The ACIT,GNR Circle, Gandhinagar V. Gujarat Informatics Ltd., Gandhinagar

ITA 2301/AHD/2012

• Counselvise Citation: 230120514 RSA 2012
• Duration Of Justice: 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 12-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K SRIDHAR
• Assessee Lawyers: ANIL P SHAH
• Section: 143(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD B BENCH BEFORE: SHRI MUKUL KR. SHRAWAT JUDICIAL MEMBER AND SHRI T.R. MEEN A, ACCOUNTANT MEMBER ASSST. COMMISSIONER OF INCOME TAX, GANDHINAGAR (APPELLANT) VS. GUJRAT INFORMATICS LTD. (RESPONDENT) PAN: AABCG5863B REVENUE BY : SRI K.SRIDHAR, CIT-D.R. ASSESSEE BY : SRI ANIL P. SHAH, A.R. DATE OF HEARING : 12-12-2012 DATE OF PRONOUNCEMENT : 21-12-2012 / ORDER PER : MUKUL KR. SHRAWAT, JUDICIAL MEMBER:- THIS IS AN APPEAL FILED BY THE REVENUE ARISING FROM THE ORDER OF LD. CIT(A) GANDHINAGAR, AHMEDABAD DATED 16-07-2012 AND THE ONLY GROUND RAISED IS REPRODUCED BELOW:- ITA NO. 2301/AHD/2012 A.Y.:-2009-10 ITA NO.2301 /AHD/2012 A.Y. 2009-08 PAGE NO THE ACIT VS. GUJARAT INFORMATICS LTD. 2 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF INTEREST PROVISION EXPENSE MADE BY THE AO AMOUNTING TO RS. 2,39,64,697/- 2. FACTS IN BRIEF IN RESPECT OF THE ISSUED RAISED A S EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER MADE U/S 143(3) DATE D 28-12-2012 THAT THE ASSESSEE-COMPANY WAS INCORPORATED UNDER THE COMPANI ES ACT,1956 AS GOVERNMENT COMPANY ON 19-02-1999. THE ASSESSEE-COM PANY IS SAID TO BE A NODAL AGENCY FOR DEVELOPMENT OF INFORMATION TECHN OLOGY INDUSTRY IN GUJRAT STATE. THE ASSESSEE COMPANY HAD TAKEN INITI ATIVE FOR IMPLEMENTATION OF I.T. POLICES OF THE STATE GOVERNMENT. THE ASSES SEE-COMPANY HAS ALSO PROVIDED CONSULTATION SERVICES TO VARIOUS GOVERNMEN T DEPARTMENTS TOWARDS PROCUREMENT OF HARDWARE AND DEVELOPMENT OF SOFTWARE . IT WAS NOTED BY THE AO THAT THE ASSESSEE-COMPANY HAD DEBITED A SUM OF R S. 2,39,64,697/- IN PROFIT AND LOSS ACCOUNT UNDER THE HEAD (INTEREST ON GRANTS/PAYMENT ON ADVANCES). THE ASSESSEE HAS FURNISHED A DETAILED E XPLANATION AND INFORMED THAT THE GOVERNMENT ORGANIZATIONS PLACED THEIR FUND S WITH THE ASSESSEE FOR THE PURPOSE OF PROCUREMENT OF COMPUTER HARDWARE AND SOFTWARE. IT WAS EXPLAINED THAT THOSE FUNDS OR ADVANCES WERE IN THE NATURE OF ADVANCE FOR THE PURPOSE OF THE BUSINESS. ON UNUTILIZED PORTION OF THE GRANT, THE ASSESSEE WAS REQUIRED TO MAKE PAYMENT OF INTEREST. HOWEVER, THE AO WAS NOT CONVINCED AND HELD THAT IN THE LIGHT OF THE PROVISIONS OF SEC TION 36(1)(III) AND SECTION 37(1) THE ASSESSEE IS NOT ENTITLED FOR THE CLAIM OF INTEREST EXPENSE. WITH THIS FACTUAL BACKGROUND, WE HAVE BEEN INFORMED THAT ON I DENTICAL FACTS IN ASSESSEES OWN CASE FOR A.Y. 06-07 THE ITAT B BEN CH ITA NO. 187/AHD/2010 VIDE AN ORDER DATED 09-11-2012 ALLOWED THE CLAIM IN THE FOLLOWING MANNER:- ITA NO.2301 /AHD/2012 A.Y. 2009-08 PAGE NO THE ACIT VS. GUJARAT INFORMATICS LTD. 3 7. WE HAVE HEARD BOTH THE SIDES. WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW IN THE LIGHT OF VOLUMINOUS CO MPILATION FILED AND CASE LAWS CITED. THE ADMITTED FACTUAL POSITION IS THAT THE ASSESSEE- COMPANY IS A GOVERNMENT UNDERTAKING INCORPORATED FO R THE IMPLEMENTATION OF IT POLICIES IN THE STATE OF GUJAR AT AND TO PROVIDE CONSULTATION SERVICES TO VARIOUS GOVERNMENT DEPARTM ENTS TOWARDS SOFTWARE DEVELOPMENT. CERTAIN GRANTS WERE GIVEN T O THE ASSESSEE. THERE WAS A CLAUSE AS PER CERTAIN GOVERNMENT REGULA TIONS THAT IF AN AMOUNT REMAINS UNSPENT OUT OF THE GRANT, THEN THE U NSPENT AMOUNT SHALL BEAR INTEREST @ 6% PER ANNUM. IN THE LIGHT O F THE SAID INSTRUCTIONS, THE ASSESSEE HAS MADE THE PROVISION I N ITS BOOKS OF ACCOUNT. IN THIS REGARD, FEW G.RS ARE PLACED ON RE CORD. HOWEVER, THE MAIN QUESTION BEFORE US IS THAT THE ACTION OF THE A SSESSEE OF PROVIDING 6% INTEREST ON THE UNSPENT AMOUNT OF GRANT IS ALLOW ABLE WHETHER U/S.36(1)(III) OF IT ACT OR U/S.37(1) OF IT ACT. WE ARE OF THE VIEW THAT SINCE THE AMOUNT IN QUESTION WAS NOT IN THE NATURE OF BORROWINGS OR LOANS, THEREFORE THE PROVISIONS OF SECTION 36(1)(II I) DO NOT APPLY ON THESE FACTS. WE ARE IN AGREEMENT WITH LD.CIT(A) TH AT THIS PLEA OF THE ASSESSEE IS NOT ACCEPTABLE. ONCE WE HAVE HELD SO A ND THAT THIS VIEW HAS ALREADY BEEN EXPRESSED BY LD.CIT(A), THEREFORE THE OBJECTION OF THE REVENUE DEPARTMENT THAT THE LD.CIT(A) WAS NOT J USTIFIED IN ALLOWING THE EXPENDITURE U/S.36(1)(III) IS UNWARRAN TED. BECAUSE OF THIS REASON, WE HEREBY ALSO HOLD THAT THE CASE LAWS CITED BY LD.DR OF PEPSU ROAD TRANSPORTATION (SUPRA) DO NOT APPLY ON T HE PRESENT FACTS OF THIS APPEAL BECAUSE OF THE REASON THAT THE HONBLE P&H HIGH COU RT IN THAT CITED DECISION HAS SETTLED THE ISSUE WHICH REVOLVE AROUND THE PROVISIONS OF SECTION 36(1)(III) OF IT ACT. NOW THE QUESTION LE FT BEFORE US IS THAT WHETHER THE PROVISIONS SO MADE BY THE ASSESSEE IS E LIGIBLE FOR DEDUCTION U/S.37(1) OF IT ACT. IN THIS CONNECTION, FEW DECISIONS WERE CITED BEFORE LD.CIT(A) AND CONSIDERING ALL THOSE DE CISIONS AS CITED SUPRA, WE ARE OF THE CONSIDERED VIEW THAT ON ONE HA ND THE ASSESSEE HAS EARNED INTEREST INCOME ON INVESTMENT OF THE SUR PLUS FUND AND ON THE OTHER HAND MADE THE PROVISIONS OF INTEREST, HEN CE SUCH A CLAIM DOES FALL UNDER THE PROVISIONS OF SECTION 37(1) OF IT ACT. WE HAVE BEEN INFORMED THAT THE UNSPENT SURPLUS FUNDS HAVE B EEN INVESTED AS PER THE GUIDELINES AND THEREUPON INTEREST WAS EARNE D BY THE ASSESSEE. ON THE OTHER HAND, THE ASSESSEE HAS TO PAY INTEREST THAT TOO AS PER THE DIRECTIONS OF THE GOVERNMENT, HENCE THE PROVISIONS MADE BY THE ITA NO.2301 /AHD/2012 A.Y. 2009-08 PAGE NO THE ACIT VS. GUJARAT INFORMATICS LTD. 4 ASSESSEE IS, THEREFORE, MEANT FOR THE PURPOSE OF TH E BUSINESS, HENCE QUALIFY FOR CLAIM U/S.37(1) OF THE IT ACT. IN THE RESULT, THE VIEW TAKEN BY THE LD.CIT(A) IS HEREBY CONFIRMED AND THIS GROUN D OF THE REVENUE IS DISMISSED. . 3 ON HEARING THESE SUBMISSIONS OF BOTH THE SIDES, WE ARE OF THE CONSIDERED VIEW THAT SINCE ON IDENTICAL FACTS A VIE W HAS ALREADY BEEN TAKEN BY A RESPECTED CO-ORDINATE BENCH IN ASSESSEES OWN CASE FOR A.Y. 06-07, THEREFORE, THE SAME SHALL APPLY FOR THE YEAR UNDER CONSIDERATION. RESPECTFULLY FOLLOWING THE VIEW ALREADY TAKEN, WE H EREBY DIRECT THAT THE LD. CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSE E. THIS GROUND OF THE REVENUE IS HEREBY DISMISSED. 4. REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (T.R. MEENA) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL M EMBER AHMEDABAD : DATED 21/12/2012 AK / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. / CONCERNED CIT 4. - / CIT (A) 5. , ! , '# / DR, ITAT, AHMEDABAD 6. $% &' / GUARD FILE. BY ORDER/ , ( / ' ) ! , '#