Sri K Pattabhi Rama Reddy, Visakhapatnam V. The ACIT, Circle-2(1), Visakhapatnam

ITA 210/VIZ/2004

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 2575 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 6 year(s) 8 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-11-2010
• Assessment Year: 2000-2001
• Appeal Filed On: 29-03-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J SIRI KUMAR
• Keywords: Business expenditure; Opportunity of being heard

Judgement Text

ITA NO. 56/VIZAG/2003 & 210 OF 2004 - K.PATTABIRA MA REDDY, VIZAG PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 56/VIZAG/2003 & 210/VIZAG/2004 ASSESSMENT YEAR: 1999-2000 & 2000-01 K.SARAT KUMAR, L/R:K PATTABHI RAMA REDDY, VISAKHAPATNAM. VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIR-2(1), VISAKHAPATNAM . (APPELLANT) PAN NO: ABBPK 8884 E (RESPONDENT) APPELLANT BY: SHRI G.V.N. HARI, CA RESPONDENT BY: SHRI J SIRI KUMAR, DR ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE APPEALS OF THE ASSESSEE ARE DIRECTED AGAINST T HE ORDERS PASSED BY LD. CIT(A-2), VISAKHAPATNAM AND THEY RELATE TO T HE ASSESSMENT YEARS 1999-2000 AND 2000-01. SINCE THE ISSUES URGED IN T HESE TWO APPEALS ARE IDENTICAL IN NATURE, THEY WERE HEARD TOGETHER AND A RE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. 2. IN BOTH THE YEARS, THE ASSESSEE IS CHALLENGING THE DECISION OF LEARNED CIT(A): (A) -IN HOLDING THAT THE INTEREST ON BANK DEPOSITS IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. (B) -IN NOT ALLOWING THE EXPENDITURE CLAIMED BY TH E ASSESSEE. 3. THE FACTS RELATING TO THE ISSUES ARE STATED IN BRIEF. THE ASSESSEE IS A CONTRACTOR AND DURING THE YEARS UNDER CONSIDERATION , THE ASSESSEE DID NOT EXECUTE ANY CONTRACT WORKS. IN THE PAST YEARS, THE ASSESSEE HAD EXECUTED ITA NO. 56/VIZAG/2003 & 210 OF 2004 - K.PATTABIRA MA REDDY, VIZAG PAGE 2 OF 4 CONTRACTS FOR M/S ENGINEERING PROJECTS (INDIA) LTD. , NEW DELHI AND THE SAME RESULTED IN DISPUTE BETWEEN THE PARTIES LEADING TO LEGAL PROCEEDINGS. AS A RESULT, THE ASSESSEE RECEIVED ARBITRATION AWARD MON EY, IN PART IN THE EARLIER YEARS WHICH WERE KEPT IN FIXED DEPOSITS IN BANK. T HE INTEREST INCOME RECEIVED FROM THE SAID FIXED DEPOSITS WAS OFFERED B Y THE ASSESSEE UNDER THE HEAD INCOME FROM BUSINESS. THE ASSESSEE ALSO CLAI MED EXPENSES INCURRED BY HIM TOWARDS, CONSULTANCY CHARGES, LEGAL FEES, TR AVELING, OFFICE EXPENSES ETC. AGAINST THE SAID INCOME. THE ASSESSING OFFICE R WAS OF THE VIEW THAT THE ASSESSEE HAD CLOSED DOWN ITS CONTRACT BUSINESS AND HENCE ASSESSED THE INTEREST INCOME UNDER THE HEAD INCOME FROM OTHER SO URCES AND ALSO DID NOT ALLOW THE EXPENDITURE CLAIMED, EXCEPT THAT PERT AINING TO BANK CHARGES AND AUDIT FEE. THE ASSESSEE CARRIED THE MATTER IN APPEAL, BUT DID NOT FIND FAVOUR WITH THE LEARNED CIT(A). HENCE THE ASSESSEE IS IN APPEAL BEFORE US FOR THESE TWO YEARS. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE RECORD. THE LEARNED AUTHORISED REPRESENTATIVE PLACED RELIANCE O N THE FOLLOWING CASE LAW TO CONTEND THAT THE INTEREST RECEIVED ON FIXED DEPOSITS KEPT WITH BANK IS ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS. A) CIT VS. ARVIND CONSTRUCTION CO. LTD. (2008) 215 CTR (DEL) 363 B) CIT V GOVINDA CHOUDHURY & SONS (1993) (203 ITR 881 (S.C)) C) CIT & ANR VS. CHINNA NACHIMUTHU (2008) (297 IT R 70 (KAR)) D) CIT VS. L.V.E. VAIRAVAN CHETTIAR (1969) (72 ITR 144 (MAD)) E) CIT VS. BHAGWATI RE-ROLLING MILLS (1995) (211 I TR 227 (RAJ.)) WE HAVE GONE THROUGH THE ABOVE CITED CASE LAW AND I N OUR VIEW, THE FACTS OF THE INSTANT CASE ARE DIFFERENT FROM THE FACTS PR EVAILING IN THE ABOVE CITED CASES AND HENCE, IN OUR VIEW, THE ASSESSEE COULD NO T PLACE RELIANCE ON THEM. IN THE INSTANT CASE, THE ASSESSEE HAS RECEIVE D PART OF ARBITRATION AMOUNT AND HAS DEPOSITED THE SAME IN BANK FIXED DEP OSITS. IT WAS NOT SHOWN TO US THAT THE ASSESSEE COULD NOT UTILIZE THE INTEREST REALIZED ON SUCH DEPOSITS ACCORDING TO HIS SWEET WILL. SIMILARLY TH E ASSESSEE HAS NOT SHOWN ITA NO. 56/VIZAG/2003 & 210 OF 2004 - K.PATTABIRA MA REDDY, VIZAG PAGE 3 OF 4 ANY BUSINESS COMPULSION FOR MAKING THE IMPUGNED DEP OSITS SO MADE. IN THESE CIRCUMSTANCES, WE DO NOT FIND ANY MERIT IN TH E CLAIM OF THE ASSESSEE TO ASSESS THE INTEREST INCOME UNDER THE HEAD INCOME FROM BUSINESS. ACCORDINGLY WE UPHOLD THE DECISION OF LEARNED CIT(A ) IN APPROVING THE ACTION OF THE ASSESSING OFFICER IN ASSESSING THE SA ID INTEREST INCOME UNDER THE HEAD INCOME FROM BUSINESS. 5. NEXT ISSUE RELATES TO THE DEDUCTIBILITY OF E XPENSES CLAIMED BY THE ASSESSEE. THE LEARNED A.R PLACED A COPY OF ASSESSM ENT ORDER RELATING TO THE ASSESSMENT YEAR 2001-02 TO SUBMIT THAT THE ASSE SSING OFFICER HAD DISALLOWED THE EXPENDITURE CLAIM MADE IN THAT YEAR FOR THE REASON THAT THE SAME SHOULD BE ALLOWED ON ACCRUAL BASIS IN THE YEAR IN WHICH THE LIABILITY FOR THE EXPENDITURE ACCRUED. ACCORDINGLY, THE LEARNED A.R SUBMITTED THAT THE ASSESSING OFFICER DID NOT ALLOW THE EXPENDITURE IN BOTH THE YEARS, I.E IN THE YEAR OF ACCRUAL AND ALSO IN THE YEAR IN WHICH THE A RBITRATION AWARD WAS RECEIVED. 6. THERE IS NO DISPUTE THAT THE ASSESSEE HAD MA INTAINED AN OFFICE AND HAS PURSUED HIS ARBITRATION CASE AND OFFERED THE AR BITRATION AMOUNT IN THE YEAR OF RECEIPT. IN SUCH A KIND OF SITUATION, IN O UR VIEW, THE ASSESSEES ACTION OF PURSUING THE ARBITRATION MATTER ITSELF CO NSTITUTES A BUSINESS ACTIVITY AND HENCE THE EXPENDITURE INCURRED IN MAINTAINING A N OFFICE AND PURSUING THE ARBITRATION MATTER SHOULD BE ALLOWED AS BUSINES S EXPENDITURE. AT THIS STAGE, THE LEARNED D.R POINTED OUT THAT THE ASSESSI NG OFFICER DID NOT VERIFY THE EXPENDITURE CLAIM OF THE ASSESSEE AND ACCORDING LY SUBMITTED THAT THE DETAILS OF EXPENDITURE CLAIMED BY THE ASSESSEE NEED TO BE VERIFIED. WE FIND FORCE IN THE SUBMISSIONS OF LEARNED D.R. ACCORDING LY, WE SET ASIDE THE MATTER OF EXAMINATION OF EXPENDITURE CLAIM MADE BY THE ASSESSEE TO THE FILE OF ASSESSING OFFICER WITH A DIRECTION TO EXAMINE TH E EXPENDITURE CLAIM OF THE ITA NO. 56/VIZAG/2003 & 210 OF 2004 - K.PATTABIRA MA REDDY, VIZAG PAGE 4 OF 4 ASSESSEE AFTER AFFORDING THE NECESSARY OPPORTUNITY OF BEING HEARD AND ALLOW THE SAME AS BUSINESS EXPENDITURE IN THE YEAR OF ACC RUAL. 7. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE A RE TREATED AS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 22 ND DECEMBER, 2010. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE: 22-12-2010 COPY TO 1 SHRI K.SARAT KUMAR, L/R: K PATTABHI RAMA REDDY, P ROPRIETOR, M/S K PATTABHI RAMA REDDY ENGINEERS & CONTRACTORS, 47-15- 1, DWARAKANAGAR, VISAKHAPATNAM 530 016. 2 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2(1) , AYAKAR BHAVAN, DABAGARDENS, VISAKHAPATNAM. 3 4. THE CIT II, VISAKHAPATNAM. THE CIT(A)-II, VISAKHAPATNAM. 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM