Olympia Tech Park (Chennai) Pvt. Ltd., CHENNAI V. ITO, CHENNAI

ITA 2065/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8084 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 09-01-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 06-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHISH TRIPATHI IRS
• Assessee Lawyers: M I SIRISH
• Keywords: Business income

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C (SMC) BENCH : CHENNAI . , ! BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBE R ./I.T.A. NO. 2065/MDS/2016 / ASSESSMENT YEAR : 2012-2013 M/S. OLYMPIA TECH PARK (CHENNAI) PRIVATE LIMITED, NO.1, OLYMPIA TECHNOLOGY PARK, SIDCO INDUSTRIAL ESTATE, GUINDY, CHENNAI 600 032. [PAN AABCO 0824C] VS. THE INCOME TAX OFFICER, CORPORATE WARD 5(1) CHENNAI. ( '# / APPELLANT) ( $%'# /RESPONDENT) / APPELLANT BY : SHRI. M.I. SIRISH, C.A. /RESPONDENT BY : SHRI. ASHISH TRIPATHI, IRS, JCIT. /DATE OF HEARING : 11-01-2017 ! /DATE OF PRONOUNCEMENT : 25-01-2017 & / O R D E R IN THIS APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST AN ORDER DATED 28.03.2016 OF LD. COMMISSIONER OF INCO ME TAX (APPEALS)- 3, CHENNAI, IT ASSAILS AN ADDITION OF ?8,40,320/- A S INTEREST INCOME. 2. FACTS APROPOS ARE THAT ASSESSEE ENGAGED IN REAL EST ATE BUSINESS HAD FILED RETURN OF INCOME FOR THE IMPUGNE D ASSESSMENT DECLARING NIL INCOME. DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, IT WAS NOTED THAT THE BY LD. ASSESSING OFFICER THAT ASSESSEE HAD ITA NO.2065/MDS/2016. :- 2 -: ENTERED INTO A JOINT VENTURE AGREEMENT WITH ONE SHR I. N.S. SRINIVASAN AND SIX OTHERS FOR DEVELOPING 15.86 ACRES OF LAND A T EGATTUR & NAVALUR VILLAGE, CHENGALPET TALUK FOR CONSTRUCTING AND SELL ING LUXURY VILLAS. AS PER THE AGREEMENT, IT WAS THE RESPONSIBILITY OF THE ASSESSEE TO CONSTRUCT VILLAS. THE SAID CONSTRUCTION WAS STATE D TO HAVE BEEN STARTED DURING THE PREVIOUS YEAR RELEVANT TO IMPUGN ED ASSESSMENT YEAR. EXPENDITURE INCURRED FOR CONSTRUCTION WAS S HOWN BY THE ASSESSEE IN ITS BALANCE SHEET AS WORK IN PROGRESS. LD. ASSESSING OFFICER NOTED THAT ASSESSEE HAD EARNED INTEREST INC OME OF ?8,40,320/- FROM FIXED DEPOSITS PLACED WITH ONE M/S. KSM NIRMAN PVT. LTD. AS PER LD. ASSESSING OFFICER ASSESSEE WAS STILL TO SET UP ITS BUSINESS. SINCE IT HAD NO INCOME FROM ITS OPERATIONS IN THE RELEVANT P REVIOUS YEAR, HE APPLIED THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD VS. CIT 227 ITR 172 AND HELD THAT SUCH INTEREST WAS TO BE TAXED UNDER THE HEAD INCO ME FROM OTHER SOURCES. AN ADDITION OF ?8,40,320/- WAS MADE. 3. AGGRIEVED, ASSESSEE MOVED IN APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). ARGUMENT OF T HE ASSESSEE WAS THAT IT HAD COMMENCED ITS BUSINESS ACTIVITIES BEFORE THE PREVIOUS YEAR RELEVANT TO PRECEDING ASSESSMENT YEAR 2011-20 12. AS PER THE ASSESSEE IT RECOGNIZED REVENUE BASED ON PROJECT COM PLETION METHOD. ITA NO.2065/MDS/2016. :- 3 -: ACCORDING TO IT, EXPENDITURE INCURRED FOR CONSTRUC TING THE VILLAS WERE SHOWN AS A PART OF ITS WORK IN PROGRESS/INVENTORY. ASSESSEE POINTED OUT THAT IT HAD DURING THE RELEVANT PREVIOUS YEAR RECEIVED AN ADVANCE OF ?50.85 CRORES FROM ITS CUSTOMERS FOR CONSTRUCTIN G VILLAS AND INVESTED A SUM OF ?44.80 CRORES FOR CONSTRUCTION. AS PER AS SESSEE SUBSTANTIAL LOANS WERE TAKEN BY IT FOR CONSTRUCTING VILLAS. INT EREST INCOME EARNED ON FUNDS TEMPORARILY PARKED HAD TO BE CONSIDERED AS A PART ITS BUSINESS ACTIVITIES ONLY. IN ANY CASE AS PER THE A SSESSEE, INTEREST INCOME HAD TO BE NETTED OFF WITH INTEREST EXPENDITU RE SINCE THERE WAS A DIRECT NEXUS. CONTENTION OF THE ASSESSEE WAS THA T INTEREST EXPENDITURE WAS MUCH HIGHER THAN THE INTEREST INCOM E AND EVEN IF INTEREST INCOME WAS CONSIDERED UNDER THE HEAD INC OME FROM OTHER SOURCES ONCE EXPENDITURE WAS SET OFF, THERE WOULD BE NO CASE FOR AN ADDITION. 4. HOWEVER, LD. COMMISSIONER OF INCOME TAX (APPEALS) W AS NOT APPRECIATIVE OF THE ABOVE CONTENTIONS. ACCORDING TO HIM, ASSESSEE HAD NOT SET UP ITS BUSINESS DURING THE RELEVANT PRE VIOUS YEAR AND THEREFORE THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD (SUPRA) CLEARLY APPLIED. 5. NOW BEFORE ME, LD. AUTHORISED REPRESENTATIVE STRONG LY ASSAILING THE ORDERS OF THE LOWER AUTHORITIES SUBMI TTED THAT ASSESSEE HAD SET UP ITS BUSINESS WELL PRIOR TO THE RELEVANT PREVIOUS YEAR. ITA NO.2065/MDS/2016. :- 4 -: ACCORDING TO LD. AUTHORISED REPRESENTATIVE IT HAD R ECEIVED SUBSTANTIAL AMOUNT FROM THE CUSTOMERS FOR CONSTRUCTING VILLAS. LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT APPROVAL FOR THE CONS TRUCTION WAS RECEIVED ON 22.11.2010 AND ASSESSEE HAD STARTED CON STRUCTION WORK OF THE VILLAS. LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE MOMENT THE JOINT DEVELOPMENT WAS ENTERED WITH SHRI. N.S. S RINIVASAN AND OTHERS, THE BUSINESS OF THE ASSESSEE STOOD SETUP. L D. AUTHORISED REPRESENTATIVE SUBMITTED THAT ASSESSEE HAD NOT RETU RNED ANY REVENUE IN THE PROFIT AND LOSS ACCOUNT ONLY FOR A REASON TH AT SINCE IT WAS FOLLOWING PROJECT COMPLETION METHOD. 6. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE STRONG LY SUPPORTING THE ORDERS OF THE AUTHORITIES BELOW, SUB MITTED THAT ASSESSEE COULD NOT SHOW WHETHER BUSINESS WAS ACTUAL LY SETUP DURING THE RELEVANT PREVIOUS YEAR. 7. I HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE ORDE RS OF THE LOWER AUTHORITIES. IT IS NOT DISPUTED THAT ASSESSEE HAD ENTERED INTO JOINT DEVELOPMENT AGREEMENT ON 18 TH MAY, 2011 WITH SHRI. N.S. SRINIVISAN AND OTHERS FOR DEVELOPMENT OF 15.86 ACRE S OF LAND AND CONSTRUCTION OF VILLAS THEREIN. ASSESSEE HAD ALSO STARTED CONSTRUCTION WORK AND ITS BALANCE SHEET PLACED AT PAPER BOOK PAG E 190 REFLECTS AN INVENTORY OF ?44,80,46,798.50, WHICH INCLUDE WORK IN PROGRESS OF ?29,09,75,621/-. A SUM OF ?50,85,70,701.33 RECEI VED BY IT AS ITA NO.2065/MDS/2016. :- 5 -: ADVANCE FROM CUSTOMERS WERE SHOWN AS PART OF ITS C URRENT LIABILITY. JUST BECAUSE ASSESSEE DID NOT RECOGNIZE ANY INCOME DOES NOT MEAN THE PROJECT HAD NOT COMMENCED. ADMITTEDLY, ASSESS EE COMPANY WAS INCORPORATED IN THE YEAR 2008. THIS BEING THE CASE , I AM OF THE OPINION THAT THE BUSINESS OF THE ASSESSEE HAD COMME NCED. ONCE THE BUSINESS IS CONSIDERED AS SETUP, INTEREST EARNED O N DEPOSITS MADE OUT OF TEMPORARILY SURPLUS, IN MY OPINION COULD NOT HAV E BEEN CONSIDERED INTEREST INCOME UNDER THE HEAD INCOME FROM OTHER SO URCES BUT ONLY AS A BUSINESS RECEIPT. IN SUCH CIRCUMSTANCES, JUDGMENT OF HONBLE APEX COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD (SUPRA ) HAD NO APPLICATION. LD ASSESSING OFFICER IS DIREC TED TO REDUCE FROM THE VALUE OF THE WORK IN PROGRESS THE INTEREST INC OME RECEIVED BY THE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON WEDNESDAY, THE 25TH DA Y OF JANUARY, 2017, AT CHENNAI . SD/ - ( . ) (ABRAHAM P. GEORGE) / ACCOUNTANT MEMBER '# / CHENNAI $% / DATED:17THJANUARY, 2017 KV %& '()( / COPY TO: 1. / APPELLANT 3. *+, / CIT(A) 5. (-. / / DR 2. / RESPONDENT 4. * / CIT 6. .01 / GF