WHETHER THE INTEREST INCOME ARISING OUT OF FOR KEPT AS MARGIN MONEY TO OBTAIN THE BANK GUARANTEE FOR SECURING THE CONTRACT/TO ENTER INTO AGREEMENT WITH THE CWC (THE CENTRAL WAREHOUSING CORPORATION) REQUIRES TO BE TREATED AS BUSINESS INCOME (AS CLAIMED BY THE APPELLANT) OR INCOME FROM OTHER SOURCES (AS TREATED BY THE LD. AO IN THE IMPUGNED O RDER). 5.4,5 IT IS ASCERTAINED FROM THE DOCUMENT SUBMITTED BY THE APPELLANT LIKE AGREEMENT WITH THE CWC, BANK GUARANT EE DOCUMENT BY THE BANKS TO THE CWC, TERM AND CONDITIO N MENTIONED IN THE SANCTIONED LETTER FOR BANK GUARANT EE ETC, AND FACT OF THE CASE DISCUSSED ABOVE THAT AS A PRECONDI TION TO SECURE THE CONTRACT/AGREEMENT WITH THE CW C, THE APPELLANT WAS UNDER OBLIGATION TO SUBMIT BANK GUARANTEE TO THE CW C AND FOR THIS REASON, THE APPELLANT HAD TO KEEP FOR AS M ARGIN MONEY WITH THE BANK TO OBTAIN THE SAID BANK GUARANT EE, IMPORTANTLY, THE ACT OF KEEPING FOR WITH THE BANK I S APPARENTLY A COMPULSION ON THE PART OF THE APPELLAN T WHICH INDICATES A DIRECT NEXUS BETWEEN THE INTEREST INCOM E ON ACCOUNT ITA NO.1122/DEL./2018 ITA NO.1123/DEL./2018 12 OF THIS FOR AND THE BUSINESS ACTIVITY, THUS, THIS I NTEREST INCOME ATTAINS THE CHARACTER OF BUSINESS INCOME AS HELD IN THE CASE OF CIT VS JAYPEE OSC VENTURES LTD. (2012) 17 TAXMANN.COM 257 (DELHI) WHEREIN THE HON'BLE DELHI H IGH COURT HAS INTERALIA OBSERVED THAT: IT WAS APPARENT FROM RECORDS THAT BANK GUARA NTEE WAS FURNISHED AS A CONDITION PRECEDENT TO ENTERING INTO CONTRACT AND FURTHER IT WAS TO BE KEPT ALIVE TO FULFILL CERT AIN OBLIGATIONS. QUITE APART FROM THE ABOVE, THE RELEASE OF THE SAME WAS DEPENDENT ON THE SATISFACTION OF CERTAIN CONDITIONS . THUS, THE INSTANT CASE IS NOT ONE WHERE THE ASSESSEE HAD MADE THE DEPOSIT OF SURPLUS MONEY LYING IDLE WITH IT IN ORDER TO EAR N INTEREST; ON THE CONTRARY, THE AMOUNT OF INTEREST WAS EARNED FRO M FIXED DEPOSITS WHICH WERE KEPT IN THE BANK FOR FURNISHING THE BANK GUARANTEE. IT HAD AN INEXTRICABLE NEXUS WITH SECURI NG THE CONTRACT ..... ' AND THEREFORE, THE SAID INTEREST I NCOME WAS ALLOWED TO BE TREATED AS BUSINESS INCOME. 5.4.6 RELIANCE IS ALSO PLACED ON THE JUDICIAL DECIS ION IN THE CASE OF EMPIRE PUMPS (P) LTD. VS ACIT (2015) 54 TAXMANN.COM 317 (GUJARAT) WHEREIN HON'BLE HIGH COUR T OF GUJARAT HAS TAKEN INTO CONSIDERATION THE JUDGMENT I N THE CASE OF CIT VS JAYPEE DSC VENTURES LTD. CITED (SUPRA) WH ILE DECIDING THE ISSUE PERTAINING TO SECTION 801 OF THE ACT AND HELD THEREIN: 1(10) ... THUS, IT IS CLEAR THAT THE INCOME EARNE D FROM FIXED DEPOSIT PLACED FOR BUSINESS PURPOSE CANNOT BE TREATED AS INCOME FROM OTHER SOURCE BUT MUST BE SEE N AS PART OF THE ASSESSEE'S BUSINESS INCOME. IN THE PRES ENT CASE ALSO THE ASSESSEE WAS COMPELLED TO PARK A PART OF ITS FUNDS IN FIXED DEPOSITS UNDER THE INSISTENCE OF THE FINANCIAL INSTITUTIONS AND THEREFORE THE INCOME REC EIVED THEREUPON CANNOT BE TERMED TO BE INCOME FROM OTHER SOURCES ... ' 5.4.7 IN VIEW OF THE FACTUAL MATRIX OF THE CASE AND JUDICIAL PRONOUNCEMENTS CITED SUPRA INCLUDING THAT OF JURISD ICTIONAL HIGH COURT OF DELHI, I FIND THAT THIS GROUND OF APP EAL IS COVERED UNDER THE RATIO AND DECISION OF THE CASES A ND THEREFORE, DESERVES TO BE DECIDED IN FAVOUR OF APPELLANT. ACCO RDINGLY, THE INTEREST INCOME OF RS.20,05,747/- IS DIRECTED TO BE TREATED AS INCOME FROM BUSINESS 'AND PROFESSION SO MU.CH SO TH E SAME SHOULD BE ALLOWED FOR COMPUTATION OF DEDUCTION U/S 80IA OF THE ACT. ITA NO.1122/DEL./2018 ITA NO.1123/DEL./2018 13 24. WE HAVE PERUSED THE AFORESAID FINDINGS WHICH AR E STRICTLY ON FACTS IN THE LIGHT OF THE LAW LAID DOWN BY HONBLE DELHI HIGH COURT IN CASE OF CIT VS. JAYPEE DSC VENTURES LTD. ( 2012) 17 TAXMANN.COM 257 (DELHI), THE RATIO OF WHICH IS THAT, WHEN A BANK GUARANTEE IS FURNISHED AS A CONDITION PRECEDEN T TO ENTERING INTO A CONTRACT AND FURTHER IT HAS TO BE KEPT ALIVE TO FULFILL CERTAIN OBLIGATIONS AND THE FIXED DEPOSITS HAVE NOT BEEN MA DE OUT OF THE SURPLUS FUNDS AVAILABLE WITH THE ASSESSEE, THE SAME IS TO BE TREATED AS BUSINESS INCOME. SINCE JUDGMENT OF BY HONBLE JURISDICTIONAL HIGH COURT IN CASE OF CIT VS. JAYPEE DSC VENTURES LTD. (SUPRA) IS SQUARELY APPLICABLE TO THE FACTS OF THE CASE AT HAND, LD. CIT (A) HAS RIGHTLY DELETED THE A DDITION. SO, GROUND NO.,4 OF AY 2014-15 IS DETERMINED AGAINST TH E REVENUE. 25. RESULTANTLY, BOTH THE APPEALS FOR THE ASSESSMEN T YEARS 2013-134 & 2014-15 FILED BY THE REVENUE ARE DISMISS ED. ORDER PRONOUNCED IN OPEN COURT ON THIS 28 TH DAY OF OCTOBER, 2021 AFTER THE CONCLUSION OF THE VIRTUAL HEARING. SD/- SD/- (R.K. PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 28 TH DAY OF OCTOBER, 2021 TS ITA NO.1122/DEL./2018 ITA NO.1123/DEL./2018 14 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-1, GURGAON. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.