The Small Farmers Agri-Business Consortium, Trivandrum V. Assistant Director of Incometax(Exemption), Trivandrum

ITA 212/COCH/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64789 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 23-08-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 22-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S PRAVEEN
• Assessee Lawyers: R SREEKUMAR

Judgement Text

1 ITA NO. 212/COCH/2010 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKARA N(AM) I.T.A NO. 212/COCH/2010 (ASSESSMENT YEAR 2004-05) THE SMALL FARMERS AGRI BUSINESS CONSORTIUM VS THE A.D.I.T.(EXEMPTION) TC-25/2149, USHUS TRIVANDRUM THYVILA LANE, THAMPANOOR TRIVANDRUM PAN : AAJFS9747H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R SREEKUMAR RESPONDENT BY : SHRI S PRAVEEN DATE OF HEARING : 23-08-2012 DATE OF PRONOUNCEMENT : 14-09-2012 O R D E R PER N.R.S. GANESAN (JM) BEING AGGRIEVED, THE TAXPAYER IS CHALLENGING THE O RDER OF COMMISSIONER OF INCOME-TAX(A) DATED 15-12-2009 FOR ASSESSMENT YEAR 200 4-05. 2. SHRI R SREEKUMAR, THE LD.REPRESENTATIVE FOR THE T AXPAYER SUBMITTED THAT THE ASSESSING OFFICER HAS TREATED THE ENTIRE INTERE ST OF THE ASSESSMENT YEARS 2000- 01 AND 2001-02 AS INCOME FOR THE YEAR UNDER CONSIDER ATION WITHOUT SETTING OFF THE EXPENDITURE OF THAT YEAR. ACCORDING TO THE LD. REPRESENTATIVE, THE INTEREST INCOME RECEIVED FOR THE ASSESSMENT YEARS 2000-01 AND 2001-02 CANNOT BE 2 ITA NO. 212/COCH/2010 SUBJECT MATTER OF TAXATION FOR THE YEAR UNDER CONSI DERATION. THE LD.REPRESENTATIVE FURTHER SUBMITTED THAT ATLEAST TH E EXPENDITURE INCURRED BY THE TAXPAYER HAS TO BE SET OFF AGAINST THE INCOME ASSES SED. ON A QUERY FROM THE BENCH WHAT IS THE NATURE OF THE EXPENDITURE, THE LD .REPRESENTATIVE CLARIFIED THAT SAME IS THE ADMINISTRATIVE EXPENDITURES LIKE SALARY, WAGES, ETC. THE LD.REPRESENTATIVE FURTHER CLARIFIED THAT THE TAXPAY ER HAS NO INCOME OTHER THAN THE INTEREST ON THE FIXED DEPOSIT. THE LD.REPRESENTATI VE FURTHER SUBMITTED THAT THE TAXPAYER IS NOT CLAIMING ANY EXEMPTION U/S 10(23C)( IV) EVEN THOUGH THE SAME WAS CLAIMED BEFORE THE LOWER AUTHORITIES. THE LD.R EPRESENTATIVE FURTHER SUBMITTED THAT THE TAXPAYER IS ONLY CLAIMING SET OF F OF THE EXPENDITURE FOR THE RELEVANT ASSESSMENT YEARS WHILE ASSESSING THE INTER EST INCOME. THE INTEREST INCOME HAS TO BE ASSESSED ONLY IN THE RESPECTIVE YE ARS. ON A QUERY FROM THE BENCH WHEN THE FIXED DEPOSIT MATURED, THE LD.REPRES ENTATIVE FOR THE TAXPAYER SUBMITTED THAT HE HAS NO DETAILS WITH HIM. THE LD. REPRESENTATIVE CLARIFIED THAT HE IS ALSO NOT ABLE TO FURNISH ANY DETAILS WITH REGARD TO THE FIXED DEPOSIT WHICH ATTAINED MATURITY DURING THE YEAR UNDER CONSIDERATI ON. 3. ON THE CONTRARY, SHRI S PRAVEEN, THE LD.DR SUBMI TTED THAT THE TAXPAYER HAS ADMITTED THAT THE INTEREST RELATED TO ASSESSMENT YE ARS 2002-03 TO 2004-05 BY FURNISHING THE RETURN OF INCOME. HOWEVER, THE TAXP AYER CLAIMS THAT THE INTEREST RELATED TO ASSESSMENT YEAR 2000-01 IS EXEMPT FOR THE YEAR UNDER CONSIDERATION. FOR THE ASSESSMENT YEAR 2001-02 THE TAXPAYER HAS NOT FURNISHED ANY RETURN OF INCOME. HOWEVER, THE TAXPAYER WAS CLAIMING CREDIT FOR TDS RELATING TO ASSESSMENT YEAR 2001-02. THEREFORE, THE INTEREST PO RTION RELATING TO ASSESSMENT YEAR 2001-02 TO THE EXTENT OF RS.16,41,375 WAS ADDED TO THE TOTAL INCOME OF THE TAXPAYER. THE TDS CERTIFICATES DO NOT INDICATE ANY BREAK UP PERIOD FOR WHICH IT RELATES. THEREFORE, IT IS IMPOSSIBLE TO APPORTION THE PERIOD OF INTEREST FOR 3 ITA NO. 212/COCH/2010 DIFFERENT ASSESSMENT YEARS. SINCE THE TAXPAYER HAS NOT FILED ANY MATERIAL TO SHOW THAT THE INTEREST INCOME RELATES TO CREDIT OF TDS C LAIM, THE ASSESSING AUTHORITY HAS NO OTHER ALTERNATIVE BUT TO TAX THE ENTIRE AMOUNT A S INCOME FOR THE YEAR UNDER CONSIDERATION. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE ONLY SOURCE O F INCOME OF THE TAXPAYER IS INTEREST FROM FIXED DEPOSIT. THE TAXPAYER COULD NO T FURNISH THE DETAILS OF THE FIXED DEPOSIT WHICH MATURED DURING THE YEAR UNDER C ONSIDERATION. IN RESPECT OF INTEREST ON SECURITIES, THE KERALA HIGH COURT IN COM MISSIONER OF INCOME-TAX VS FEDERAL BANK LTD (2008) 301 ITR 188 (KER) HAD AN OCCA SION TO CONSIDER THE YEAR OF ASSESSABILITY. THE KERALA HIGH COURT, AFTER CONSID ERING SECTION 56(2)(ID) AS AMENDED, FOUND THAT THE TAXPAYER IS ENTITLED FOR IN TEREST ONLY ON MATURITY OF THE SECURITY. THE TAXPAYER OBVIOUSLY NOT ENTITLED TO I NTEREST WHICH WAS NOT REALLY DUE IN THE PREVIOUS YEAR. THE KERALA HIGH COURT FURTHER FOUND THAT MERELY BECAUSE THE TAXPAYER HAS DECLARED IT AS AMOUNT RECEIVABLE I N THE COURSE OF TIME IT DOES NOT MEAN THAT THE INTEREST INCOME HAD IN FACT ACCRU ED TO THE TAXPAYER. IN FACT, THE KERALA HIGH COURT HAS OBSERVED AS FOLLOWS AT PAG ES 190 AND 191 OF THE ITR: THE QUESTION RAISED IS WHETHER THE SAID INCOME RE ALLY ACCRUED TO THE ASSESSEE BY VIRTUE OF THE ASSESSEE S HOWING IT IN THE PROFIT AND LOSS ACCOUNT. WE ARE UNABLE TO ACCEPT T HE CONTENTION OF THE DEPARTMENT BASED ON THE DECISION ABOVE REFERRED , THAT ONCE THE ASSESSEE SHOWS THE AMOUNT IN THE PROFIT AND LOS S ACCOUNT AS INCOME, IT IS ASSESSABLE UNDER THE ACT. INCOME ACC RUED OBVIOUSLY MEANS INCOME THAT HAS BECOME DUE OR RECEIVABLE BY T HE ASSESSEE. IN THIS CASE, THE DEPARTMENT HAS NO CASE THAT THE S ECURITIES HELD BY THE ASSESSEE WERE MATURED DURING THE RELEVANT YEAR OR THE ASESSEE WAS ENTITLED TO RECEIVE THE INTEREST ON SUCH SECURI TIES. SINCE THE SECURITIES HAD NOT MATURED FOR PAYMENT, THE ASSESSE E WAS OBVIOUSLY NOT ENTITLED TO INTEREST, AND THE INTERES T WAS REALLY NOT 4 ITA NO. 212/COCH/2010 DUE TO THEM IN THE PREVIOUS YEAR. THE ASSESSEE HAD SHOWN IT IN THE PROFIT AND LOSS ACCOUNT ONLY TO SHOW WHAT IT IS ENT ITLED IN DUE COURSE WHICH STATEMENT MAY HELP BETTER EXPLANATION OF THE FINANCIAL POSITION OF THE ASSESSEE. MERELY BECAUSE THE ASSESSEE HAS DECLARED IT AS AMOUNT RECEIVABLE IN THE COURSE OF T IME, IT DOES NOT MEAN THAT INTEREST ON INCOME HAD IN FACT ACCRUED TO THE ASSESSEE. AS HELD BY THE SUPREME COURT IN STATE BANK OF TRAVAN CORES CASE (1986) 158 ITR 102 ABOVE REFERRED, ONLY REAL INCOME IS ASSESSABLE UNDER THE ACT. THOUGH INTEREST DUE OR RECEIVABLE I S ASSESSABLE UNDER THE MERCANTILE SYSTEM, SINCE THE INTEREST ON SECURITIES INVOLVED IN THIS CASE, WAS NEITHER RECEIVED NOR REC EIVABLE DURING THE PREVIOUS YEAR, SUCH INTEREST CANNOT BE ASSESSED AND THE TRIBUNAL RIGHTLY HELD SO UPHOLDING THE ORDER OF THE COMMISSI ONER OF INCOME- TAX (APPEALS). 5. IN VIEW OF THE JUDGMENT OF THE KERALA HIGH COURT WHICH IS BINDING ON THIS TRIBUNAL, THE INTEREST INCOME HAS TO BE ASSESSED IN THE YEAR IN WHICH THE TAXPAYER IS ENTITLED TO RECEIVE THE INTEREST ON SUCH DEPOSIT S / SECURITIES. IN THE CASE BEFORE US, THE LD.REPRESENTATIVE FOR THE TAXPAYER WAS NOT IN A POSITION TO FURNISH THE DETAILS WITH REGARD TO THE MATURITY OF THE FIXED DE POSIT. THEREFORE, IT IS VERY DIFFICULT TO FIND OUT WHEN THE TAXPAYER IS ENTITLED TO RECEIVE THE INTEREST FROM THE BANK ON SUCH FIXED DEPOSIT. UNLESS AND UNTIL THE MA TURITY OF THE FIXED DEPOSIT IS ASCERTAINED, THE ACTUAL YEAR OF RECEIPT MAY NOT BE DETERMINABLE. THEREFORE, THE ACTUAL DATE OF MATURITY OF THE FIXED DEPOSIT HAS TO BE FIRST ASCERTAINED AFTER CONSIDERING THE FIXED DEPOSIT RECEIPT ISSUED BY THE RESPECTIVE BANKS. THESE ISSUES ARE NOT EXAMINED BY THE ASSESSING OFFICER IN THE LI GHT OF THE JUDGMENT OF THE KERALA HIGH COURT IN THE CASE OF FEDERAL BANK LTD (SU PRA). THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSING OFF ICER HAS TO EXAMINE THE ISSUE IN THE LIGHT OF THE JUDGMENT OF THE KERALA HIGH COURT I N THE CASE OF FEDERAL BANK LTD (SUPRA). ACCORDINGLY, THE ORDERS OF LOWER AUTHORIT IES ARE SET ASIDE AND THE ISSUE OF ASSESSABILITY OF INTEREST ON FIXED DEPOSIT IS RE MITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL EXA MINE THE ISSUE IN THE LIGHT OF THE 5 ITA NO. 212/COCH/2010 JUDGMENT OF THE KERALA HIGH COURT IN THE CASE OF FED ERAL BANK LTD (SUPRA) AND THEREAFTER DECIDE THE SAME IN ACCORDANCE WITH LAW A FTER GIVING REASONABLE OPPORTUNITY TO THE TAXPAYER. 6. IN THE RESULT, THE APPEAL OF THE TAXPAYER IS ALL OWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 14 TH SEPTEMBER, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 14 TH SEPTEMBER, 2012 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH