Matoshri Ramabai Ambedkar Magaswargiya, Kolhapur V. ITO, Kolhapur

ITA 1804/PUN/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 72497 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 10-09-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Section: 143(3); 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.1804/PN/2012 (ASST. YEAR: 2008-09) MATOSHRI RAMABAI AMBEDKAR MAGASWARGIYA SAHAKARI SOOT GIRANI MARYADIT, WARANANAGAR, TAL. PANHALA, DIST. KOLHAPUR PAN: AACCM5657Q APPELLANT VS. ITO, WARD 1(3), KOLHAPUR RESPONDENT APPELLANT BY : SHRI M.K. K ULKARNI RESPONDENT BY : SHRI S.P . WALIMBE DATE OF HEARING: 31.12.2013 DATE OF ORDER : 31.12.2013 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS), [SHORT CIT (A)] KOLHAPUR, DATED 24.07.2012 ON THE FOLLOWING GROUNDS . 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW WHETHER LD. CIT(A) KOLHAPUR WAS JUSTIFIED IN REJECT ING THE APPEAL OF THE APPELLANT-ASSESSEE HOLDING THAT THE I NTEREST EARNED ON DEPOSITS KEPT WITH BANKS WAS TAXABLE UNDE R S. 56 OF THE ACT WHICH INTEREST WAS EARNED WHEN THE BU SINESS OF THE ASSESSEE WAS NOT SET UP AT ALL? 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW WHETHER THE LD.CIT(A) KOLHAPUR WAS CORRECT IN HIS D ECISION CONFIRMING THE DECISION OF THE A. 0. TO TAX THE INT EREST INCOME AS INCOME FROM OTHER SOURCES, EVEN THOUGH TH E DEPOSITS KEPT WITH BANKS IN PRE SET UP PERIOD HAD D IRECT 2 LINK WITH THE ESTABLISHMENT OF SOOT GIRINI AND WITH OUT ARTY INTENTION TO EARN ANY INCOME? 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW WHETHER THE LD. CIT(A)-KOLHAPUR WAS CORRECT IN HIS DECISION TAKEN BY HIM FOLLOWING THE JUDGMENT OF THE HON'BLE SUPREME COURT IN TUTIKORIN ALKALI CHEMICALS & FERTI LIZERS LTD. (1997) 227 ITR 172 (SC) WHEN SAID DECISION WAS PRACTICALLY OVERRULED BY SUPREME COURT IN KARNAL CO . OP. SUGAR MILLS LTD. (2000) 243 ITR 2 (SC) AND IN BONGAIDAON REFINERY AND PETROCHMEICALS LTD. (200 1) 251 ITR 329 (SC)? 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW IT IS PRAYED THAT THE ORDER OF THE CIT(A) KOLHAPUR BY QUASHED FOLLOWING THE PRECEDENTS AS MENTIONED IN GR OUND NO. 3 ABOVE. 5. THE APPELLANT CRAVES/LEAVE TO ADD, AMEND OR ALTER A NY OF THE ABOVE GROUNDS OF APPEAL. 2. THE ASSESSEE IS A CO-OPERATIVE SOCIETY, REGISTER ED UNDER SOCIETIES ACT PROPOSED TO SET-UP A SPINNING MILL. IN ADDITION TO SHARE CAPITAL CONTRIBUTED BY ITS MEMBERS, THE ASSES SEE ALSO RECEIVED AN AMOUNT OF RS.10,04,00,000/- FROM THE ST ATE GOVERNMENT THROUGH ACCOUNT PAYEE CHEQUE ON THE IDB I BANK. THIS AMOUNT WAS INVESTED IN VARIOUS BANKS AS THE ASSESSEE WAS YET TO COMMENCE PRODUCTION ACTIVITIES OWIN G TO THE FACT THAT CONSTRUCTION OF THE PROJECT WAS UNDER WAY AND MACHINERIES WERE YET TO BE ACQUIRED. AS A RESULT, THE ASSESSEE EARNED INTEREST OF RS.41,83,517/- ON THE ABOVE SUM. THE ASSESSEE FILED ITS RETURN OF INCOME ON 31.03.2009 DECLARING TOTAL INCO ME AT NIL. THE CASE WAS SELECTED FOR SCRUTINY AND CONSEQUENTLY AN ORDER U/S. 143(3) OF I.T. ACT WAS PASSED WHEREBY INTEREST RECE IVED FROM NATIONALIZED BANKS AMOUNTING TO RS.41,83,517/- WAS BROUGHT TO TAX WHICH WAS CONFIRMED BY THE CIT(A). 2.1 THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF O F ASSESSEE AND LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THA T THE AUTHORITIES BELOW HAS NOT JUSTIFIED IN HOLDING THAT THE INTEREST 3 EARNED ON DEPOSITS KEPT WITH BANKS WAS TAXABLE U/S. 56 OF I.T. ACT. ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRE SENTATIVE HAS SUPPORTED THE ORDER OF AUTHORITIES BELOW. 2.2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND M ATERIAL ON RECORD, WE FIND THAT THE ISSUE IS WITH REGARD TO TH E TREATMENT OF THE INTEREST EARNED OF RS.41,83,517/- ON BANK DEPOS IT FOR TAX PURPOSE. ACCORDING TO THE ASSESSING OFFICER, ONLY INTEREST RECEIVED FROM COOPERATIVE BANK IS EXEMPT U/S.80(P) AND INTEREST INCOME RECEIVED FROM NATIONALIZED BANKS WILL BE TAX ABLE IN THE ASSESSEES HAND. THE ASSESSING OFFICER DID NOT AGR EES THE CONTENTION OF THE ASSESSEE THAT THE AMOUNT RECEIVED FROM GOVERNMENT WAS KEPT IN NATIONALIZED BANK AS PER INS TRUCTIONS FROM STATE GOVERNMENT, ACCORDINGLY, CHARGED TO TAX INTEREST OF RS.41,83,517/-. THE COOPERATIVE SOCIETY WAS SET UP ON 09.12.1993. AFTER COLLECTION OF FUNDS FROM THE MEM BERS TOWARDS THEIR SHARE OF CAPITAL (RS.1,41,15,884/-) THE PROCE SS OF COLLECTION OF FUNDS OTHER STAKE HOLDERS, NAMELY THE GOVERNMENT OF MAHARASHTRA, WHO HAD TO CONTRIBUTE RS.10,04,00,000/ - AS ITS SHARE OF SHARE CAPITAL, STARTED. THIS SHARE CAPITAL WAS CONTRIBUTED ON 31.03.2007 AND WAS KEPT IN AN ACCOUN T IN IDBI BANK. THE GOVERNMENT OF MAHARASHTRA VIDE LETTER DA TED 29.03.2007 INDICATED THAT THE FUND SHOULD BE UTILIS ED FOR SETTING UP OF SPINNING MILL. AT THE END OF THE RELEVANT AC COUNTING PERIOD 60 % OF CIVIL WORK WAS COMPLETED AND ORDER FOR PROC UREMENT OF MACHINERY, ALONG WITH SECURITY DEPOSIT, WAS PLACED WITH VOLTAS LTD. NO INTEREST WAS EARNED FROM THE SUPPLIER OF MA CHINERY. IN THE INTERREGNUM, THE ASSESSEE KEPT THIS AMOUNT IN V ARIOUS INSTITUTIONS AND EARNED INTEREST THEREON. THE INSTI TUTIONS FROM WHICH INTEREST TO THE TUNE OF RS.49,35,409/-WAS EAR NED ARE SHIVAJI SAHAKARI BANK LTD., UNION BANK OF INDIA, BA NK OF INDIA AND IDBI BANK AGAINST WHICH EXPENSES TO THE TUNE OF RS.15,40,341/- WAS CLAIMED. THE ASSESSEE HAD RECEI VED INTEREST 4 TO THE TUNE OF RS.27,83,940/- FROM SHIVAJI SAHAKARI BANK LTD., ANOTHER COOPERATIVE INSTITUTION AND RS.41,83,517/- FROM OTHER BANKS. MANUFACTURING HAS NOT STARTED DURING THE REL EVANT PREVIOUS YEAR. THE ASSESSEE CLAIMED A DEDUCTION OF THE AMOUNT OF RS.33,95,068/- UNDER SECTION 80P OF THE INCOME-TAX ACT AGAINST WHICH AN AMOUNT OF RS.27,83,940/- RECEIVED FROM SHI VAJI SAHAKARI BANK LTD. WAS ALLOWED. THE ASSESSING OFFIC ER DID NOT ALLOW THE CLAIM OF RS.15,40,341/- ATTRIBUTED TO VAR IOUS EXPENSES ON THE GROUND THAT DURING PRE-BUSINESS COMMENCEMENT PERIOD, THE EXPENSES OUGHT TO BE CAPITALIZED WHICH WAS EVID ENT THAT FUNDS GIVEN BY THE GOVERNMENT OF MAHARASHTRA AS THE IR CONTRIBUTION TOWARDS SHARE CAPITAL WAS DEPOSITED WI TH VARIOUS BANKS PRIMARILY AS THE SAME WAS IDLE FUND LYING WIT H THE ASSESSEE PENDING DEVELOPMENT OF LAND AND CONSTRUCTI ON OF FACTORY BUILDING AND ERECTION OF SPINNING MILL. 2.3 HONBLE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. VS. CIT (1997) 227 ITR 172 (SC) HAS HELD THAT IN CASE FOUNDS HAVE BEEN BORROWED FOR SET TING UP OF A PLANT AND IF THE FUNDS ARE 'SURPLUS' AND THEN BY VI RTUE OF THAT CIRCUMSTANCE THEY ARE INVESTED IN FIXED DEPOSITS, T HE INCOME EARNED IN THE FORM OF INTEREST WILL BE TAXABLE UNDE R THE HEAD INCOME FROM OTHER SOURCES. THE ASSESSEE HAS NOT MAKE OUT THE CASE THAT THE DEPOSITS KEPT WITH BANK FOR SETTING U P OF A FACTORY. IN FACT IT WAS SURPLUS FUND WHICH WAS KEPT WITH THE BANK ON WHICH THE ASSESSEE EARNED INTEREST. THE RATIO OF H ONBLE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMI CALS & FERTILIZERS LTD. IS SQUARELY APPLICABLE AND INTERES T EARNED BY THE ASSESSEE DURING CONSTRUCTION PERIOD ON DEPOSITS KEP T WITH THE NATIONALIZED BANK IS ASSESSABLE AS INCOME FROM OTHE R SOURCES AS DONE BY THE ASSESSING OFFICER. THIS VIEW IS FORTIF IED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CI T VS. BOKARO STEEL LTD. (1999) 236 ITR 315 (SC). ACCORDINGLY, W E ARE NOT 5 INCLINED TO INTERFERE IN THE FINDINGS OF CIT(A) WHO HAS REJECTED THE APPEAL OF ASSESSEE HOLDING THAT INTEREST EARNED ON DEPOSIT KEPT WITH BANK WAS TAXABLE U/S.56 OF I.T. ACT. THE SAM E IS UPHELD. 3. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS D ISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 31 ST DAY OF DECEMBER, 2013. SD/- SD/- (R.K. PANDA) (SHAILENDRA KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 31 ST DECEMBER 2013 GCVSR COPY TO:- 1) ASSESSEE 2) DEPARTMENT 3) THE CIT(A), KOLHAPUR 4) THE CIT, KOLHAPUR 5) THE DR, B BENCH, I.T.A.T., PUNE. 6) GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE