M/s. Sical Iron Ore Terminal (Mangalore) Ltd., CHENNAI V. ACIT, CHENNAI

ITA 2566/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4325 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 01-09-2016
• Court: TRIBUNAL
• Department Lawyers: M NANDAKUMAR
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Capital asset; Principle of natural justice

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI , !' #$ , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI GEORGE MATHAN, JUDICIAL MEMBER ./ I.T.A.NO.2566/MDS./2016 / ASSESSMENT YEAR : 2012-13 M/S.SICAL IRON ORE TERMINAL (MANGALORE) LTD ., SOUTH INDIA HOUSE, 73,ARMENIAN STREET, CHENNAI 600 001. VS. THE ACIT, COMPANY CIRCLE VI(3), CHENNAI 600 034. [PAN AANCS 5418 A] ( $% / APPELLANT) ( &'$% /RESPONDENT) / APPELLANT BY : MR.R.VIJAYARAGHAVAN, ADVOCATE /RESPONDENT BY : MR.M.NANDAKUMAR, D.R ! ' #$% / DATE OF HEARING : 15 - 05 - 201 7 &' #$% / DATE OF PRONOUNCEMENT : 02 - 06 - 201 7 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-15,CHENNA I DATED 12.07.2017 PERTAINING TO ASSESSMENT YEAR 2012-13. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS FO R OUR ADJUDICATION. ITA NO.2566/MDS./2016 :- 2 -: 1. THE ORDER OF CIT(A) IS CONTRARY TO LAW, FACTS AND FIN THE CIRCUMSTANCES OF THE CASE. 2. THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT T HAT ASSESSEE HAD OFFERED THIS INTEREST INCOME BY WAY OF REDUCTIO N IN THE COST OF FIXED ASSETS AND IS ELIGIBLE TO CLAIM CREDIT FOR THE TDS DEDUCTED THEREON. 3. THE ITO OUGHT TO HAVE APPLIED THE DECISION OF S UPREME COURT IN THE CASE OF KARNAL CO-OPERATIVE SUGAR MILLS LTD. , (243 ITR 2) AS THE PROVIDING OF BANK GUARANTEE FOR CONSTRUCTION HAS NEXUS WITH ACQUISITION OF FIXED ASSET. 4. THE CITA OUGHT O HAVE FOLLOWED HER OWN DECISION IN THE CASE OF SICAL IRON ORE TERMINALS LTD., AND DECISION OF D ELHI HIGH COURT IN THE CASE OF CIT VS. JAYPEE DSC VENTURES LT D., (2012) 17 TAXMANN.COM 257) 3. THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE C OMPANY HAD SIGNED A CONCESSIONAIRE AGREEMENT WITH M/S.NEW MANG ALORE PORT TRUST, MANGALORE FOR MECHANIZATION OF IRON ORE HAND LING FACILITIES AT THE DEEP DRAFT MULTIPURPOSE BERTH AT NEW MANGALORE PORT , ON BUILD, OPERATE AND TRANSFER BASIS. THE INSTALLATION OF TH E ABOVE FACILITY HAS NOT YET COMMENCED, AS SUCH THE ASSESSEE HAD NOT CAR RIED OUT ANY BUSINESS ACTIVITIES DURING THE FINANCIAL YEAR 2011- 12. DURING THE YEAR, THE SHARE CAPITAL OF THE ASSESSEE COMPANY HAD INCRE ASED TO 21.74% CRORES AND THE ENTIRE SHARES ARE HELD BY THE HOLDIN G COMPANY M/S.SICAL LOGISTICS LTD. FOR DEVELOPMENT OF THE IR ON ORE TERMINAL THE ASSESSEE COMPANY HAD TO EXECUTE A BANK GUARANTEE FO R ` 13.96 CRORES ITA NO.2566/MDS./2016 :- 3 -: TO THE MANGALORE PORT TRUST, AND FOR OBTAINING THIS BANK GUARANTEE, THE ASSESSEE HAD TO MAKE A FIXED DEPOSIT ` 2.77 CRORES (MARGIN MONEY DEPOSIT) WITH THE BANKER. THIS MARGIN MONEY DEPOSIT HELD WITH THE BANKER HAD YIELDED INTEREST AND THE ASSESSEE COMPAN Y HAD EARNED AN INTEREST INCOME OF ` 26,85,299/- DURING THE FINANCIAL YEAR 2011/12. DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THA T THE ASSESSEE COMPANY HAD NOT OFFERED THE INTEREST INCOME FOR TAX ATION, BUT CAPITALIZED INTEREST PORTION EARNED ALSO, ON THE PL EA THAT THE INTEREST INCOME EARNED IS GOING TO REDUCE THE COST OF THE CA PITAL ASSET, TO THE EXTENT OF INCOME EARNED. 3.1 THE AO OBSERVED THAT THE COMPANY BEING AT PRE- OPERTIVE STAGE, THE INTEREST INCOME EARNED OUT OF THE FIXED DEPOSITS NEEDS TO BE OFFERED FOR TAXATION. UNLIKE THE PAYMENT OF INTERE ST, WHICH CAN BE CAPITALIZED PRIOR TO COMMENCEMENT OF THE BUSINESS, THE INTEREST INCOME EARNED ON DEPOSITS CANNOT BE CAPITALIZED, AS THE SAME REPRESENT A CLEAR INCOME UNDER A SPECIFIC HEAD INC OME FROM OTHER SOURCES, AS PER THE PROVISIONS OF THE ACT. THEREF ORE, THE AO TREATED THE INTEREST INCOME EARNED OUT OF INVESTMENTS AT ` 26,85,299/- DURING THE FINANCIAL YEAR 2011/12 AS INCOME FROM OTHER SOU RCES. AGGRIEVED BY THE ACTION OF LD. ASSESSING OFFICER, THE ASSESSE E CARRIED THE APPEAL BEFORE THE LD.CIT(A). ITA NO.2566/MDS./2016 :- 4 -: 3.2 THE ASSESSEE SUBMITTED BEFORE LD.CIT(A) THAT T HE BANK GUARANTEE IS REQUIRED FOR CONSTRUCTION OF CAPITAL A SSET AND IS DIRECTLY RELATED TO THE CAPITAL ASSET. FURTHER, THE SUBMISSI ON OF THE ASSESSEE WAS THAT THE INTEREST EARNED ON SUCH DEPOSIT WHICH IS DIRECTLY LINKED TO ACQUISITION OF CAPITAL ASSETS HAS TO GO TO REDUCE T HE COST OF CAPITAL ASSET. FURTHER, LD.A.R SUBMITTED THAT LD.CIT(A) HEL D THE SAME ISSUE IN ASSESSEE'S OWN CASE IN THE ASSESSMENT YEAR 2008-09 THAT THIS CANNOT BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES. ON APPEAL, LD.CIT(A) AFTER HEARING THE SUBMISSIONS OF THE LD.A .R, ENDORSED THE ACTION OF THE LD. ASSESSING OFFICER. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. THE ORDER OF LD.CIT(A) IS VERY CRYPTIC ONE. THE LD .CIT(A) HAS NOT CONSIDERED EVERY POINT OF OBJECTION RAISED BY THE A SSESSEE. IN OUR OPINION THE LD.CIT(A) SHOULD HAVE PASSED A WELL REASONED S PEAKING ORDER AFTER EXAMINED THE ENTIRE FACTS OF THE CASE. IN OUR OPINI ON, THE LD.CIT(A) BEING THE QUASI JUDICIAL AUTHORITY SHOULD HAVE PASSED A R EASONED ORDER AS HELD BY SUPREME COURT IN THE CASE OF KRANTI ASSOCIATES P.LT D VS. MASOOD AHMED KHAN [2010] 9 SCC 496 WHICH STATUTORILY REQUIRES RE CORDING OF REASONS AND REQUIREMENT OF PASSING A REASONED ORDER BY AN AUTHO RITY WHETHER ADMINISTRATIVE, QUASI-JUDICIAL OR JUDICIAL, HAD LAI D DOWN AS UNDER:- (A) IN INDIA THE JUDICIAL TREND HAS ALWAYS BEEN T O RECORD REASONS, EVEN IN ADMINISTRATIVE DECISIONS, IF SUCH DECISIONS AFFECT ANYONE PREJUDICIALLY. ITA NO.2566/MDS./2016 :- 5 -: (B) A QUASI-JUDICIAL AUTHORITY MUST RECORD REASON S IN SUPPORT OF ITS CONCLUSIONS. (C) INSISTENCE ON RECORDING OF REASONS IS MEANT TO SERVE THE WIDER PRINCIPLE OF JUSTICE THAT JUSTICE MUST NOT ONLY BE DONE IT MUST ALSO APPEAR TO BE DONE AS WELL. (D) RECORDING OF REASONS ALSO OPERATES AS A VALID RESTRAINT ON ANY POSSIBLE ARBITRARY EXERCISE OF JUDICIAL AND QUASI JUDICIAL O R EVEN ADMINISTRATIVE POWER. (E) REASONS REASSURE THAT DISCRETION HAS BEEN EXER CISED BY THE DECISION MAKER ON RELEVANT GROUNDS AND BY DISREGARDING EXTRA NEOUS CONSIDERATIONS. (F) REASONS HAVE VIRTUALLY BECOMES AS INDISPENSABL E COMPONENT OF A DECISION MAKING PROCESS AS OBSERVING PRINCIPLES OF NATURAL JUSTICE BY JUDICIAL, QUASI-JUDICIAL AND EVEN BY ADMINISTRATIVE BODIES. (G) REASONS FACILITATE THE PROCESS OF JUDICIAL REVI EW BY SUPERIOR COURTS. (H) THE ONGOING JUDICIAL TREND IN ALL COUNTRIES CO MMITTED TO RULE OF LAW AND CONSTITUTIONAL GOVERNANCE IS IN FAVOUR OF REASONED DECISIONS BASED ON RELEVANT FACTS. THI S IS VIRTUALLY THE LIFE BLOOD OF JUDICIAL DECISION MAKING JUSTIFYING THE PR INCIPLE THAT REASON IS THE SOUL OF JUSTICE. (I) JUDICIAL OR EVEN QUASI-JUDICIAL OPINIONS THESE DAYS CAN BE AS DIFFERENT AS THE JUDGES AND AUTHORITIES WHO DELIVER THEM. THE D ECISIONS SHALL SERVE ONE COMMON PURPOSE WHICH IS TO DEMONSTRATE BY REASON THAT THE RELEVANT FACTORS HAVE BEEN OBJECTIVELY CONSIDER ED. THIS IS ITA NO.2566/MDS./2016 :- 6 -: IMPORTANT FOR SUSTAINING THE LITIGANTS FAITH IN TH E JUSTICE DELIVERY SYSTEM. (J) INSISTENCE ON REASON IS A REQUIREMENT FOR BOTH JUDICIAL ACCOUNTABILITY AND TRANSPARENCY. (K) IF A JUDGE OR A QUASI-JUDICIAL AUTHORITY IS NO T CANDID ENOUGH ABOUT HIS/HER DECISION MAKING PROCESS THEN IT IS IMPOSSIB LE TO KNOW WHETHER THE PERSON DECIDING IS FAITHFUL TO THE DOCTRINE OF PRECEDENT OR TO THE PRINCIPLES OF INCREMENTALISM. (L) REASONS IN SUPPORT OF DECISIONS MUST BE COGENT , CLEAR AND SUCCINCT. A PRETENCE OF REASONS OR RUBBER STAMP REASONS, IS N OT TO BE EQUATED WITH A VALID DECISION MAKING PROCESS. (M) IT CANNOT BE DOUBTED THAT TRANSPARENCY IS THE SINE QUA NON OF RESTRAINT ON ABUSE OF JUDICIAL POWERS. TRANSPARENCY IN DECISION MAKING NOT ONLY MAKES THE JUDGES AND DECISION MAKERS LESS PRONE TO ERRORS BUT ALSO MAKES THEM SUBJECT TO BROADER SCRUTINY. (N) SINCE THE REQUIREMENT TO RECORD REASONS EMANAT ES FROM THE BROAD DOCTRINE OF FAIRNESS IN DECISION MAKING, THE SAID R EQUIREMENT IS NOW VIRTUALLY A COMPONENT OF HUMAN RIGHTS, WHICH REQUIR ES, ADEQUATE AND INTELLIGENT REASONS MUST BE GIVEN FOR JUDICIAL DECI SIONS. (O) IN ALL COMMON LAW JURISDICTIONS, JUDGMENTS PLAY A VITAL ROLE IN SETTING UP PRECEDENTS FOR THE FUTURE. THEREFORE, FOR DEVELOPMENT OF LAW, REQUIREMENT OF GIVING REASONS F OR THE DECISION IS OF THE ESSENCE AND IS VIRTUALLY A PART OF DUE PROC ESS. ITA NO.2566/MDS./2016 :- 7 -: 5. IN VIEW OF THE ABOVE DISCUSSION, WE ARE INCLINE D TO REMIT THE ISSUE IN DISPUTE TO THE FILE OF LD.CIT(A) FOR PASSING A SPE AKING ORDER ON THE ISSUES IN DISPUTE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES ORDER PRONOUNCED ON 2 ND JUNE, 2017, AT CHENNAI. SD/ - SD/ - ( !' #$ ) (GEORGE MATHAN) ) / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER ( ' / CHENNAI ) / DATED: 2 ND JUNE , 2017. K S SUNDARAM * #+, - ,# / COPY TO: 1 . / APPELLANT 3. ! .# () / CIT(A) 5. ,12 #3 / DR 2. / RESPONDENT 4. ! .# / CIT 6. 24 5' / GF