M/s Bhavya Cements Limited, Hyderabad V. DCIT, Central Circle -5, Hyderabad

ITA 1650/HYD/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7639 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 14-07-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 05-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Keywords: Search and seizure; Source of fund

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICAL MEMBER ITA.NO.1648, 1649 & 1650/HYD/2012 ASSESSMENT YEARS 2008-09, 2009-10 & 2010-11 M/S. BHAVYA CEMENTS LTD., HYDERABAD. PAN AADCB-1182-A VS. DCIT, CC-5 HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. A. SRINIVAS FOR REVENUE : MR. D. SUDHAKAR RAO DATE OF HEARING : 25.08.2014 DATE OF PRONOUNCEMENT 03.09.2014 ORDER PER B. RAMAKOTAIAH, A.M. THESE THREE APPEALS ARE BY ASSESSEE AGAINST THE O RDER OF THE LD. CIT(A) COMMON ORDER FOR A.YS. 2008-09, 2 009-10 DATED 18.07.2012 AND ANOTHER ORDER FOR A.Y. 2010-11 OF TH E SAME DAY. SINCE COMMON ISSUES ARE INVOLVED, THESE THREE APPEA LS ARE HEARD TOGETHER AND DECIDED BY THIS COMMON ORDER. 2. AT THE OUTSET, THE APPEALS ARE FILED WITH DELAY OF 2 DAYS AND ASSESSEE HAS FURNISHED VALID REASONS FOR F ILING THE APPEAL. IT WAS EXPLAINED THAT MANAGING DIRECTOR WAS AWAY TRAVELLING AND COULD NOT REACH HYDERABAD ON THE DUE DATE. THEREFORE, THE APPEAL WAS FILED WITH A DELAY OF 2 D AYS. CONSIDERING 2 ITA.NO.1648, 1649 & 1650/HYD/2012 M/S. BHAVYA CEMENTS LTD., HYDERABAD THE AFFIDAVIT AND SUBMISSIONS, WE CONDONE THE DELAY AND ADMIT THE APPEALS. 2.1. ALL THREE APPEALS ARE ON COMMON ISSUE OF BRI NGING TO TAX THE INTEREST EARNED DURING THE PRE-OPERATIVE PE RIOD OF THE ASSESSEE COMPANY. ASSESSEE COMPANY WAS INCORPORATED ON 16.04.2007 WITH A INTENTION OF MANUFACTURING OF CEM ENT. IT PERTAIN TO THE GROUP OF SRI VENIGALLA ANANDA PRASAD AND BHA VYA CONSTRUCTIONS AND SEARCH AND SEIZURE OPERATIONS WER E CARRIED ON 07.10.2009. FOR THE YEARS UNDER REFERENCE, RETURNS WERE FILED DECLARING NIL INCOME. A.O. NOTICED THAT ASSESSEE HA S EARNED INTEREST IN RESPECTIVE YEARS AS UNDER : A.Y. INTEREST EARNED (RS.) 2008-09 5,14,834 2009-10 15,45,397 2010-11 71,94,260 2.2. ASSESSING OFFICER WAS OF THE OPINION THAT TH E INTEREST EARNED HAS TO BE TREATED AS INCOME FROM OT HER SOURCES AND CANNOT BE SET OFF TO PRE-OPERATIVE EXPENDITURE AS WAS DONE BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS. THEREFORE, H E BROUGHT THE AMOUNTS TO TAX IN THE RESPECTIVE ASSESSMENT YEARS. 3. BEFORE THE LD. CIT(A) IT WAS SUBMITTED THAT ASS ESSEE HAD PARKED ITS BUSINESS FUNDS TEMPORARILY IN THE FO RM OF SHORT TERM DEPOSITS WITH THE BANKS AND THE SOURCES FOR TH E AMOUNTS ARE SHARE APPLICATION MONEY AS WELL AS TERM LOANS OBTAI NED. ASSESSEE SUBMITTED THAT THERE ARE NO SURPLUS FUNDS AND INTER EST EARNED HAS TO BE ADJUSTED IN THE PRE-OPERATIVE EXPENDITURE. WI THOUT PREJUDICE TO THE CONTENTION, ASSESSEE ALSO GAVE BIFURCATION T HAT AMOUNTS OF 3 ITA.NO.1648, 1649 & 1650/HYD/2012 M/S. BHAVYA CEMENTS LTD., HYDERABAD INTEREST EARNED IN A.Y. 2008-09 WAS ENTIRELY FROM T HE SHARE APPLICATION MONEY WHEREAS IN A.Y. 2009-10 AN AMOUNT OF RS.2,65,798 WAS EARNED ON SHARE APPLICATION MONEY W HEREAS BALANCE OF RS.12,79,599 AND THE ENTIRE INTEREST IN A.Y. 2010-11 WAS EARNED ON TERM LOAN OBTAINED WHICH ARE PARKED W ITH THE SAME BANK PENDING PURCHASE OF MACHINERY ETC., ASSESSEE R ELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F CIT VS. BOKARO STEELS LTD., 236 ITR 315 AND ALSO VARIOUS OT HER DECISIONS AS LISTED IN LD. CIT(A) ORDER IN PARA 5.2 IN PAGE 4 . 3.1. LD. CIT(A) WITHOUT EXAMINING THE FACTS OF THE CASE, HOWEVER, ANALYSED THE POSITION OF LAW AND CONFIRMED THE AMOUNTS IN HIS DETAILED ORDER RUNNING FROM PARAS 5.4 TO 5.1 0. WE DO NOT INTEND TO EXTRACT THE DETAILED ANALYSIS OF THE CASE LAW ON THE ISSUE BY THE LD. CIT(A). 4. LD. COUNSEL SUBMITTED THAT THE INTEREST WAS EAR NED OUT OF THE BUSINESS FUNDS WHICH CANNOT BE TREATED A S SURPLUS AND THEREFORE, THE AMOUNTS ARE RIGHTLY ADJUSTED TO THE PRE-OPERATIVE EXPENDITURE. 5. LD. D.R. HOWEVER RELIED ON THE ORDERS OF THE A. O. AND LD. CIT(A) ON THE ISSUE. 6. AFTER PERUSING THE ANNUAL RETURNS PLACED ON REC ORD AND SUBMISSIONS BEFORE THE LD. CIT(A), WE ARE OF TH E OPINION THAT BOTH THE A.O. AND LD. CIT(A) CONSIDERED THE ISSUE O NLY ON THE PRINCIPLES OF LAW WITHOUT EXAMINING THE FACTS OF TH E CASE. ASSESSEE IN FACT, BEFORE THE LD. CIT(A) GAVE A TABLE INDICAT ING THE INTEREST EARNED IN SHARE APPLICATION MONEY AND INTEREST EARN ED ON TERM LOANS WHICH ARE TEMPORARILY PARKED. THE LD. CIT(A) DID NOT EXAMINE THE FACTS AT ALL. WE ARE OF THE OPINION THA T THE DECISION AS 4 ITA.NO.1648, 1649 & 1650/HYD/2012 M/S. BHAVYA CEMENTS LTD., HYDERABAD TO TAX THE AMOUNT AS INCOME FROM OTHER SOURCES OR TO BE ALLOWED AS ADJUSTMENT IN PRE-OPERATIVE EXPENDITURE CANNOT B E DECIDED ON LEGAL PRINCIPLES ALONE, WITHOUT EXAMINING THE FACTS OF INTEREST EARNING BY THE ASSESSEE COMPANY. A.O. COULD HAVE EX AMINED THE DETAILS OF TDS CERTIFICATES TO VERIFY WHETHER THE D EPOSITS ARE FOR SHORT PERIOD OR THE DEPOSITS FOR A LONGER PERIOD DU RING THE YEARS 2008-09 TO 2009-2010. A.O. ALSO COULD HAVE EXAMINED THE SOURCE OF FUNDS WHETHER THERE ARE SHARE APPLICATION MONEY OR TERM LOANS DIRECTLY OBTAINED BY THE COMPANY FOR PURCHASE OF MACHINERY/ASSETS OR FOR WORKING CAPITAL. A.O. ALSO REQUIRED TO EXAMINE WHETHER THERE ARE ANY MARGIN MONEY DEPOSITS OR ANY OTHER COMPULSORY DEPOSITS REQUIRED WHILE CONDUCTING BUSINESS ACTIVITY. A.O. CAN AS WELL OBTAIN THE RELEVANT LEDG ER COPIES OF THE INTEREST EARNED/FIXED DEPOSITS MADE SO AS TO ANALYS E WHETHER ASSESSEE HAD SURPLUS FUNDS OR ONLY BUSINESS FUNDS T EMPORARILY PARKED IN DEPOSITS. UNLESS THESE FACTS ARE EXAMINED , IT IS NOT POSSIBLE TO DECIDE THE ISSUE ONLY ON LEGAL PRINCIPL ES. IN VIEW OF THIS, WE ARE OF THE OPINION THAT THE ISSUE REQUIRES DETAI LED EXAMINATION FIRST TO ANALYSE THE FACTS OF EARNING THE INTEREST AND THEN TO DECIDE IN VIEW OF JUDGMENTS OF HONBLE SUPREME COURT IN TH E CASE OF BOKARO STEELS LTD. 236 ITR 315 (SC) WHEREIN THE AMO UNTS ARE TO BE ADJUSTED IN THE PRE-OPERATIVE EXPENDITURE OR ON THE BASIS OF DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD., VS. CIT 227 IT R 122 WHEREIN THE INTERESTS ARE CONSIDERED AS INCOME FROM OTHER S OURCES. A.O. IS ALSO DIRECTED TO KEEP IN MIND THE DECISION OF HONB LE SUPREME COURT IN THE CASE OF KARNAL COOPERATIVE SUGAR MILLS 243 ITR 2 AND ALSO THE DECISION OF HONBLE DELHI HIGH COURT IN TH E CASE OF INDIAN OIL PANIPAT POWER CONSORTIUM VS ITO 315 ITR 255 IN ANALYZING THE FACTS AND DECIDING ACCORDING TO THE PRINCIPLES OF L AW ON THE ISSUE. FOR THIS PURPOSE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND A.O. 5 ITA.NO.1648, 1649 & 1650/HYD/2012 M/S. BHAVYA CEMENTS LTD., HYDERABAD AND RESTORE THE ISSUE TO THE FILE OF A.O. FOR FRESH CONSIDERATION ACCORDING TO THE FACTS AND LAW. 7. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 03.09.2014. SD/- SD/- (SAKTIJIT DEY) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 03 RD SEPTEMBER, 2014 VBP/- COPY TO 1. M/S. BHAVYA CEMENTS LTD., PLOT NO.A-1, 2 ND FLOOR, BHAVYA SPOORTHI, ROAD NO.1, JUBILEE HILLS, HYDERABA D. 2. DCIT, CENTRAL CIRCLE-5, AAYAKAR BHAVAN, BASHEERB AGH, HYDERABAD. 3. CIT(A)-VII, HYDERABAD 4. CIT-(CENTRAL), HYDERABAD 5. D.R. B BENCH, ITAT, HYDERABAD.