Appeal Details
Counselvise Citation
16920514 RSA 2010
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 10 month(s) 14 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
02-12-2011
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
B
Assessment Year
1995-1996
Appeal Filed On
19-01-2010
Judgement Text
, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, B BENCH . .. . . .. . , !' !' !' !', , , , #$ #$ #$ #$ # ## #. .. .% $% % $% % $% % $%, , , , &' ( &' ( &' ( &' ( & ' & ' & ' & ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER) ITA NO.169 AND 170/AHD/2010 [ASSTT.YEAR : 1995-96 AND 2005-2006] DADRA NAGAR HAVELI SAHAKARI KHAND UDYOG MANDALI LTD., S.NO.287/A, VILLAGE : SURANGI VIA: KHADOLI DADRA NAGAR HAVELI, SILVASSA. PAN : AAAAK 0901 F /VS. ITO, WARD-1 VAPI. ( (( (*+ *+ *+ *+ / APPELLANT) ( (( (,-*+ ,-*+ ,-*+ ,-*+ / RESPONDENT) ./ 0 1 &/ ASSESSEE BY : SHRI R.N.VEPARI ( 0 1 &/ REVENUE BY : SHRI SAMIR TEKRIWAL 3 0 /4'/ DATE OF HEARING : 23 RD NOVEMBER, 2011 5%6 0 /4'/ DATE OF PRONOUNCEMENT : 2 ND DECEMBER, 2011 &7 / O R D E R PER G.C. GUPTA, VICE-PRESIDENT: THESE TWO APPEALS BY THE ASSESSEE FOR THE A.Y.1995-96 AND 2005-2006 ARE DIRE CTED AGAINST THE ORDER OF THE CIT(A). SINCE IDENTICAL ISSUES ARE IN VOLVED IN BOTH THE APPEALS, THESE ARE DISPOSED WITH THIS CONSOLIDATED ORDER. 2. THE ONLY ISSUE IN BOTH THESE APPEALS OF THE ASSE SSEE IS REGARDING THE VALIDITY OF THE PENALTY IMPOSED UNDER SECTION 271(1 )(C) OF THE INCOME TAX ACT, 1961 ON THE ASSESSEE. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ASSESSEE- COOPERATIVE SOCIETY WAS ENGAGED IN THE BUSINESS OF ESTABLISHING SUGAR FACTORY IN NOTIFIED BACKGROUND AREA OF DADRA NAGAR HAVELI, UNION ITA NO.169 AND 170/AHD/2010 -2- TERRITORY. HE SUBMITTED THAT IN ORDER TO GRANT BEN EFIT TO THE TRIBAL POPULATION OF THIS AREA, THE CENTRAL GOVERNMENT HAS GIVEN A PACKAGE, ACCORDING TO WHICH, THE GOVERNMENT WAS TO CONTRIBUT E SHARE CAPITAL OF THE FACTORY TO THE EXTENT OF 32.5% OF THE TOTAL PROJECT COST AND 7.5% OF THE PROJECT COST WAS TO BE CONTRIBUTED BY THE SUGARCANE GROWER MEMBERS AND CO-OPERATIVE INSTITUTIONS IN THE AREA. THE BALANCE 60% OF THE PROJECT COST WAS TO BE RAISED BY WAY OF TERM LOAN. HE SUBMITTED THAT THE TOTAL PROJECT INITIALLY WAS ESTIMATED AT RS.15 CRORES AND THE GOV ERNMENT CONTRIBUTED ITS SHARE OF SHARE CAPITAL OF RS.4.45 CRORES UNDER LETT ER DATED 27.03.1991 AND 26.03.1992. DUE TO SOME COMPELLING CIRCUMSTANCES, THE PROJECT COULD NOT BE STARTED AND THE COST OF THE PROJECT INCREASE D TO RS.24.75 CRORES DUE TO DELAY AND THE CONTRIBUTION OF THE GOVERNMENT TOW ARDS SHARE CAPITAL WAS INCREASED TO APPROX. RS.7.25 CRORES. HE SUBMITTED THAT ONE OF THE CONDITIONS FOR THE GOVERNMENT CONTRIBUTION WAS THAT THE SHARE CAPITAL CONTRIBUTION TILL IT WAS REQUIRED, HAD TO REMAIN DE POSITED WITH THE NATIONALISED BANK AND WAS NOT TO BE WITHDRAWN WITHO UT THE PRIOR APPROVAL OF THE ADMINISTRATOR, UNION TERRITORY. ACCORDINGL Y, THE INTEREST RECEIVED ON FIXED DEPOSITS OF THE GOVERNMENT CAPITAL CONTRIB UTION WAS DIRECTLY TAKEN TO RESERVE ACCOUNT. THE LEARNED COUNSEL FO R THE ASSESSEE SUBMITTED THAT THE PROJECT COST WAS REVISED LATER O N AND WAS WORKED OUT TO RS.50 CRORES AND THE GOVERNMENT CONTRIBUTION WAS RS .16.25 CRORES OF WHICH APPROX. RS.7.25 CRORES WAS ALREADY RELEASED B Y THE GOVERNMENT. ON THE INVESTMENT OF RS.7.25 CRORES WITH NATIONALIS ED BANKS, THE INTEREST OF ABOUT RS.4.95 CRORES WAS EARNED TILL 31.3.1997 A ND THE GOVERNMENT DIRECTED THAT THIS INTEREST MAY BE CONSIDERED AS PA RT OF SHARE CAPITAL CONTRIBUTION THAT IT WAS REQUIRED TO MAKE. HE SUBM ITTED THAT THE ASSISTANT REGISTRAR, CO-OPERATIVE SOCIETY, SILVASSA VIDE HIS LETTER DATED 24.9.1999 REQUIRED THE ASSESSEE TO ISSUE SHARE CERTIFICATE IN THE NAME OF PRESIDENT ITA NO.169 AND 170/AHD/2010 -3- OF INDIA FOR THE TOTAL INTEREST ACCRUED ON INVESTM ENT OF GOVERNMENT SHARE CAPITAL UPTO 31.03.1999. HE SUBMITTED THAT THE DEP ARTMENT HAS TAKEN A VIEW THAT THIS INTEREST AMOUNT WAS INCOME IN THE HA NDS OF THE ASSESSEE AND SHOULD HAVE BEEN OFFERED FOR TAXATION. HE SUBM ITTED THAT THE ASSESSEE HAS BONA FIDE BELIEF THAT IT HAD NO DOMAIN OVER THE INTEREST AMO UNT AS THE CENTRAL GOVERNMENT HAS CONSIDERED IT AS ITS OWN FUN D RIGHT FROM THE DAY ONE WHEN IT AGREED TO GIVE PACKAGE TO THE SOCIETY. THE ADDITION ON THIS INTEREST AMOUNT BY THE AO WAS CONFIRMED IN QUANTUM APPEAL OF THE ASSESSEE BY THE CIT(A) AND THE TRIBUNAL. THE ASSES SEE HAS FILED APPEAL AGAINST THE ORDER OF THE TRIBUNAL WITH BOMBAY HIGH COURT VIDE INCOME TAX APPEAL NO.258 OF 2006 AND THE SAME HAS BEEN ADM ITTED BY THE HONBLE HIGH COURT. IN THESE FACTS, THE AO HAS LEV IED PENALTY UNDER SECTION 271(1)(C) OF THE ACT FOR NON-DISCLOSURE OF THE INTEREST AMOUNT FOR THE RELEVANT FINANCIAL YEARS, AGAINST WHICH THE APP EAL PREFERRED TO THE CIT(A) WAS DISMISSED AND THE ASSESSEE HAS COME IN A PPEAL BEFORE THE TRIBUNAL. THE LEARNED COUNSEL SUBMITTED THAT THE BONA FIDE BELIEF OF THE ASSESSEE IS CLEAR IN THE FACTS OF THE CASE. HE SUB MITTED THAT IN FACT THE PRINCIPLE OF OVER-RIDING TITLE APPLIES TO THE FACTS OF THE CASE AS THE ASSESSEE HAS NEVER RECEIVED THE INTEREST AMOUNT AND THE INTE REST INCOME NEVER ACCRUED TO IT. HE REFERRED TO VARIOUS LETTERS OF T HE ADMINISTRATOR OF DADRA AND NAGAR HAVELI, UNION TERRITORY WHEREIN THE ASSES SEE WAS DIRECTED THAT THE INTEREST EARNED ON SHARE CAPITAL CONTRIBUTION B Y THE CENTRAL GOVERNMENT KEPT IN SPECIAL ACCOUNT OF SILVASSA BRAN CH OF THE STATE BANK OF INDIA AS RESERVE WAS NOT PERMITTED TO BE WITHD RAWN WITHOUT PRIOR APPROVAL OF THE ADMINISTRATOR OF THE UNION TERRITOR Y. HE REFERRED TO THE LETTER DATED 6-11-1998 FROM THE ADMINISTRATOR, DADR A AND NAGAR HAVELI, UNION TERRITORY WHEREIN THE ASSESSEE WAS DIRECTED T HAT THE INTEREST ACCRUED ON GOVERNMENT SHARE CAPITAL CONTRIBUTION BE ADJUSTED AGAINST THE ITA NO.169 AND 170/AHD/2010 -4- ADDITIONAL SHARE CAPITAL CONTRIBUTION BY THE ADMINI STRATION. THE LEARNED COUNSEL FOR THE ASSESSEE REFERRED TO THE LETTER OF THE ADMINISTRATOR OF DADRA AND NAGAR HAVELI, UNION TERRITORY DATED 24.09 .1999 WHEREIN THE ASSESSEE WAS INFORMED TO ADJUST THE INTEREST EARNED ON CENTRAL GOVERNMENT SHARE CAPITAL CONTRIBUTION AS AN ADDITIONAL SHARE C APITAL CONTRIBUTION BY THE ADMINISTRATION AND IT WAS SPECIFICALLY MADE CLE AR THAT TO ISSUE SHARE CERTIFICATE FOR INTEREST ACCRUED ON THE GOVERNMENT SHARE AMOUNT UPTO 31- 3-1999 IN THE NAME OF PRESIDENT OF INDIA AS THE I NTEREST WAS TERMED AS ADDITIONAL SHARE FROM THE ADMINISTRATION. HE SUBMI TTED THAT CONTENTS OF VARIOUS LETTERS FROM ADMINISTRATION OF DADRA AND NA GAR HAVELI CLEARLY SHOWED THAT THE INTEREST BELONGED TO THE CENTRAL GO VERNMENT AND THEREFORE THE AMOUNT WAS NOT INCLUDIBLE IN THE HANDS OF THE A SSESSEE. HE RELIED ON A SERIES OF DECISIONS, CITATIONS OF WHICH WERE GIVEN FROM PAGE NOS.16 TO 21 OF THE COMPILATION FILED BY THE ASSESSEE. 4. THE LEARNED DR HAS OPPOSED THE SUBMISSIONS OF TH E LEARNED COUNSEL FOR THE ASSESSEE. HE SUBMITTED THAT THERE WAS NO DOMAIN OF THE CENTRAL GOVERNMENT OVER THE INTEREST INCOME ACCRUED ON THE CONTRIBUTION MADE BY THE CENTRAL GOVERNMENT AND THERE WAS NO DIR ECTION OF THE CENTRAL GOVERNMENT TO THE ASSESSEE FOR NON-UTILISAT ION OF INTEREST AMOUNT FOR ITS BUSINESS PURPOSE. HE SUBMITTED THAT VARIOU S DECISIONS RELIED UPON BY THE LEARNED COUNSEL ARE DISTINGUISHABLE SINCE IN THESE CASES, THE ASSESSEE HAS SHOWN THE INCOME AND THEN CLAIMED THAT THE SAME WAS NOT LIABLE TO TAX WHEREAS IN THE CASE OF THE ASSESSEE, THE ASSESSEE HAS NOT SHOWN ANY INCOME AT ALL. HE SUBMITTED THAT IT IS N OT A CASE WHERE THE ASSESSEE HAS CLAIMED CERTAIN DEDUCTIONS AND THE AO HAS DISALLOWED. THE LEARNED DR SUBMITTED THAT THE LATER EVENT THAT THE GOVERNMENT HAS DIRECTED TO CONVERT THE RESERVE AMOUNT INTO SHARE C APITAL OF THE ITA NO.169 AND 170/AHD/2010 -5- GOVERNMENT, ARE NOT RELEVANT SINCE ONE HAS TO SEE T HE CONDUCT OF THE ASSESSEE DURING THE RELEVANT PERIOD. HE SUBMITTED THAT THE LETTER OF ADMINISTRATOR OF THE DADRA AND NAGAR HAVELI, UNION TERRITORY TO ISSUE SHARE CERTIFICATE FOR THE AMOUNT OF INTEREST ACCRUE D ON THE GOVERNMENT SHARES UPTO 31-3-1999 IN THE NAME OF THE PRESIDENT OF INDIA WAS DATED 24- 9-1999 WHICH WAS MUCH BEYOND THE ASSESSMENT YEAR 19 95-1996. HE RELIED ON THE FOLLOWING DECISIONS IN SUPPORT OF HIS ARGUMENTS: I) TOTGAR'S CO-OPERATIVE SALE SOCIETY LTD. V. INCOME-T AX OFFICER, 322 ITR 283 (SC) II) CIT VS. ZOOM COMMUNICATION LTD., 327 ITR 510 (DEL) ; III) PSB INDUSTRIES INDIA P. LTD. VS. CIT, ITA NO.792 OF 2011 DATED JULY 11, 2011, DELHI HIGH COURT IV) ORDER OF THE ITAT, AHMEDABAD B BENCH IN ITA NO.3229/AHD/2010 DATED 20.10.2011; THE LEARNED DR SUBMITTED THAT THE INTEREST INCOME E ARNED BY THE ASSESSEE ON ITS FDRS WITH STATE BANK OF INDIA WAS CREDITED B Y THE ASSESSEE TO RESERVE ACCOUNT AND NOT TO ITS PROFIT & LOSS ACCO UNT. HE SUBMITTED THAT THE ASSESSEE HAS NOT CLAIMED ANY EXEMPTION ON THE I NTEREST AMOUNT AND HENCE NOT TAKEN THE SAME TO ITS PROFIT AND LOSS ACC OUNT FILED ALONG WITH ITS RETURN OF INCOME. HE SUBMITTED THAT THIS CONDUCT O F THE ASSESSEE TAKES AWAY THE CASE OF THE ASSESSEE FROM BONA FIDE CONDUCT AS THE EXPLANATION OF THE ASSESSEE WAS NOT JUSTIFIABLE AS THE ASSESSEE HAS EARNED INTEREST INCOME DURING THE RELEVANT YEAR AND THE REDEMPTION TO THE CENTRAL GOVERNMENT WAS MUCH LATER. HE RELIED ON THE ORDERS OF THE AO AND THE CIT(A). 5. THE LEARNED COUNSEL FOR THE ASSESSEE IN HIS REJO INDER SUBMITTED THAT THE CASE LAWS CITED BY THE LEARNED DR ARE DISTINGUI SHABLE SINCE THEY PERTAIN TO THE CASES WHERE UNSUSTAINABLE CLAIM HAS BEEN MADE BY THE ITA NO.169 AND 170/AHD/2010 -6- ASSESSEE. HE SUBMITTED THAT THE ASSESSEE HAS MADE BONA FIDE CLAIM AND THE ISSUE IS PENDING BEFORE THE HONBLE BOMBAY HIGH COURT IN THE QUANTUM APPEAL OF THE ASSESSEE. HE SUBMITTED THAT FROM DAY ONE, THE CENTRAL GOVERNMENT WAS ENTITLED TO THE INTEREST ACC RUED ON THE AMOUNT GIVEN BY IT AND THE INTEREST AMOUNT WAS CONVERTED I NTO SHARE CAPITAL OF THE CENTRAL GOVERNMENT IN THE NAME OF THE PRESIDENT OF INDIA AND WAS NEVER IN THE DOMAIN OF THE ASSESSEE AND THE CLAIM OF THE ASSESSEE WAS BONA FIDE AND WAS A SUSTAINABLE CLAIM. 6. WE HAVE CONSIDERED RIVAL SUBMISSIONS CAREFULLY A ND HAVE PERUSED THE COPIES OF VARIOUS DOCUMENTS FILED IN THE COMPIL ATION BY THE ASSESSEE. WE FIND THAT THE ASSESSEE, A COOPERATIVE SOCIETY, W AS ENGAGED IN THE BUSINESS OF MANUFACTURING OF SUGAR AND MARKETING OF AGRICULTURE PRODUCE OF ITS MEMBERS. THE ASSESSEE SOCIETY WAS INCORPORA TED WITH MAIN BASIC OBJECT OF ESTABLISHING SUGAR FACTORY IN THE NOTIFIE D AREA OF DADRA AND NAGAR HAVELI, UNION TERRITORY. CENTRAL GOVERNMENT IN ORDER TO GRANT BENEFIT TO THE TRIBAL POPULATION OF THE AREA HAS EN COURAGED SETTING UP OF SUGAR FACTORY BY GIVING ATTRACTIVE FINANCIAL PACKAG ES, ACCORDING TO WHICH, THE GOVERNMENT WAS TO CONTRIBUTE THE SHARE CAPITAL OF THE FACTORY TO THE EXTENT OF 32.5% OF THE TOTAL PROJECT COST AND 7.5% OF THE PROJECT COST WAS CONTRIBUTED BY THE SUGARCANE GROWERS AND THE CO-OPE RATIVE INSTITUTIONS IN THE AREA AND THE BALANCE 60% OF THE PROJECT COST WA S TO BE RAISED BY WAY OF TERM LOAN. THE INITIAL PROJECT COST WAS ESTIMAT ED AT RS.15 CRORES AND THE GOVERNMENT CONTRIBUTION TOWARDS THE SHARE CAPIT AL COMES ABOUT RS.4.45 CRORES. LATER ON THE PROJECT COST WAS REVI SED UPWARD TO RS.24.75 CRORES DUE TO DELAY IN IMPLEMENTATION OF THE PROJEC T. CONSEQUENTLY, THE CONTRIBUTION OF THE GOVERNMENT TOWARDS SHARE CAPITA L INCREASED TO APPROX. RS.7.25 CRORES. SUBSEQUENTLY, A HIGH LEVEL TEAM OF EXPERTS OF THE ITA NO.169 AND 170/AHD/2010 -7- CENTRAL GOVERNMENT UNDERTOOK A STUDY OF THE UNIT AN D RECOMMENDED REVIVAL OF THE PROJECT AND THE REVISED PROJECT COST WAS WORKED OUT AT RS.50 CRORES. THE CONTRIBUTION OF THE GOVERNMENT IN THE REVISED PROJECT COST COMES TO RS.16.25 CROES OUT OF WHICH APPROX. RS.7.2 5 CRORES WERE ALREADY RELEASED BY THE CENTRAL GOVERNMENT. ONE OF THE CONDITIONS FOR CENTRAL GOVERNMENT CONTRIBUTION WAS THAT THE SHARE CAPITAL CONTRIBUTION TILL IT WAS REQUIRED, HAD TO REMAIN DEPOSITED WITH THE NATIONALISED BANKS AND WAS NOT TO BE WITHDRAWN WITHOUT PRIOR APPROVAL OF THE ADMINISTRATOR OF DADRA & NAGAR HAVELI, UNION TERRITORY. ONE IMPO RTANT CONDITION OF THE GOVERNMENT FOR ITS CONTRIBUTION TO THE PROJECT WAS THAT THE INTEREST EARNED ON DESIGNATED SPECIAL ACCOUNT WITH STATE BAN K OF INDIA WAS TO BE KEPT IN SPECIAL ACCOUNT AND WAS TO BE MAINTAINED AS RESERVE. THE ASSESSEE PURSUANT TO THIS CONDITION DIRECTLY TOOK T HE INTEREST RECEIVED ON FDR OF THE GOVERNMENT CAPITAL CONTRIBUTION TO RESE RVE ACCOUNT. THE ASSESSEE EARNED ON THIS INVESTMENT INTEREST OF ABOU T RS.4.95 CRORES TILL 31- 3-1997 AND THE ASSESSEE WAS DIRECTED VIDE LETTER OF THE ASSTT.REGISTRAR, CO-OPERATIVE SOCIETY, SILVASSA DATED 24.9.1999 TO I SSUE SHARE CERTIFICATE IN THE NAME OF THE PRESIDENT OF INDIA FOR THE TOT AL INTEREST ACCRUED ON INVESTMENT OF GOVERNMENT SHARE CAPITAL UPTO 31-3-19 99. IN THESE FACTS OF THE CASE, THE CLAIM OF THE ASSESSEE WAS THAT IT WAS NOT LIABLE TO INCOME TAX ON THE AMOUNT OF INTEREST ACCRUED ON CAPITAL CONTRI BUTION MADE BY THE CENTRAL GOVERNMENT WHICH WAS KEPT IN DESIGNATED SPE CIAL ACCOUNT WITH THE STATE BANK OF INDIA AND THE INTEREST THEREON WAS DI RECTED TO BE CONSIDERED AS PART OF THE SHARE CAPITAL CONTRIBUTION WHICH THE CENTRAL GOVERNMENT WAS REQUIRED TO MAKE. THE CLAIM OF THE ASSESSEE WAS T HAT THE PRINCIPLE OF DIVERSION BY OVER-RIDING TITLE APPLIES TO THE FACTS OF THE ASSESSEE, AS THE ASSESSEE WAS NEVER HAVING ANY DOMAIN OF THE INTERES T ACCRUED ON THE FDRS WITH THE SBI OF THE GOVERNMENT CONTRIBUTION AM OUNT, WHICH WAS ITA NO.169 AND 170/AHD/2010 -8- CONSIDERED AS PART OF THE SHARE CAPITAL CONTRIBUTIO N OF THE GOVERNMENT. THIS CLAIM OF THE ASSESSEE WAS REJECTED BY THE AO A ND APPEAL TO THE CIT(A) AND TO THE TRIBUNAL PREFERRED BY THE ASSESSE E WAS ALSO DISMISSED. WE FIND THAT THE PENALTY PROCEEDINGS AND THE ASSESS MENT PROCEEDINGS ARE INDEPENDENT TO EACH OTHER. THE ISSUE OF TAXABILITY OF INTEREST ACCRUED ON DESIGNATED SPECIAL ACCOUNT WITH THE SBI OF THE GOVE RNMENT CONTRIBUTION CONSIDERED AS PART OF SHARE CAPITAL CONTRIBUTION BY THE CENTRAL GOVERNMENT WAS DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL AN D THE ASSESSEE PREFERRED APPEAL TO THE HONBLE BOMBAY HIGH COURT V IDE INCOME-TAX APPEAL NO.258 OF 2006 WHICH HAS BEEN ADMITTED BY TH E HONBLE HIGH COURT. WE FIND THAT THE FACT THAT THE HONBLE HIGH COURT HAS ADMITTED THE ABOVE APPEAL OF THE ASSESSEE IN THE QUANTUM CASE, I TSELF SHOWS THAT THE ISSUE WAS DEBATABLE AND THE CLAIM OF THE ASSESSEE C OULD NOT BE OUTRIGHTLY REJECTED AS UNTENABLE OR UNSUSTAINABLE PER SE. THE FACT THAT THE ISSUE INVOLVES INTERPRETATION OF LAW AND HAS SUBSTANTIAL QUESTION OF LAW, IS SUFFICIENT TO TAKE AWAY THE CASE OF THE ASSESSEE FR OM THE CLUTCHES OF THE PENAL PROVISIONS OF SECTION 271(1)(C) OF THE ACT. THE FACT THAT THE ASSESSEE WAS DIRECTED BY THE ADMINISTRATOR OF DADRA AND NAGAR HAVELI, UNION TERRITORY VIDE ITS LETTER DATED 24.9.1999 TO ADJUST THE INTEREST EARNED ON SHARE CAPITAL OF THE CENTRAL GOVERNMENT A S ADDITIONAL SHARE CAPITAL BY THE ADMINISTRATION AND TO ISSUE THE SHAR E CERTIFICATE FOR THE INTEREST AMOUNT ON THE GOVERNMENT SHARE CAPITAL UPT O 31-3-1999 IN THE NAME OF PRESIDENT OF INDIA SHOWS THAT THE INTERES T AMOUNT WAS TERMED AND TREATED BY ALL CONCERNED AS ADDITIONAL SHARE CA PITAL FROM THE ADMINISTRATION. THIS ASPECT OF THE CASE COULD NOT BE CONTROVERTED BY THE REVENUE. THE ASSESSEE HAS FILED COPIES OF VARIOUS LETTERS FROM THE ADMINISTRATION OF DADRA AND NAGAR HAVELI, UNION TER RITORY, IN ITS COMPILATION WHICH CLEARLY SHOWS THAT THE INTEREST B ELONGED TO THE CENTRAL ITA NO.169 AND 170/AHD/2010 -9- GOVERNMENT AND ACCORDINGLY, THE ASSESSEES CLAIM TH AT THE INTEREST AMOUNT WAS NOT INCLUDIBLE IN ITS HANDS COULD NOT BE TERMED AS MAKING UNSUSTAINABLE AND FRIVOLOUS CLAIM. THE ARGUMENT OF THE LEARNED DR THAT THERE WAS NO DOMAIN OF THE CENTRAL GOVERNMENT OVER THE INTEREST INCOME ACCRUED ON THE CONTRIBUTION MADE BY THE CENTRAL GOV ERNMENT AND THERE WAS NO DIRECTION OF THE CENTRAL GOVERNMENT TO ASSES SEE FOR NON-UTILISATION OF THE INTEREST AMOUNT FOR ITS BUSINESS PURPOSE, IS NOT SUSTAINABLE SINCE THE ASSESSEE WAS DIRECTED TIME AND AGAIN VIDE VARIOUS L ETTERS FROM THE ADMINISTRATION OF DADRA & NAGAR HAVELI AND ALSO ASS TT.REGISTRAR, CO- OPERATIVE SOCIETIES, SILVASSA TO CONSIDER THE INTER EST AMOUNT AS PART OF THE SHARE CAPITAL CONTRIBUTION, THAT WAS REQUIRED TO BE MADE BY THE CENTRAL GOVERNMENT AND ALSO TO ISSUE SHARE CERTIFICATE IN T HE NAME OF THE PRESIDENT OF INDIA FOR THE TOTAL INTEREST AMOUNT ON INVESTMENT OF GOVERNMENT SHARE CAPITAL UPTO 31-3-1999. IN VIEW O F THESE DIRECTIVES BY THE AUTHORITIES, THERE IS NO REQUIREMENT OF ANY FUR THER DIRECTION TO THE ASSESSEE BY THE CENTRAL GOVERNMENT FOR NON-UTILISAT ION OF INTEREST AMOUNT FOR ITS BUSINESS PURPOSE. THE DECISIONS OF THE HON BLE COURTS RELIED UPON BY THE LEARNED DR PERTAINS TO THE CASES WHERE UNSUS TAINABLE CLAIM HAS BEEN MADE BY THE ASSESSEE AND IT WAS FOUND THAT THE ASSESSEE HAS NOT MADE A BONA FIDE CLAIM OF EXEMPTION/DEDUCTION. THE FACTS OF THE CA SE OF THE ASSESSEE WERE THAT THE ASSESSEE HAS MADE CLAIM WHICH COULD NOT BE TERMED AS FRIVOLOUS CLAIM AND THE HONBLE BOMBAY HI GH COURT HAS ALREADY ADMITTED QUANTUM APPEAL OF THE APPEAL OF TH E ASSESSEE. THE ARGUMENTS OF LEARNED DR THAT THE ASSESSEE SHOULD HA VE SHOWN THE INTEREST INCOME FIRST AND THEN IT COULD HAVE CLAIMED THE EXE MPTION THERETO AND SINCE THE ASSESSEE HAS NOT DONE SO, THE CONDUCT OF THE ASSESSEE COULD NOT BE SAID TO BE BONA FIDE , DEVOID OF ANY MERIT FOR THE REASONS THAT SINCE AS PER THE SCHEME OF THE GOVERNMENT COUPLED WITH VARIO US DIRECTIVES ISSUED ITA NO.169 AND 170/AHD/2010 -10- BY THE AUTHORITIES FROM TIME TO TIME, THE ASSESSEE WAS OBLIGED TO CONSIDER THE AMOUNT OF INTEREST EARNED IN DESIGNATED SPECIAL ACCOUNT OF THE SBI AS PART OF THE SHARE CAPITAL CONTRIBUTION OF THE CENTR AL GOVERNMENT AND THEREFORE THE ASSESSEE HAS VALIDLY HAD A BONA FIDE BELIEF THAT SINCE THE ASSESSEE HAS NO DOMAIN OVER THE INTEREST ACCRUED ON THE CAPITAL CONTRIBUTION AMOUNT OF THE CENTRAL GOVERNMENT, THE INTEREST AMOUNT WAS NOT THE INCOME OF THE ASSESSEE AND ACCORDINGLY NOT TAXABLE IN ITS HANDS. TO JUDGE THE VALIDITY OF THE PENALTY ORDER UNDER SE CTION 271(1)(C), THE OVERALL CONDUCT OF THE ASSESSEE IS IMPORTANT TO DEC IDE WHETHER THE A CLAIM OF THE ASSESSEE WAS BONA FIDE OR WAS TO HOODWINK THE DEPARTMENT. IN THIS CASE, WE FIND THAT IT COULD NOT BE SAID THAT TWO VI EWS ON THE ISSUE OF TAXABILITY OF THE INTEREST ACCRUED ON THE CENTRAL G OVERNMENT CAPITAL CONTRIBUTION KEPT IN THE DESIGNATED SPECIAL ACCOUNT WITH NATIONALISED BANK WERE NOT POSSIBLE. WE FIND THAT THE NATIONALISED B ANKS HAVE MADE TDS ON THE AMOUNT OF THE INTEREST ACCRUED ON THE CAPITA L CONTRIBUTION OF THE GOVERNMENT AND THE TDS CERTIFICATES WERE FILED BY T HE ASSESSEE ALONG WITH ITS RETURN OF INCOME AND THEREFORE IT COULD NO T BE SAID THAT THE MATERIAL FACTS RELEVANT FOR ITS ASSESSMENT WERE NOT DISCLOSED BY THE ASSESSEE BEFORE THE AO AT THE STAGE OF THE ASSESSME NT ITSELF. IN OUR CONSIDERED VIEW NO PRUDENT PERSON CAN TRY TO CONCEA L THE INCOME OR FILE INACCURATE PARTICULARS THEREOF, REGARDING WHICH, TH E COMPLETE DETAILS ARE FILED WITH THE AO AT THE ASSESSMENT STAGE IN THE FO RM OF TDS CERTIFICATES. THIS CONDUCT OF THE ASSESSEE TAKES AWAY THE CASE OF THE ASSESSEE FROM THE RIGOROUS OF PENAL PROVISIONS OF SECTION 271(1)(C) O F THE ACT. IN OUR CONSIDERED VIEW, THE ISSUE OF TAXABILITY OF INTERES T ACCRUED ON SHARE CAPITAL CONTRIBUTION OF THE CENTRAL GOVERNMENT IN T HE HANDS OF THE ASSESSEE WAS HIGHLY DEBATABLE FOR WHICH THERE COULD POSSIBLY AND VALIDLY BE TWO VIEWS AND THE ASSESSEE HAVING DECLARED ALL THE MATE RIAL FACTS RELEVANT ITA NO.169 AND 170/AHD/2010 -11- THERETO IN THE FORM OF TDS CERTIFICATES FILED ALONG WITH THE RETURN OF INCOME AND THE CONDUCT OF THE ASSESSEE BEING BONA F IDE, IT IS NOT A FIT CASE FOR IMPOSING PENALTY UNDER SECTION 271(1)(C) OF THE ACT, WHICH IS ACCORDINGLY CANCELLED FOR BOTH THE ASSESSMENT YEARS IN APPEALS BEFORE US. 7. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( #.% $% /A.MOHAN ALANKAMONY) &' ( /ACCOUNTANT MEMBER ( . .. . . .. . /G.C. GUPTA) !' !' !' !' /VICE-PRESIDENT C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD
