ITO, Jalgaon V. Tapi Irrigation Development Corporation, Jalgaon

ITA 2367/PUN/2012

• Counselvise Citation: 236724514 RSA 2012
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 30-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MODI
• Assessee Lawyers: S L RATNAPARKI
• Keywords: Business income
• Section: 56; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NOS.2367 TO 2369/PN/2012 (ASST. YEARS: 2006-07, 2008-09, 2009-10) ITO, WARD 2(1), JALGAON APPELLANT VS. TAPI IRRIGATION DEVELOPMENT CORPORATION, SINCHAN BHAVAN, AKASHWANI CHOWK, JALGAON. PAN:AACCT7606E RESPONDENT ITA NO.482/PN/2011 (ASST. YEAR: 2007-08) TAPI IRRIGATION DEVELOPMENT CORPORATION, SINCHAN BHAVAN, AKASHWANI CHOWK, JALGAON. PAN:AACCT7606E APPELLANT VS. ITO, WARD 2(1), JALGAON RESPONDENT DEPARTMENT BY : SHRI A.K. MODI ASSESSEE BY : SHRI S.L. RATNAPARKI DATE OF HEARING : 27.11.2013 DATE OF PRONOUNCEMENT : 29.11.2013 ORDER PER SHAILENDRA KUMAR YADAV, JM: FIRST THREE APPEALS FILED BY REVENUE AND LAST APPE AL FILED BY ASSESSEE PERTAIN TO SAME ASSESSEE ON SAME ISSUES, T HESE ARE BEING DISPOSED OFF BY COMMON ORDER FOR THE SAKE OF CONVEN IENCE. 2. IN ITA NO.2367/PN/2012, THE REVENUE HAS TAKEN TH E FOLLOWING GROUNDS IN A.Y.2006-07. 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN TREATING THE INCOME AS FROM BUSINES S OR PROFESSION WHICH IS NOT SO, THE CIT(A) HAS OVERLOOK ED THE AUDIT REPORT OF THE ASSESSEE COMPANY ITSELF SPEAKS ABOUT DIFFERENT ASPECT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN RELYING UPON THE DECISION OF VIDARB HA IRRIGATION DEVELOPMENT CORPORATION, WHEREAS IT IS T O BE SAID HERE THAT THE SAID DECISION HAS NOT REACHED TO ITS FINALITY. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE APPELLANT, THEREFORE, PRAYS THAT THE ORDER OF THE C IT(A)-II, NASHIK BE VACATED ON THIS POINT AND THAT OF THE ASS ESSING OFFICER BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND AND / OR A LTER ANY GROUNDS OF APPEAL AT THE TIME OF HEARING.' 3. IN THIS CASE IN FIRST ROUND, ASSESSEES APPEAL A GAINST ORIGINAL ASSESSMENT ORDER WAS DECIDED BY CONCERNED CIT(A), N ASHIK VIDE ORDER DATED 13.08.2009. THE ASSESSEE HAS CARRIED T HE MATTER TO ITAT, PUNE, WHEREIN VIDE ORDER DATED 06/07/2011 HAS SET ASIDE THE ISSUES RELATING TO THE BUSINESS NATURE OF THE A SSESSEE AND APPLICABILITY OF PROVISION OF SEC. 56 OF THE IT ACT TO THE FILE OF THE CIT(A) FOR FRESH ADJUDICATION AFTER CONSIDERING THE DECISION OF THE HON'BLE HIGH COURT, BOMBAY ON THE ISSUE AND THE CON SEQUENTIAL ORDER OF THE ITAT, MUMBAI 'BENCH -A' DATED 22/07/20 05. AS MENTIONED BY THE CONCERNED ASSESSING OFFICER PASSED ORDER VIDE DT. 19/12/2008, WHICH WAS DECIDED BY CONCERNED CIT( A) ON 13.08.2009, WHEREIN THE MAIN GROUND RELATING TO TAXABILITY OF INTEREST RECEIVED FROM TEMPORARY DEPOSITS OF SURP LUS FUNDS WAS DISMISSED BY HOLDING THAT THE ASSESSEE WAS NOT ENGA GED IN ANY BUSINESS ACTIVITY AND THEREFORE, THE INCOME FROM IN TEREST WAS RIGHTLY ASSESSED UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. 4. AS STATED ABOVE, TRIBUNAL IN ITA NO.1238/PN/09 D ATED 06.07.2011 WHILE SETTING ASIDE THE ORDER FOR A.Y 20 06-07 IN RESPECT OF THE ISSUE AS TO WHETHER THE APPELLANT WA S ENGAGED IN ANY BUSINESS ACTIVITY AND THE HEAD OF INCOME UNDER WHICH THE 3 INTEREST EARNED ON ANY TEMPORARY DEPOSITS OF SURPLU S FUNDS WAS REQUIRED TO BE ASSESSED, ITAT, PUNE 'A' BENCH HELD AS UNDER. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AS WELL AS THE BINDING JURISDICTIONAL H IGH COURT DECISION IN THE CASE OF VIDC READ WITH THE ORDER OF THE TRIBUNAL DT. 22.07.2005, IN GENERAL AND PARAGRAPHS 87 TO 97 OF THE SAID ORDER OF THE TRIBUNAL, IN PARTICULAR. B ASICALLY, THE CASE OF THE ASSESSEE IS THAT IT IS A COVERED ISSUE BY THE ORDER OF THE TRIBUNAL DATED 22.07.2005 IN THE CASE OF THE VIDC AND THE SAME HAS RESULTED CONSEQUENT TO THE JUDGMENT OF THE HON. HIGH COURT. SAID JUDGMENT OF THE HIGH COURT HA S GIVEN FINDING THAT THE INCOME OF THE VIDC IS TO BE COMPUT ED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 28 OF THE ACT. HOWEVER, IT IS A FACT THAT THE SAID JUDGMENT OF THE HON. HIGH COURT AND DECISION OF THE HON. TRIBUNAL WERE NOT DI SCUSSED IN THE IMPUGNED ORDER PROBABLY THEY ARE NOT FILED B EFORE HIM DURING THE FIRST APPELLATE PROCEEDINGS, ALTHOUGH TH EY ARE IN EXISTENCE AT THE RELEVANT POINT OF TIME. PRIMA FACI E, ON THE DEMONSTRATION OF THE ISSUES BY ID COUNSEL, WE FIND THERE IS FUNCTIONAL ANALOGY BETWEEN THE ASSESSEE AND THE VID C. WE DO NOT HAVE RELEVANT ORDINANCES AND OBJECTS OF THE BOTH CORPORATIONS FOR COMPARISON AND ADJUDICATION. PARAG RAPHS 87 TO 97 OF THE SAID ORDER OF THE TRIBUNAL IN THE CASE OF THE VIDC SUPRA, ARE RELATED TO THE ISSUE UNDER CONSIDERATION . IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE ISSUE HA S TO BE SET ASIDE TO THE FILES OF THE CIT (A) FOR ADJUDICATING THE ISSUE AFRESH AFTER CONSIDERING THE JUDGMENT OF THE HIGH C OURT AND THE CONSEQUENTIAL ORDER OF THE TRIBUNAL AT 22.07.20 05. THE ASSESSEE IS ALSO DIRECTED TO FILE COPIES OF SAID JUDGMENT/DECISION BEFORE THE CIT(A) FOR FACILITATIN G EARLY DISPOSAL OF THE ISSUES. ACCORDINGLY, THE ISSUE RELA TING TO THE BUSINESS NATURE OF THE ASSESSEE IS SET ASIDE TO THE FILE OF THE CIT(A). ACCORDINGLY, RELEVANT GROUNDS ARE SET ASIDE . 7. OTHER ISSUES EMANATING FROM THIS APPEAL RELATE T O THE APPLICABILITY OF THE PROVISIONS OF SEC. 56 OF THE A CT. IN CASE, AS A RESULT OF THE SET ASIDE PROCEEDINGS BEFORE THE CI T(A) ON THE FIRST ISSUE DISCUSSED IN THE PRECEDING PARAGRAPHS, IF THE CIT(A) COMES TO THE CONCLUSION THAT THE ISSUE IS CO VERED BY THE DECISION IN THE CASE OF THE VTDC SUPRA, AND THE REFORE, ASSESSEES VIEW OF CONDUCTING OF BUSINESS IS UPHELD, THE TAXABILITY OF INTEREST INCOME UNDER THE HEAD 'PROFI TS AND GAINS FROM THE BUSINESS OR PROFESSION' BECOMES FINA L AND THUS, THE SAME HAS TO BE DEALT WITH AS PER THE PROV ISIONS OF SEC. 28 OF THE ACT AS HELD BY THE HON. HIGH COURT I N THE CASE OF THE VIDC. CONSEQUENTLY, THE INTEREST PAID SHALL HAVE TO BE DEALT WITH AS PER THE PROVISIONS OF SEC. 28 OF THE ACT. IN ANY CASE THE REQUIREMENT OF DETERMINING THE NEXUS BETWE EN THE 4 INTEREST PAID OR INTEREST RECEIVED IS RELEVANT FOR THE PROVISIONS OF SEC. 56 AND 57 OF THE ACT AND NOT FOR SECTION 28 OF THE ACT. IN ANY CASE, THE REVENUE AUTHORITIES HAVE NOT TRAVE LLED MUCH ON THIS ISSUE AS THEY TOOK A VIEW THAT THE INTEREST INCOME IS TO BE DEALT WITH AS PER THE PROVISIONS OF SEC. 56/5 7 OF THE ACT. THEREFORE, WE SET ASIDE THIS ISSUE ALSO TO THE FILE OF THE CIT (A). ACCORDINGLY, ALL GROUNDS I.E. 1 TO 5 ARE SET A SIDE. 5. IN TERMS OF ABOVE DIRECTIONS OF ITAT, THE ASSESS EE BEFORE CIT(A) FILED A COPY OF ORDER OF THE HONBLE BOMBAY HIGH COURT, NAGPUR BENCH AND THE ITAT MUMBAI IN THE CASE OF VID ARBHA IRRIGATION DEVELOPMENT CORPORATION REFERRED TO BY I TAT, PUNE IN THE APPEAL ORDER IN THE CASE OF THE ASSESSEE FOR A. Y. 2006-07 ALONGWITH THE COPY OF THE VIDC ACT AND TO EXPLAIN A S TO HOW THE FUNCTIONS OF BOTH THE CORPORATIONS I.E VIDC AND THAT OF THE ASSESSEE WERE SIMILAR. IN ORIGINAL APPEAL, THERE I S DISPUTE OF CLAIM WHETHER THE ASSESSEE WAS ENGAGED IN ANY BUSINESS AC TIVITY AND THAT INTEREST OF RS.2,20,03,120/- EARNED ON TEMPORA RY DEPOSIT OF SURPLUS FUNDS WAS REQUIRED TO BE SET OFF AGAINST TH E INTEREST PAID AND SHOULD NOT BE HELD TO BE 'INCOME FROM OTHER SOU RCES'. HIS PREDECESSOR VIDE ORDER DATED 13.08.2009 HAD DISMISS ED THE SAID GROUNDS BY AGREEING WITH ASSESSING OFFICER. 6. SIMILAR ISSUE WAS CONSIDERED BY THE HONBLE BOMB AY HIGH COURT / ITAT, MUMBAI IN THE CASE OF VIDARBHA IRRIGA TION DEVELOPMENT CORPORATION (VTDC) IN RESPECT OF WHICH THE ITAT, PUNE, IN THE CASE OF THE ASSESSEE HELD THAT THERE W AS PRIMA FACIE FUNCTIONAL ANALOGY BETWEEN THE APPELLANT AND VIDC A ND FURTHER DIRECTED EXAMINATION OF THE SAID ORDERS AND THE FUN CTIONS OF BOTH THE CORPORATIONS TO DECIDE AS TO WHETHER THE CASE O F THE ASSESSEE WAS COVERED BY THE ABOVE MENTIONED ORDERS IN THE CA SE OF VIDC. 7. CIT(A) HAVING EXAMINED THE THINGS AS PER DIRECTI ONS HAVING ANALOGY OF ASSESSEE THAT VIDARBHA IRRIGATION DEVELO PMENT CORPORATION (VTDC). IN VIEW OF ABOVE DIRECTIONS, I T WAS FOUND THAT MUMBAI TRIBUNAL VIDE ORDER IN THE CASE OF VIDC HELD AS UNDER. 5 '96 CONSIDERING THE RIVAL SUBMISSIONS AND GOING THR OUGH THE DECISIONS CITED BY THE CONTENDING PARTIES, WE A RE OF THE VIEW THAT THERE IS NO DOUBT THAT THE ASSESSEE HAD COMMENCED ITS ENTRUSTED ACTIVITY-BUSINESS. ASSESSEE CORPORATION WAS FORMED FOR COMPLETION OF THE ALREAD Y EXISTING PROJECTS OR FOR FURTHER ENTRUSTED PROJECTS . THERE IS NO DOUBT THAT EVEN BEFORE THE PROJECTS WERE ENTRUST ED TO THE ASSESSEE, SOME PORTION OF THE CANALS WERE COMPL ETED AND WATER SUPPLIED TO VARIOUS FIELDS AND WATER CHAR GES WERE BEING COLLECTED BY THE IRRIGATION DEPARTMENT O F THE STATE. MERELY BECAUSE THE ASSESSEE HAD TAKEN OVER CONSTRUCTION ACTIVITIES IT DOES NOT MEANT THAT THE ASSESSEE HAS NOT COMMENCED THE BUSINESS. IT IS ALMOST EXACTL Y LIKE AN INDUSTRIAL UNDERTAKING IF AN EXISTING UNDERTAKIN G IS PURCHASED BY A NEW ASSESSEE, IT DOES NOT MEAN THAT THE NEW ASSESSEE HAD NOT COMMENCED ITS BUSINESS. THE NE W OWNER MAY EXPAND THE EXISTING UNDERTAKING AND ITS CAPACITY. TO SAY THAT ONLY WHEN IT IS IN FULL SWING AND COMPLETED THE ENTIRE EXPANSION THE BUSINESS COMMENC ED IS AN INCORRECT APPRECIATION. WE HAVE NO DOUBT THAT TH E VIEW CANVASSED BY THE LEARNED STANDING COUNSEL HAS NO LE GAL SANCTITY. ' CONSEQUENTLY TO THE ORDER OF BOMBAY HIGH COURT IN S AME CASE APPEARING AT PARA NO. 40 /PG NO. 49 OF THE ORD ER, INTER ALIA HELD AS UNDER: . IN VIEW OF THE PROVISIONS OF THE VIDC ACT TO SHOW THAT THE ASSESSEE HAS TAKEN OVER EXISTING BUSI NESS, SUCH IRRIGATION PROJECTS ETC. OF THE STATE GOVT. WH EREIN INCOME FROM SALE OF WATER WAS ALREADY COMMENCED AND CONTINUED AFTER CORPORATION CAME INTO EXISTENCE AND STEPPED INTO THE SHOES OF THE STATE GOVT. AFTER APPOINTED D AY UNDER THE PROVISIONS OF THE VIDC ACT.' 8. THE ASSESSEE TAPI IRRIGATION DEVELOPMENT CORPORA TION AND VIDARBHA IRRIGATION DEVELOPMENT CORPORATION ARE COR PORATIONS ESTABLISHED BY THE GOVT. OF MAHARASHTRA FOR UNDERTA KING IRRIGATION SCHEMES FOR SUPPLY OF WATER AS PER THE DIRECTIONS O F THE STATE GOVT. TO EXAMINE AS TO WHETHER THE FUNCTIONS AND AC TIVITIES OF THE ASSESSEE AND THE VIDC WERE SIMILAR, THE TEDC ACT WA S COMPARED WITH THE VIDC ACT. IN RESPONSE TO QUERY, ASSESSEE F ILED COMPARATIVE TABLE JUSTIFYING THE CLAIM THAT THE FUN CTIONS AND 6 ACTIVITIES OF BOTH THE CORPORATIONS WERE SIMILAR. T HE COMPARATIVE TABLE FILED BY THE ASSESSEE IS REPRODUCED AS UNDER: PARTICULARS IN RESPECT OF TIDC ACT IN RESPECT OF VIDC ACT DETAILS OF ORDINANCE ORDINANCE ON 4 TH DEC. 1997 ORDINANCE ON 12 H MARCH 1997 APPLICABLE W.E.F. 4 TH DEC. 1997 12 TH MARCH 1997 AREA OF OPERATION MAIN STREAM OF TAPI RIVER GODAVARI & TAPI RIVER VA LLEY IN THE VIDARBHA REGION. HEAD OFFICE LOCATION JALGAON NAGPUR EX-OFFICIO CHAIRMAN MINISTER OF IRRIGATION MINISTER OF IRRIGATION FUNCTIONS OF THE CORPORATION IN BRIEF (CLAUSE NO. 18 OF BOTH THE ACTS) * IRRIGATION PROJECTS AND COMMAND AREA DEVELOPMENT INCLUDING FLOOD CONTROL AND GENERATION OF HYDRO ELECTRICAL ENERGY. * PLAN, INVESTIGATE, DESIGN, CONSTRUCT, AND MANAGE IRRIGATION PROJECTS AND COMMAND AREA DEVELOPMENT UPTO WATER USE OF TMC AT 75 % DEPENDABILITY. * PLAN, INVESTIGATE, DESIGN, CONSTRUCT, AND MANAGE SCHEMES OF GENERATION OF HYDRO ELECTRICAL ENERGY. * ENTER INTO CONTRACT IN RESPECT OF THE WORKS AND OTHER MATTERS TRANSFERRED TO THE CORPORATION ALONGWITH ASSETS AND LIABILITIES. * TO INVITE TENDERS BIDS, OFFERS AND ENTER INTO CONTRACTS FOR ACTIVITIES OF THE CORPORATION. * TO PROMOTE PARTICIPATION OF ANY PERSON OR BODY OR ASSOCIATION OF INDIVIDUALS IN THE ACTIVITIES OF CORPORATION. * TO UNDERTAKE SCHEMES OR WORKS JOINTLY WITH OTHER CORPORATE BODIES OR INSTITUTIONS OR WITH GOVT. OR LOCAL AUTHORITIES FOR THE PURPOSES FOR WHICH CORPORATION IS ESTABLISHED. * IRRIGATION PROJECTS AND COMMAND AREA DEVELOPMENT INCLUDING FLOOD CONTROL AND GENERATION OF HYDRO ELECTRICAL ENERGY. * PLAN, INVESTIGATE, DESIGN, CONSTRUCT, AND MANAGE IRRIGATION PROJECTS AND COMMAND AREA DEVELOPMENT. * PLAN, INVESTIGATE, DESIGN, CONSTRUCT, AND MANAGE SCHEMES OF GENERATION OF HYDRO ELECTRICAL ENERGY. * ENTER INTO CONTRACT IN RESPECT OF THE WORKS AND OTHER MATTERS TRANSFERRED TO THE CORPORATION ALONGWITH ASSETS AND LIABILITIES. * TO INVITE TENDERS BIDS, OFFERS AND ENTER INTO CONTRACTS FOR ACTIVITIES OF THE CORPORATION. * TO PROMOTE PARTICIPATION OF ANY PERSON OR BODY OR ASSOCIATION OF INDIVIDUALS IN THE ACTIVITIES OF CORPORATION. * TO UNDERTAKE SCHEMES OR WORKS JOINTLY WITH OTHER CORPORATE BODIES OR INSTITUTIONS OR WITH GOVT. OR LOCAL AUTHORITIES FOR THE PURPOSES FOR WHICH CORPORATION IS ESTABLISHED. * TO PROMOTE TOURISM, WATER SPORTS AND OTHER RELATED 7 * TO PROMOTE TOURISM, WATER SPORTS AND OTHER RELATED ACTIVITIES AROUND IRRIGATION AND HYDRO ELECTRIC POWER PROJECTS. * TO DEVELOP LAND NEARBY LAKE OR NEAR IRRIGATION FACILITIES AND TO LEASE TO INTERESTED PARTIES. * TO PREPARE ANNUAL PLAN AND 5 YEARS DEVELOPMENT PLAN. * TO PREPARE ANNUAL BUDGET. * TO TAKE POSSESSION OF THE EXISTING CO-OPERATIVE LIFT IRRIGATION SCHEMES ENUMERATED IN SCHEDULE APPENDED TO THIS ACT EACH HAVING ICA GREATER THAN 250 HA IN JALGAON (21 NOS.) AND DHULE (35 NOS.) DISTRICTS FOR OPERATION AND MAINTENANCE. * TO UNDERTAKE ANY OTHER ACTIVITIES ENTRUSTED BY THE STATE GOVT. IN FURTHERANCE OF THE OBJECTIVES. ACTIVITIES AROUND IRRIGATION AND HYDRO ELECTRIC POWER PROJECTS. * TO DEVELOP LAND NEARBY LAKE OR NEAR IRRIGATION FACILITIES AND TO LEASE TO INTERESTED PARTIES. * TO PREPARE ANNUAL PLAN AND 5 YEARS DEVELOPMENT PLAN. * TO PREPARE ANNUAL BUDGET. * TO UNDERTAKE ANY OTHER ACTIVITIES ENTRUSTED BY THE STATE GOVT. IN FURTHERANCE OF THE OBJECTIVES. 9. IN THIS BACKGROUND, IT WAS STATED ON BEHALF OF A SSESSEE THAT ACTIVITIES AND FUNCTIONS OF BOTH THE CORPORATIONS S IMILAR TO EACH OTHER EXCEPT FOR THE DIFFERENCE IN THE GEOGRAPHICAL AREA OF OPERATION. IN THIS BACKGROUND, ASSESSEE SUBMITTED THAT ITS CASE IS COVERED BY THE DECISION IN THE CASE OF IN THE CASE OF VIDC. THE ASSESSEE HAS ALSO EXAMINED WITH EVIDENCES THAT THE ACTIVITIES FOR WHICH THE CORPORATION WAS FORMED ARE CONTINUED AND SUPPORT PRODUCED WORK ORDERS/RUNNING BILLS OF VARIOUS CANAL S, EARTHWORKS, IRRIGATION CAPITAL WORKS UNDER TAKEN OVER PAST COUP LE OF YEARS. SOME OF THE ACTIVITIES THAT THE ASSESSEE HAS UNDERT AKEN SINCE ITS INCORPORATION ARE AS FOLLOWS: DATE OR WORK ORDER NATURE OF ACTIVITY IN BRIEF 14/04/1999 CONSTRUCTION OF EARTHEN DAM, SPILLWAY, GUIDE WALLS OF LOWER TAPI PROJECT, TALUKA AMALNER. 29/10/2002 CONSTRUCTION OF EARTHEN DAM, SPILLWAY, NOF DIVIDE WALL, GUIDE WALL OF EXISTING HATNUR WEIR TALUKA BHUSAWAL. 8 29/03/2005 CONSTRUCTING EARTH WORK AND STRUCTURES - HINGONA MINOR NO. 2. 24/10/2005 CONSTRUCTING EARTH WORK AND STRUCTURES - HINGONA MINOR NO. 1. 04/07/2006 CONSTRUCTING OF EARTH WORKS OF MARUL NO. 2. 08/06/2007 CONSTRUCTING RCC CASTS IN SITU BRIDGE - ANJANI DAM. 02/05/2008 CONSTRUCTING OF EARTH WORKS AND STRUCTURES LB CANAL ANJANI MEDIUM PROJECT 24/12/2009 CONSTRUCTING EARTH WORKS OF LEFT CANAL ANJANI MEDIUM PROJECT. 05/06/2010 REPAIRS TO TEMPORARY BILLS ON ANJANI RIVER. 02/08/2008 CONSTRUCTING OF EARTH WORKS AND STRUCTURES VISHNAPUR MINOR NO. 1. . 02/03/2009 DESIGN, FABRICATION, SUPPLY, ERECTION, TESTING, AND COMMISSIONING OF 23 NOS. REDIAL GATES ETC. AT LOWER TAPI PROJECT PADALE, TALUKA AMALNER. 23/02/2011 ASPHALTING OF APPROACH ROAD OF JALOD- BUDHGAON BRIDGE. 21/02/2012 PROTECTION WALL OF AQUA DUCT OF MOR MAIN CANAL. THE ABOVE DETAILS WERE SUBMITTED TO ESTABLISH THAT ACTIVITIES AND FUNCTIONS OF CORPORATION FOR WHICH IT WAS ESTAB LISHED BY TIDC ACT CONTINUE TILL DATE. OTHER CONDITIONS WERE ALSO ANALYSED BY CIT(A) AFTER CALLING THE REMAND REPORT. AFTER HAVI NG CONSIDERED THE SUBMISSIONS ON BEHALF OF ASSESSEE, CIT(A) GRANTED R ELIEF TO THE ASSESSEE. SAME HAS BEEN OPPOSED BEFORE US, INTER A LIA SUBMITTED THAT THE CIT(A) ERRED IN TREATING THE INCOME AS FRO M INCOME FROM PROFESSION OR BUSINESS WHICH IS SO, CIT(A) HAS OVER LOOKED AUDIT REPORT OF ASSESSEES COMPANY WHICH ITSELF SPEAK ABO UT DIFFERENT ASPECT. CIT(A) WAS NOT JUSTIFIED IN RELYING UPON D ECISION OF VIDARBHA IRRIGATION DEVELOPMENT CORPORATION, WHEREA S IT HAS TO BE SET ASIDE SAID DECISION SO, HAS NOT REACH PENALTY, ACCORDINGLY, BE SET ASIDE THE ORDER OF THAT BE RESTORED. ON OTHER HAND, LEARNED AUTHORIZED REPRESENTATIVE SUPPORTED THE ORDER OF CI T(A). 10. AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND M ATERIAL ON RECORD, WE FIND THAT HAVING EXAMINED THE TAPI IRRIG ATION DEVELOPMENT CORPORATION ACT AND THE VIDARBHA IRRIGA TION 9 DEVELOPMENT CORPORATION ACT, CIT(A) HAS ARRIVED AT THE CONCLUSION THAT THE ACTIVITIES AND FUNCTIONS OF BOTH THE CORPO RATIONS ARE SIMILAR, EXCEPT FOR THE DIFFERENCE IN THE GEOGRAPHI CAL AREA OF OPERATION. BOTH THE CORPORATIONS WERE NEAR SIMULTAN EOUSLY FORMED BY THE GOVT. OF MAHARASHTRA TO TAKE OVER THE EXISTI NG IRRIGATION PROJECTS AND TO THEREAFTER CARRY ON THE ACTIVITIES WHICH WERE HITHERTO UNDERTAKEN BY THE IRRIGATION DEPARTMENT OF THE GOVT. OF MAHARASHTRA. THE ITAT, MUMBAI IN THE CASE OF VIDC (ITA NO. 5/NAG/2002) VIDE ORDER DT. 22.07.2005 HAS HELD BY F OLLOWING THE ORDER OF THE HONBLE BOMBAY HIGH COURT - NAGPUR BEN CH (ITA NO. 49 OF 2003 DT. 27.07.2004) HELD THAT ASSESSEE HAD C OMMENCED BUSINESS ACTIVITY ON THE DATE ON WHICH IT WAS FORME D. THE ITAT, MUMBAI TRIBUNAL WAS OF THE VIEW THAT THE CORPORATI ON HAD STEPPED INTO THE SHOES OF THE IRRIGATION DEPARTMENT OF THE STATE AND WAS CARRYING ON THE ALREADY ESTABLISHED BUSINES S. IT WAS THEREFORE HELD THAT VIDC WAS CARRYING ON BUSINESS S INCE THE DATE OF FORMATION. THE ASSESSEE WAS ALSO EXACTLY IN CARR YING SIMILAR ACTIVITY. WHEREAS, THE AREA OF OPERATION OF VIDC WA S GODAVARI AND TAPI RIVER VALLEY IN THE VIDARBHA REGION, THE AREA OF OPERATION OF THE ASSESSEE IS THE MAIN STREAM OF TAPI RIVER. BOTH THE STATE GOVT. CORPORATIONS ARE OPERATING IN THE SAME FASHION. IT WAS FOUND APPARENT THAT IN CASE OF ASSESSEE COVERED BY THE DE CISIONS OF HONBLE BOMBAY HIGH COURT /ITAT MUMBAI IN THE CASE OF VIDARBHA IRRIGATION DEVELOPMENT CORPORATION (VIDC) REFERRED TO ABOVE. IN VIEW OF ABOVE, CIT(A) WAS JUSTIFIED IN HO LDING THAT ASSESSEE WAS ENGAGED IN BUSINESS ACTIVITY SINCE THE DATE OF FORMATION IN THE YEAR 1997. 11. HAVING SAID SO, THE NEXT ISSUE TO BE DECIDED WA S THE HEAD UNDER WHICH INTEREST ON DEPOSIT OF TEMPORARY SURPLU S FUNDS WAS REQUIRED TO BE ASSESSED. THE HONBLE BOMBAY HIGH CO URT IN THE CASE OF CIT - VS - LOK HOLDINGS, (2009) 308 ITR 356 (BOM) HAS HELD THAT INTEREST EARNED BY ASSESSEE ON TEMPORARY DEPOSIT OF 10 SURPLUS MONEY RECEIVED IN THE FORM OF ADVANCES FROM INTENDING PURCHASERS TO BE 'BUSINESS INCOME' AND NOT AS 'INCO ME FROM OTHER SOURCES'. FOLLOWING RATIONAL OF LOK HOLDINGS (SUPR A), CIT(A) HELD THAT INTEREST INCOME OF RS.2,20,03,120/- WAS REQUIR ED TO BE ASSESSED AS INCOME AS BUSINESS INCOME. 12. IN THIS BACKGROUND CIT(A) HELD THAT INTEREST SH ALL HAVE TO BE DEALT WITH AS PER THE PROVISIONS OF SEC. 28 OF THE ACT. IT WAS FURTHER OBSERVED THAT THE REQUIREMENT OF DETERMININ G THE NEXUS BETWEEN THE INTEREST PAID OR INTEREST RECEIVED IS R ELEVANT FOR THE PROVISION OF SEC. 56 AND 57 (III) OF THE ACT AND NO T FOR SEC. 28 OF THE ACT. 13. THE ASSESSEE NOTED IN THE COURSE OF HIS BUS INESS ACTIVITIES HAS DEPOSITED TEMPORARY SURPLUS FUNDS WITH BANKS WH ICH GENERATED INTEREST OF RS.2,20,03,120/-. THE ASSESS EE ALSO PAID INTEREST OF RS.1,31,96,19,250/- TO BOND HOLDERS FRO M WHOM MONEYS WERE BORROWED TO PERFORM THE VARIOUS BUSINES S ACTIVITIES OF THE CORPORATION. IN THIS BACKGROUND, CIT(A) HAS RIGHTLY DIRECTED THE ASSESSING OFFICER TO TAX INTEREST INCO ME UNDER THE HEAD PROFITS AND GAINS FROM THE BUSINESS OR PROFESS ION AS PER THE PROVISION OF SEC. 28 OF THE ACT. THIS REASONED FIN DING OF CIT(A) NEED NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 14. SIMILAR ISSUE AROSE IN CASE OF A.Y. 2008-09 AND 2009-10. FACTS BEING SIMILAR, SO FOLLOWING THE SAME REASONIN G, WE FIND THAT SINCE THE ISSUE IS IN FAVOUR OF ASSESSEE, WE UPHOLD THE ORDER OF CIT(A) FOR A.Y.2008-09 AND 2009-10 AS WELL. HOWEVE R, CIT(A) HAS DECIDED THE APPEAL FOR A.Y. 2007-08 AGAINST THE ASS ESSEE. ASSESSEE HAS APPROACHED BEFORE US AGAINST THE SAME. FACTS BEING SIMILAR, SO FOLLOWING THE SAME REASONING, WE ARE NO T INCLINED TO CONCUR WITH THE FINDING OF CIT(A) AND ASSESSING OFF ICER IS DIRECTED TO TAX THE INTEREST INCOME UNDER HEAD PROFIT AND GA IN FROM 11 BUSINESS OR PROFESSION AS PER PROVISIONS OF SEC.28 OF I.T ACT. 15. IN THE RESULT, APPEALS FILED BY THE REVENUE FOR A.Y. 2006-07, 2008-09 & 2009-10 ARE DISMISSED WHILE ASSESSEES AP PEAL FOR A.Y. 2007-08 IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE 29 TH DAY OF NOVEMBER, 2013. SD/- SD/- (G.S. PANNU) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED 29 TH NOVEMBER, 2013 GCVSR COPY TO:- 1) DEPARTMENT 2) ASSESSEE 3) THE CIT(A)-II, NASHIK 4) THE CIT-II, NASHIK 5) THE DR, A/ B BENCH, I.T.A.T., PUNE 6) GUARD FILE //TRUE COPY// BY ORDER SENIOR PRIVATE SECRETARY ITAT PUNE BENCHES, PUNE