JAIPRU RWXWEAVING PARK LTD., Jaipur V. ITO, Jaipur

ITA 227/JPR/2014

• Counselvise Citation: 22723114 RSA 2014
• Duration Of Justice: 1 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 27-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA
• Keywords: Opportunity of being heard; Additional evidence

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM VK;DJ VIHY LA- @ ITA NO. 227/JP/2014 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2010-11 M/S JAIPUR TEXWEAVING PARK LTD., 37-38, YARNWALA CHAMBER, RAMGANJ BAZAR, JAIPUR. CUKE VS. THE I.T.O. WARD-7(2), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ L A-@ PAN/GIR NO.: AABCJ 6286 B VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT VK;DJ VIHY LA- @ ITA NO. 256/JP/2014 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2010-11 THE I.T.O. WARD-7(2), JAIPUR. CUKE VS. M/S JAIPUR TEXWEAVING PARK LTD., 37- 38, YARNWALA CHAMBER, RAMGANJ BAZAR, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ L A-@ PAN/GIR NO.: AABCJ 6286 B VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI MUKESH KHANDELWAL (CA) JKTLO DH VKSJ LS @ REVENUE BY : SHRI RAJ MEHRA (JCIT LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 15/07/2015 MN?KKS'K .KK DH RKJH[ K @ DATE OF PRONOUNCEMENT : 11/09/2015 ITA 227 & 256/JP/2014_ M/S JAIPUR TEXWEAVING PARK LTD. VS. ITO 2 VKNS'K @ ORDER PER: R.P. TOLANI, J.M. THESE ARE CROSS APPEALS ONE BY THE ASSESSEE AND ANO THER BY THE DEPARTMENT ARE AGAINST THE ORDER DATED 28/01/2014 P ASSED BY THE LEARNED CIT(A)-III, JAIPUR FOR A.Y. 2010-11. RESPEC TIVE GROUNDS OF BOTH THE APPEALS ARE AS UNDER:- GROUNDS OF ASSESSEES APPEAL 1. THAT THE LD CIT(A) HAS ERRED SERIOUSLY IN LAW AND ON FACTS IN NOT ADMITTING ADDITIONAL EVIDENCES SUBMITTED BEF ORE HIM DURING THE COURSE OF HEARING IGNORING THAT FOR GRAN TING THE JUSTICE THE ADDITIONAL EVIDENCES WERE VITAL FOR ADJU DICATING ON THE ISSUE OF TAXING INTEREST EARNED BY THE APPEL LANT ON GRANT DURING PRE OPERATION PERIOD. 2. THAT THE LD. CIT(A) HAS ERRED SERIOUSLY IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE LD A.O. WHEREBY HE H AS TAXED THE INTEREST OF RS. 63,21,497/- EARNED BY THE APPELLANT DURING PRE OPERATION PERIOD ON THE GRANT RECEIVED FROM GOVERNMENT OF INDIA. GROUNDS OF REVENUES APPEAL 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E CIT(A) HAS ERRED IN RESTRICTING THE ADDITION MADE UNDER THE HE AD INCOME FROM OTHER SOURCES FROM RS. 66,22,116/- TO R S. 63,21,497/- WITHOUT CONSIDERING THE ENTRIES REFLECTE D IN FORM 26AS. ITA 227 & 256/JP/2014_ M/S JAIPUR TEXWEAVING PARK LTD. VS. ITO 3 2. THE CIT(A) HAS FURTHER ERRED IN GRANTING RELIEF O F RS. 11,67,000/- OF INTEREST DISALLOWED AGAINST INTEREST FREE LOANS GIVEN TO RELATED CONCERN. 2. BOTH THE GROUNDS OF THE ASSESSEES APPEAL AND GR OUND NO. 1 OF THE REVENUES APPEAL ARE REVOLVING AROUND ADDITIONA L EVIDENCE FURNISHED BEFORE THE LD CIT(A) AND CONFIRMING THE ORDER OF T HE LD ASSESSING OFFICER. THE ASSESSEE IS DEVELOPING TEXTILE PARK. TH E ASSESSEE FILED RETURN AT NIL ON 30/09/2010, WHICH WAS ALSO REVISED O N 04/10/2010 AT NIL INCOME. THE ASSESSEE COMPANY FORMED TO SETUP A TE XTILE WEAVING PARK NEAR KISHANGARH. FOR THIS IT WAS ALLOTTED A PIE CE OF LAND BY RIICO AND GOT GRANT OF RS. 23.23 CRORES FROM THE MINISTRY OF TEXTILES, GOVT. OF INDIA. THE ASSESSEE COMPANY IS TO ALLOT/SELL THE INF RASTRUCTURE IN THE SAID TEXTILE WEAVING PARK TO THE CONCERNS IN THE BUS INESS OF TEXTILE WEAVING. THE LD ASSESSING OFFICER OBSERVED THAT THE ASSESSEE MAINTAINED RELEVANT RECORDS, BOOKS OF ACCOUNT AND S UPPORTING DOCUMENTS WHICH WERE PRODUCED DURING THE COURSE OF A SSESSMENT PROCEEDINGS BEFORE THE ASSESSING OFFICER. DURING TH E YEAR UNDER CONSIDERATION, THE DEVELOPMENT ACTIVITIES WERE IN PR OGRESS. THE ASSESSEE HAD SHOWN CAPITAL WORK IN PROGRESS AND PRE- OPERATIVE EXPENSES. THE LD ASSESSING OFFICER FOUND THAT THE AS SESSEE HAD EARNED ITA 227 & 256/JP/2014_ M/S JAIPUR TEXWEAVING PARK LTD. VS. ITO 4 INTEREST INCOME OF RS. 66,22,116/- DURING THE YEAR UNDER CONSIDERATION ON TEMPORARY DEPOSITS WITH BANK AS FDRS. THE ASSESSIN G OFFICER GAVE REASONABLE OPPORTUNITY OF BEING HEARD BY CONSIDERIN G THE HON'BLE SUPREME COURT DECISION IN THE CASE OF TUTICORIN ALKA LI CHEMICALS FERTILIZERS LTD. 227 ITR 172. THE ASSESSEE REPLIED VI DE LETTER DATED 22/10/2012 WHICH HAS BEEN REPRODUCED BY THE ASSESSI NG OFFICER ON PAGE 2-3 OF THE ASSESSMENT ORDER. THE LD ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION FILED BY THE ASSESSEE AND AFTER CONSIDERING THE DECISION OF HON'BLE SUPREME COURT I N THE CASE BOKARO STEEL 236 ITR 315 (SC) AND TUTICORIN ALKALI CHEMICA LS FERTILIZERS LTD. (SUPRA) TREATED THE INTEREST INCOME AS INCOME FROM OTHER SOURCES. 3. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD CIT(A), WHO HAD CONFIRMED THE ORDER OF THE ASSESSING OFFICER BY OBSERVING THA T THE NET INTEREST RECEIVED BY THE ASSESSEE AT RS. 63,21,496/- IN PLAC E OF ASSESSING OFFICER MADE ADDITION OF RS. 66,22,116/-. AFTER VER IFICATION OF CREDIT AND DEBIT SIDE OF THE INTEREST ACCOUNT, THE ASSESSEE HA S SUBMITTED ADDITIONAL EVIDENCE BEFORE THE LD CIT(A) I.E. COPY OF MINUTES O F THE MEETING OF THE CENTRAL GOVT. ABOUT TREATMENT OF INTEREST EARNED ON GRANT AMOUNT, ITA 227 & 256/JP/2014_ M/S JAIPUR TEXWEAVING PARK LTD. VS. ITO 5 CLARIFICATION ISSUED BY IFSL ON THE SETTLED TERM OF THE CENTRAL GOVT. THE LD CIT(A) HELD THAT THE ADDITIONAL EVIDENCE CAN BE A DMITTED IN CASE OF CONDITION LAID DOWN UNDER CLAUSE A TO D OF RULE 46A OF THE INCOME TAX RULES, 1962 (IN SHORT THE RULES). THESE EVIDENCES WE RE ASKED TO GIVE COMMENT BY THE ASSESSING OFFICER, THE LD CIT(A) AFTE R CONSIDERING THE COMMENT ON ADDITIONAL EVIDENCE, HAS HELD THAT ASSES SMENT IN THIS CASE WAS COMPLETED ON 11/01/2013. THE MINUTES OF GOVT. OF INDIA IS DATED 22/5/2007. ANOTHER DOCUMENT ISSUED BY THE MINISTRY OF TEXTILES, GOVT. OF INDIA IN RESPECT OF THE RECOVERY OF INTEREST EAR NED ON GOVERNMENT GRANTED IS DATED 27/04/2012. THE THIRD DOCUMENT, WHI CH IS REQUESTED TO BE ADMITTED FOR ADDITIONAL EVIDENCE WAS DATED 02 /7/2013, WHICH IS A CLARIFICATION IN RESPECT OF THE ADJUSTMENT OF INTER EST EARNED ON GRANT RELEASED BY THE GOVT. OF INDIA. ALL THE THREE DOCUM ENTS WERE AVAILABLE WITH THE ASSESSEE BEFORE COMPLETION OF ASSESSMENT. TH E LD ASSESSING OFFICER HAD GIVEN PROPER OPPORTUNITY OF BEING HEARD AS ALSO THAT IN SPITE OF SUCH OPPORTUNITIES DURING THE ASSESSMENT P ROCEEDINGS, SUCH DOCUMENTS WERE NOT FURNISHED. THE ASSESSEE HAS NOT RA ISED THIS ISSUE BEFORE THE ASSESSING OFFICER AT THE TIME OF ASSESSM ENT PROCEEDINGS THAT THE INTEREST AMOUNT BEING OF CAPITAL NATURE IS TO B E REDUCED FROM SUBSIDY RECEIVED AND ACCORDINGLY INTEREST EARNED ON SUCH FDRS SHOULD ITA 227 & 256/JP/2014_ M/S JAIPUR TEXWEAVING PARK LTD. VS. ITO 6 NOT BE TAXED. THERE IS NO SUFFICIENT CAUSE TO PREVEN T THE ASSESSEE FROM PRODUCING THESE EVIDENCES WITH THE ASSESSING OFFICER , THEREFORE, HE HAD NOT ADMITTED ADDITIONAL EVIDENCES UNDER RULE 46A OF THE RULES. HE ALSO RELIED ON THE VARIOUS DECISIONS OF THE HONBLE JURI SDICTIONAL HIGH COURT AS WELL AS OTHER COURTS. HE FURTHER HELD THAT THERE IS NO DISPUTE ON THE FACT THAT SUCH INTEREST INCOME OF RS. 63,21,497/- WA S EARNED BY THE APPELLANT FROM THE AVAILABLE FUND RECEIVED BY WAY OF SUBSIDY FROM GOVT. OF INDIA IN THREE INSTALLMENTS AND THAT SUCH AMOUNT WAS KEPT BY WAY OF FDRS IN THE BANK ON WHICH SUCH INTEREST INCOME WAS EA RNED AND THAT MAKING OF FDRS WAS NOT AT ALL DUE TO ANY COMPELLING CIRCUMSTANCES WHICH MAY HAVE BEEN IMPOSED BY THE GOVT. OF INDIA AN D THAT IN SUCH CIRCUMSTANCES, SUCH INTEREST INCOME IS TO BE TAXED AS INCOME FROM OTHER SOURCES. IT IS A SETTLED LAW THAT THE INTERES T INCOME FROM FDRS BEFORE COMMENCING OF BUSINESS WOULD WAYS BE TAXED AS INCOME FROM OTHER SOURCES. HE FURTHER RELIED ON THE FOLLOWING DE CISIONS:- (I) CIT VS. MODI RUBBER LTD. 208 ITR 379 (DEL.) (II) CIT VS. MANGALAM CEMENT (1996) 217 ITR 369 (RA J.) (III) TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. VS. CIT 227 ITR 172 (SC) ITA 227 & 256/JP/2014_ M/S JAIPUR TEXWEAVING PARK LTD. VS. ITO 7 (IV) MADHYA PRADESH STATE INDUSTRIES CORPORATION L TD. VS. CIT (1968) 69 ITR 824 (MP). (V) TRACO CABLE CO. LTD. VS. CIT (1969) 72 ITR 503 ( KER). (VI) CIT VS RAJASTHAN LAND DEVELOPMENT CORPORATION 211 ITR 597 (RAJ.) ACCORDINGLY, HE ALLOWED THE APPEAL PARTLY ON THIS I SSUE. 4. NOW THE ASSESSEE AS WELL AS THE REVENUE ARE IN APP EALS BEFORE US. THE LD AR HAS SUBMITTED THAT THE ADDITIONAL EVI DENCE FILED BY THE ASSESSEE HAD NOT BEEN ADJUDICATED/ADMITTED UNDER RU LE 46A OF THE RULES. THESE EVIDENCES WERE NOT AVAILABLE WITH THE ASS ESSEE AT THE TIME OF ASSESSMENT ORDER EVEN THEY WERE DATED BEFORE THE DATE OF ASSESSMENT ORDER. THESE EVIDENCES ARE GOING TO ROOT OF THE GROUND, THEREFORE, SAME ARE REQUIRED TO BE ADMITTED AS GOVT . OF INDIA HAS GRANTED SUBSIDY TO THE APPELLANT AND IMPOSED CERTAI N RESTRICTIONS ON INTEREST INCOME AS PER VARIOUS PAPERS FILED BEFORE THE LD CIT(A). THEREFORE, THE SAME MAY BE ALLOWED TO BE ADJUDICATED. THE LD CIT(A) WAS NOT RIGHT THAT INTEREST INCOME IS INCOME FROM OT HER SOURCES AS NUMBER OF RIDERS HAD BEEN PROVIDED BY THE GOVT. OF INDIA ON IT. THEREFORE, THE MATTER MAY BE SET ASIDE TO THE ASSESS ING OFFICER. ITA 227 & 256/JP/2014_ M/S JAIPUR TEXWEAVING PARK LTD. VS. ITO 8 5. AT THE OUTSET, THE LD DR HAS ARGUED THAT IT IS A SETTLED LAW IF ANY INTEREST IS EARNED AT THE TIME OF PRE-OPERATION AND FUND PUT IN THE FDRS AND INTEREST EARNED THEREON IS INCOME FROM OTHER SO URCES AS HELD BY THE HONBLE APEX COURT IN THE CASE OF TUTICORIN ALKA LI CHEMICALS & FERTILIZERS LTD. VS. CIT (SUPRA), THEREFORE, ORDER O F THE LD CIT(A) MAY PLEASE BE CONFIRMED. HOWEVER, THE LD CIT(A) HAS REDUC ED INTEREST INCOME FROM RS. 66,22,116/- TO RS. 63,21,497/- WITHO UT GIVING ANY OPPORTUNITY TO THE ASSESSING OFFICER, THEREFORE, TH E INTEREST INCOME IS TO BE ASSESSED AT RS. 66,22,116/-. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. WE HA VE ALSO GONE THROUGH THE SERIAL NO. 31 TO 40 OF THE PAPER BOOK A ND VARIOUS COPIES OF ORDERS OF MINISTRY OF TEXTILE ABOUT AGREEMENT OF SUB SIDY, WHICH REQUIRED TO BE CONSIDERED BEFORE DECIDING THE NATURE OF INTE REST INCOME, THEREFORE, WE SET ASIDE THIS ISSUE TO THE ASSESSING OFFICER AND IS DIRECTED TO GIVE A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE IS ALSO DIRECTED TO COOPERAT E WITH THE ASSESSING OFFICER AND FURNISHED ALL REQUIRED DETAILS. ACCORDI NGLY, WE SET ASIDE THIS ISSUE TO THE ASSESSING OFFICER FOR DE NOVO. HENCE, GROUND NO. 1 AND 2 ITA 227 & 256/JP/2014_ M/S JAIPUR TEXWEAVING PARK LTD. VS. ITO 9 OF THE ASSESSEES APPEAL AND GROUND NO. 2 OF THE RE VENUES APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES ONLY. 7. THE SECOND GROUND OF THE REVENUES APPEAL IS AGAI NST GRANTING OF RELIEF OF RS. 11,67,000/- OF INTEREST DISALLOWED AGA INST INTEREST FREE LOAN GIVEN TO THE RELATED CONCERN. THE LD DR SUPPORTED TH AT THE ASSESSEE HAD ADVANCES OF RS. 97.25 LACS TO M/S JTPL TEXMART PV T. LTD. AND INTEREST WAS CHARGED ON SUCH AMOUNT. THERE WAS NO BUSI NESS EXPEDIENCY OF THE ASSESSEE TO GIVE INTEREST FREE AD VANCES TO THE SISTER CONCERN. THEREFORE, ORDER OF THE ASSESSING OFFICER M AY PLEASE BE CONFIRMED. 8. AT THE OUTSET, THE LD AR HAS SUBMITTED THAT THE LD CIT(A) HAS ANALYSED THE WHOLE ISSUE IN DEPTH. HE FURTHER SUBMIT TED THAT A PRIVATE COMPANY WAS INCORPORATED BY THE SHARE HOLDERS OF THE ASSESSEE COMPANY TO FACILITATE ALL THE PARTICULARS FOR DEVEL OPING VARIOUS INFRASTRUCTURES IN THE TEXTILE PARK AT KISHANGARH. THE ASSESSEE ALSO STATED THAT THE LOAN EXTENDED TO M/S JTPL TEXMART PVT . LTD. WAS UTILIZED FOR BUYING OF SHARES IN THE ASSESSEES COM PANY AND BECAUSE OF THIS REASON, THE LOAN WAS GRANTED WITHOUT ANY INTERES T. NO NEXUS HAS BEEN ESTABLISHED BY THE ASSESSING OFFICER THAT INTE REST BEARING FUND WAS ITA 227 & 256/JP/2014_ M/S JAIPUR TEXWEAVING PARK LTD. VS. ITO 10 DIVERTED FOR ADVANCING MONEY TO THE SISTER COMPANY, THEREFORE, CHARGING OF INTEREST @ 12% ON SUCH FUND OF RS. 97,25 ,000/- ADVANCED TO SISTER CONCERN IS WITHOUT ANY BASIS AND DESERVED TO BE CONFIRMED THE ORDER OF THE LD CIT(A). THIS WAS THE BUSINESS EXPEDIEN CY ALSO THAT THE COMPANY WAS INCORPORATED BY THE SHARE HOLDERS OF THE APPELLANT COMPANY TO FACILITATE ALL THE PARTICULARS FOR DEVEL OPING VARIOUS INFRASTRUCTURES IN THE TEXTILE PARK AT KISHANGARH F OR WHICH HE RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE O F S.A. BUILDERS VS CIT 288 ITR 1 (SC). 9. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE LD CIT(A) HAS THOROUGHLY EXAMINED THIS ISSUE ON FACTS AS WELL AS O N LEGAL SIDE OF THE CASE. THE APPELLANT HAD FILED DETAILED INFORMATION A S TO WHEN THE SHARE CAPITAL WAS RECEIVED AND HOW THE PART OF SHARE CAPIT AL WAS ADVANCED TO HIS SISTER CONCERN ON WHICH NO INTEREST HAS BEEN CHA RGED. EVEN IN RESPECT OF CREDIT TRANSACTIONS ON ACCOUNT OF SWEEP T RANSFER IN THE BANK ACCOUNT AGAINST WHICH LOAN WAS ADVANCED TO M/S JTPL TE XMART PVT. LTD. THE LD CIT(A) HAS HELD THAT SWEEP TRANSFER IS THE AMOU NT FROM FDRS, WHICH WERE EARLIER GOT BY THE APPELLANT WHEN THE REQUI REMENT OF FUNDS ITA 227 & 256/JP/2014_ M/S JAIPUR TEXWEAVING PARK LTD. VS. ITO 11 WAS THERE FOR MAKING SUCH LOAN TO M/S JTPL TEXMART PVT . LTD., SUCH FDR AMOUNT WAS AUTOMATICALLY TRANSFERRED FROM FDR AC COUNT TO CURRENT ACCOUNT. THE ASSESSEE HAD NOT ADVANCED INTEREST BEA RING FUND TO ITS SISTER CONCERN, THEREFORE, CHARGING OF INTEREST ON ADVANCE TO SISTER CONCERN AND REDUCTION FROM THE PRE-OPERATIVE EXPENS ES WAS NOT JUSTIFIED. THE LD DR HAD NOT CONTROVERTED THE FINDIN G GIVEN BY THE LD CIT(A). THEREFORE, WE UPHOLD THE ORDER OF THE LD CIT(A ) ON THIS GROUND. ACCORDINGLY, REVENUES APPEAL ON THIS GROUND IS DIS MISSED. 7. IN THE RESULT, THE ASSESSEE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES ONLY AND REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/09/2015. SD/- SD/- VH-VKJ-EHUK VKJ-IH-RKSYKUH (T.R. MEENA) (R.P.TOLANI) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ @ JAIPUR FNUKAD @ DATED:- 11 TH SEPTEMBER, 2015 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- M/S JAIPUR TEXWEAVING PARK LTD., JAIPUR . 2. IZR;FKHZ @ THE RESPONDENT- THE ITO, WARD-7(2), JAIPUR. ITA 227 & 256/JP/2014_ M/S JAIPUR TEXWEAVING PARK LTD. VS. ITO 12 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDR @ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 227 & 256/JP/2014) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR