ETA Technopark Ltd., CHENNAI V. ACIT, CHENNAI

ITA 2013/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8213 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 07-01-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 22-09-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: N C PRABHAKAR
• Keywords: Business income

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . , ' # . $ , & ( BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A.NO.2013/MDS/2015 ( / ASSESSMENT YEAR: 2007-08) M/S.ETA TECHNOLOGY PARK, 10 & 11, RADHAKRISHNAN SALAI, CHEENI CITICENTRE CHENNAI-600 004. VS ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-2(1), CHENNAI-600 034. PAN:AABCE 6708M ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. N.C.PRABHAKAR, ADVOCATE /RESPONDENT BY : MR.A.V.SREEKANTH, JCIT /DATE OF HEARING : 7 TH JANUARY, 2016 /DATE OF PRONOUNCEMENT : 20 TH JANUARY, 2016 / O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)- 6, CHENNAI FOR THE ASSESSMENT YEAR 2007-08. THE ISSUE IN THE APPEAL IS WITH REGARD TO TREATMENT OF INCOME FROM D EPOSITS AS INCOME FROM BUSINESS INSTEAD OF INCOME FROM OTHER S OURCES. 2. BRIEF FACTS ARE THAT DURING THE FINANCIAL YEAR 2 006-07 RELEVANT TO THE ASSESSMENT YEAR 2007-08 THE ASSESS EE HAS NOT CARRIED ON ANY BUSINESS ACTIVITY AS ON 31.3.200 7 AND THE 2 ITA NO.2013/MDS/2015 ASSESSEES CONSTRUCTION PROJECT IS STILL UNDER CONS TRUCTION. ASSESSEE AVAILED TERM LOANS FROM BANKS AND UNUTILIZ ED FUNDS WERE TEMPORARY PARKED INTO BANKS AS DEPOSITS AND E ARNED INTEREST INCOME OF ` 41,48,804/-. IT IS CONTENDED BY THE ASSESSEE THAT INTEREST EARNED FROM SUCH DEPOSITS SH OULD BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. THE ASSESSEE DID NOT OFFER THE INTEREST TO TAX. ACCORDI NG TO THE ASSESSING OFFICER INTEREST INCOME EARNED BY PARKING FUNDS IS INCOME FROM OTHER SOURCES AS HELD BY THE SUPREME CO URT IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZE RS LTD. VS. CIT ( 227 ITR 172)(SC). ACCORDINGLY, HE BROUGHT THE ABOVE INTEREST INCOME UNDER THE HEAD INCOME FROM OTHER S OURCES. AGGRIEVED THE ASSESSEE CARRIED ON APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIO NER OF INCOME TAX (APPEALS) PLACING RELIANCE ON THE JUD GEMENT OF SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMI CALS & FERTILIZERS LTD. VS. CIT, CITED SUPRA, WAS OF THE V IEW THAT INTEREST INCOME FROM BANK DEPOSITS MADE FROM UNUSED CAPITAL FUNDS IS ASSESSABLE TO TAX UNDER THE HEAD INCOME F ROM OTHER SOURCES, WHILE ALL EXPENSES INCLUDING INTEREST PAI D ON BORROWED FUNDS ARE TO BE CAPITALIZED. COMMISSIONER OF 3 ITA NO.2013/MDS/2015 INCOME TAX (APPEALS) WAS OF THE VIEW THAT THE SUPR EME COURT WHILE DELIVERING THE JUDGEMENT IN THE CASE O F CIT VS. BOKARO STEELS LTD. (236 ITR 315) (SC) HAS REFERRED TO ITS EARLIER DECISION IN THE CASE OF TUTICORIN ALKAI CHE MICALS & FERTILIZERS LTD.(SUPRA). THE COMMISSIONER OF INCOME TAX (APPEALS) DISTINGUISHED THE FACTS IN THE CASES OF I NDIAN OIL PANIPAT POWER CONSORTIUM LTD. (315 ITR 255) (DEL) AND BOKARA STEELS LTD. (236 ITR 315) (SC) AND HELD THAT THE SAME ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THUS, FOLLOWING THE DECISION OF SUPREME COURT IN TH E CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. (SUPR A), THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) ASSESSEE IS IN APPEAL BEFORE US. 3. LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. ON T HE OTHER HAND, LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 4 ITA NO.2013/MDS/2015 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED MAT ERIALS ON RECORD. IN THIS CASE, INTEREST WAS IN THE NATURE OF ADDITIONAL SOURCE OF INCOME TO THE ASSESSEE, WHICH WAS NOT IN ANY WAY LINKED TO THE BUSINESS THAT THE ASSESSEE WAS CARRYING ON. THE INTEREST INCOME THAT HAS BEEN RECE IVED BY THE ASSESSEE ON ITS OWN FUND KEPT IN DEPOSIT WITH T HE BANK DID NOT HAVE ANY DIRECT LINK OR NEXUS WITH THE BUSI NESS THAT WAS BEING CARRIED ON. THE DEPOSIT MADE WITH THE BAN K WAS FOR THE CONVENIENCE AND BENEFIT OF THE ASSESSEE WIT H A VIEW TO DERIVE INTEREST INCOME. THUS, THE TRUE CHARACTER OF THE INCOME IS NOT BUSINESS INCOME BUT INCOME FROM OT HER SOURCES ONLY. IT IS POSSIBLE TO HAVE DIFFERENT S OURCES OF INCOME EACH ONE OF WHICH WILL BE CHARGEABLE TO INCO ME-TAX AND THE ASSESSEE CAN KEEP THE SURPLUS FUNDS WHICH ARE NOT IMMEDIATELY REQUIRED FOR THE PURPOSE OF BUSINESS IN DEPOSITS IN ORDER TO EARN INTEREST AND SUCH INTEREST WILL BE CHARGEABLE UNDER SECTION 56. THE ASSESSING OFFICER AND THE COMMISSIONER OF INCOME TAX (APPEALS) WERE OF THE VI EW THAT THE INCOME EARNED BY THE ASSESSEE FROM BANK DEPOSIT S AS INCOME FROM OTHER SOURCES, WHICH IS FORTIFIED BY TH E 5 ITA NO.2013/MDS/2015 JUDGEMENT OF SUPREME COURT IN THE CASE OF CIT VS. M ONARCH TOOLS PVT. LTD. (260 ITR 258) (SC). 5. IN THE CASE OF BONGAIGAON REFINERY & PETROCHEMIC ALS LTD. VS. CIT (251 ITR 329) (SC), LARGER BENCH OF T HE SUPREME COURT AFTER CONSIDERING THE JUDGEMENT OF TH E SUPREME COURT IN THE CASE OF CIT VS. BOKARO STEELS LTD. (236 ITR 515) AND TUTICORIN ALKALI CHEMICALS & FER TILIZERS LTD.,CITED SUPRA, OBSERVED THAT INCOME DERIVED FROM HOUSE PROPERTY, GUEST HOUSE, HIRE CHARGES FOR EQUIPMENT AND RECOVERIES FROM CONTRACTORS ON ACCOUNT OF WATER AND ELECTRICITY SUPPLY RECEIVED DURING THE PERIOD OF F ORMATION OF THE ASSESSEES BUSINESS IS NOT CHARGEABLE TO TAX BU T IT HAS TO BE ADJUSTED AGAINST PROJECT COST. HOWEVER, INTERES T INCOME IS TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. 6. TAKING INTO CONSIDERATION THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION TH AT THE CLAIM OF THE ASSESSEE IS HAVING NO MERIT TO TREAT THE INCOME FROM FIXED DEPOSITS AS INCOME FROM BUSINESS OR TO DEDUCT THE 6 ITA NO.2013/MDS/2015 SAME FROM PROJECT COST AND IT HAS TO BE TREATED AS INCOME FROM OTHER SOURCES AND LIABLE TO BE TAXED ACCORDING LY. 7. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IN ITA NO.2013/MDS/2015 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH JANUARY, 2016 SD/- SD/- ( # $ . ' ) ( * ) (DUVVURU RL REDDY ) ( CHANDRA POOJARI ) - / / JUDICIAL MEMBER / / ACCOUNTANT MEMBER - /CHENNAI, 1 /DATED 20 TH JANUARY, 2016 SOMU 34 54 /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 6 () /CIT(A) 4. 6 /CIT 5. 4 : /DR 6. /GF .