Information Technology Park Ltd, Bengaluru V. Assistant Commissioner of Income Tax, Circle-3(1)(1), Bengaluru

ITA 2618/BANG/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1403 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-05-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 06-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C H SUNDAR RAO
• Assessee Lawyers: PADAMCHAND KHINCHA
• Keywords: Additional evidence; Initiation of penalty proceedings
• Section: 143(3); 234B; 250; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, BENGALURU BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 2618 /BANG/201 7 (ASSESSMENT YEAR: 2014-15) M/S. INFORMATION TECHNOLOGY PARK LTD. 1 ST FLOOR, INNOVATOR BUILDING, WHITEFIELD ROAD, INTERNATIONAL TECH PARK, BENGALURU-560066. PAN:AAACI 7042 R VS. APPELLANT ASST. COMMISSIONER OF INCOME - TAX, CIRCLE 3(1)(1), BENGALURU. RESPONDENT APPELLANT BY : SHRI PADAMCHAND KHINCHA, CA RESPONDENT BY : SHRI C.H.SUNDAR RAO, CIT(DR) DATE OF HEARING: 9/05/2019 DATE OF PRONOUNCEMENT: 12/06/2019 O R D E R PER PAVAN KUMAR GADALE, JM : THE ASSESSEE HAS FILED THE APPEAL AGAINST THE ORDER OF THE CIT(A)-III, BANGALORE PASSED U/S 143(3) AND 250 OF THE INCOME TAX ACT 1961(HEREINAFTER REFERRED TO AS THE ACT). THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : THE GROUNDS STATED HEREUNDER ARE INDEPENDENT OF AND WITHOUT PREJUDICE TO ONE ANOTHER. THE APPELLANT SUB MITS AS UNDER: 1 ORDER IS INVALID, NULL AND VOID ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [LD.CIT(A)] UNDER SECTION 250 OF THE ACT, IS INVAL ID, VOID, ITA NO.2618/BANG/2019 PAGE 2 OF 7 CONTRARY TO PROVISIONS OF LAW AND ALSO CONTRARY TO FACTS AND MATERIAL EVIDENCE EXISTING ON RECORDS. 2 ALLOCATION OF INTEREST INCURRED ON FULLY CONVERTIBL E CUMULATIVE DEBENTURES (`FCCDS') 2.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A), WITHOUT TAKING COGNISANCE OF THE SUBMISSIONS FILED BY THE APPELLANT, ERRED IN LAW AND IN FACTS IN HOLDING THA T THE LEARNED ASSESSING OFFICER (`LD. AO') WAS JUSTIFIED IN ALLOC ATING THE INTEREST ON FCCDS BETWEEN THE SEZ UNDERTAKING AND T HE NON-SEZ UNDERTAKING, THEREBY REDUCING THE DEDUCTION CLAIMED UNDER SECTION 80-IAB OF THE ACT FROM RS. 182,938,431 TO R S. 92,103,102. 2.2 THE LD. CIT(A) ERRED IN NOT ADMITTING THE ADDIT IONAL EVIDENCE SUBMITTED BY THE APPELLANT TO SUBSTANTIATE ITS CLAI M THAT INTEREST ON FCCDS SHOULD NOT BE ALLOCATED TO SEZ UNDERTAKING . 3 INTEREST UNDER SECTION 234B OF THE ACT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. AO HAS ERRED IN LEVYING INTEREST UNDER SECTION 234B OF THE ACT. 4 INITIATION OF PENALTY PROCEEDINGS ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. AO ERRED IN INITIATING PENALTY PROCEEDINGS AND THE LD. CIT(A ) ERRED IN NOT DIRECTING THE LD. AO TO DROP THE PENALTY PROCEEDING S. 5 RELIEF A) THE APPELLANT PRAYS THAT DIRECTIONS BE GIVEN TO GRA NT ALL SUCH RELIEF ARISING FROM THE ABOVE GROUNDS AND ALSO ALL RELIEF CONSEQUENTIAL THERETO. B) THE APPELLANT CRAVES LEAVE TO ADD TO OR ALTER, BY D ELETION, SUBSTITUTION, MODIFICATION OR OTHERWISE, ANY OR ALL OF THE ABOVE GROUNDS OF APPEAL, AT ANY TIME BEFORE OR DURING THE HEARING OF THE APPEAL. C) THE APPELLANT SUBMITS THAT THE ABOVE GROUNDS ARE IN DEPENDENT AND WITHOUT PREJUDICE TO ONE ANOTHER. 2. THE ASSESSEE ALSO RAISED THE FOLLOWING AD DITIONAL GROUNDS OF APPEAL: 1. THE LEARNED CIT(A) HAS ERRED IN APPLYING PROVISION S OF SECTION 80-IA(10) FOR ALLOCATION OF INTEREST EXPENDITURE OF RS. 22,64,70,998/- BETWEEN SEZ AND NON-SEZ UNITS. 2. EVEN OTHERWISE, THE LEARNED CIT(A) HAS ERRED IN INV OKING THE PROVISIONS OF SECTION 80-IA(10). 3. WITHOUT PREJUDICE, THE LEARNED CIT(A) HAS NOT DEMON STRATED THE SATISFACTION OF CONDITIONS OUTLINED IN SECTION 80-I A(10). ITA NO.2618/BANG/2019 PAGE 3 OF 7 3. AT THE TIME OF HEARING, THE LEARNED AR AR GUED ONLY ONE DISPUTED ISSUE WITH RESPECT TO ADDITION MADE BY THE AO ON ALLOCATION OF INTEREST PAID. 4. BRIEFLY, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE- COMPANY IS ENGAGED IN PROPERTY DEVELOPMENT AND FILE D THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2014-15 ON 26/11/2014 WITH TOTAL INCOME OF RS.65,47,11,470/-. SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) OF THE INCOME-TAX ACT,1961 ['THE ACT' FOR SH ORT] WAS ISSUED. IN COMPLIANCE, THE LEARNED AR APPEARED AND FILED INFORMATION. THE LEARNED AR EXPLAINED THAT THE ASS ESSEE IS ENGAGED IN THE BUSINESS OF ESTATE DEVELOPMENT, MANA GEMENT OF INFORMATION TECHNOLOGY PARK IN INDIA AND DECLARE D RECEIPTS OF RS.3,20,46,64,298/- FOR THE SAID ASSESSMENT YEAR . THE AO FOUND THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S 8 0-IAB OF OF THE ACT OF RS.18,29,38,431/- IN RESPECT OF SEZ DEVE LOPMENT UNIT. THE ASSESSEE HAS DISCLOSED INCOME FROM THREE SEGMENTS BEING ITPB ADMIN BEING OPERATIONAL RECEIPTS AND NON -SEZ UNIT AND SEZ UNIT WITH INCOME OF LEASE RENTALS + OPERATI ONAL FACILITY AND MAINTENANCE CHARGES. THE AO FOUND THAT THE ASSE SSEE HAS CLAIMED INTEREST PAID ON DEBENTURES ONLY AGAINST IT PB ADMIN REVENUE AND NON SEZ UNIT AND NO INTEREST WAS CLAIME D AGAINST SEZ UNIT WHEREAS THE ASSESSEE, AT THE TIME OF OBTAI NING LOAN ITA NO.2618/BANG/2019 PAGE 4 OF 7 FULLY CONVERTIBLE CUMULATIVE DEBENTURES AND THERE W AS NO BUILDING UNDER CONSTRUCTION EXCEPT ASCENDAS PARK S QUARE MALL. THE ASSESSEE-COMPANY AVAILED LOAN OF RS.100 CRORES FROM DBS BANK AND THE SAID LOAN WAS OBTAINED AFTER AUGUST 20 09 BUT BEFORE NOVEMBER 2010 AND THE PROCEEDS OF FULLY CONV ERTIBLE CUMULATIVE DEBENTURES WAS USED TO REPAY THE LOAN OF DBS BANK. WHEREAS THE CONSTRUCTION OF THE PARK SQUARE MALL WAS STARTED IN THE YEAR 2007-08 AND COMPLETED IN THE FI NANCIAL YEAR 2010-11, THE AO IS OF THE OPINION THAT THE MALL WA S COMPLETED MUCH BEFORE THE LOAN IN THE FORM FCCD WAS OBTAINED AND IN THE SAID PERIOD INVESTMENT IN SEZ INCREASED. FINALLY, THE AO OBSERVED THAT FUNDS WERE BORROWED FOR THE PURPOSE O F CAPITAL INVESTMENT AND NOT FOR THE PURPOSE OF WORKING CAPIT AL AND THEREFORE, AO HAS ALLOCATED THE INTEREST BASED ON T HE VALUE OF THE BUILDING REFERRED AT PAGE 3 OF THE ORDER AND DE DUCTION U/S 80-IAB OF THE ACT IS REDUCED TO THE EXTENT OF INTER EST EXPENDITURE DEBITED TO SEZ UNIT AND EXCESS CLAIM U/ S 80-IAB OF RS.9,08,35,329/-WAS DISALLOWED AND ASSESSED THE TOTAL INCOME OF RS.75, 55,46,802/- VIDE ORDER DATED 21/12 /2016. 5. AGGRIEVED BY THE ORDER, THE ASSESSEE FILED AN APPEAL WITH THE CIT(A). THE CIT(A) HAVING CONSIDERED THE FINDI NGS OF THE AO AND THE SUBMISSIONS OF THE ASSESSEE AND THE GROU NDS OF ITA NO.2618/BANG/2019 PAGE 5 OF 7 APPEAL HAS CONFIRMED THE ADDITION AND PARTLY ALLOWE D THE APPEAL. 6. AGGRIEVED BY THE ORDER, THE ASSESSEE FILED AN APPEAL WITH THE TRIBUNAL. BEFORE US, THE LEARNED AR SUBMITTED T HAT THERE IS NEXUS BETWEEN THE CONSTRUCTION OF THE BUILDING AND LOANS. WHEREAS LOAN OF RS.135 CRORES WAS OBTAINED IN MAY 2 011 AND RS.40 CRORES IN OCTOBER 2011. THE LEARNED AR FILED ADDITIONAL EVIDENCES TO SUBSTANTIATE THE REPAYMENT OF LOAN AND PRAYED FOR AN OPPORTUNITY BEFORE THE AO. CONTRA, THE LEARNED DR VEHEMENTLY OBJECTED AND SUBMITTED THAT THESE DOCUME NTS WERE FILED FOR THE FIRST TIME BEFORE THE TRIBUNAL AND TH E AO WAS DEPRIVED TO VERIFY AND EXAMINE THE MATERIAL AND PRA YED FOR DISMISSAL OF THE APPEAL. 7. WE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD. WE FOUND THAT THE LEARNED AR HAS ARGUED ONLY IN RESPECT OF DISALLOWANCE OF INTEREST AND HAS NOT ARG UED OTHER GROUNDS OF APPEAL. THEREFORE WE RESTRICT OUR DECISI ON TO THE EXTENT OF SUBMISSIONS MADE AND MATERIAL FILED. THE LEARNED AR MADE HIS SUBMISSIONS SUPPORTED BY MATERIAL PAPERS I N THE PAPER BOOK AND ALSO FILED ADDITIONAL EVIDENCE AS PE R THE PROVISIONS OF RULE 29 OF THE ITAT RULES 1963. THE A DDITIONAL EVIDENCES ARE PERTAINING TO CLAIMS AND THE DOCUMENT S WERE NOT ITA NO.2618/BANG/2019 PAGE 6 OF 7 PRODUCED BEFORE THE ASSESSING AUTHORITY. AT THE TIM E OF HEARING, THE LEARNED DR HAS HIGHLY OBJECTED TO THE ADMISSION OF ADDITIONAL EVIDENCE AS THE ASSESSEE HAS NOT BROU GHT ON RECORD REASONS FOR NOT FILING IN THE COURSE OF ASSE SSMENT PROCEEDINGS. WHEREAS THE LEARNED AR SUBMITTED THAT THAT DOCUMENTS ARE AVAILABLE NOW AND FILED AS ADDITIONAL EVIDENCE AS PER RULE 29 OF THE ITAT RULES 1963. ACCORDINGL Y, WE ADMIT THE ADDITIONAL EVIDENCE AND RESTORE THE ENTIRE DISP UTED ISSUE FOR LIMITED PURPOSE TO THE FILE OF THE AO TO VERIFY AND EXAMINE THE DOCUMENTS FILED AS ADDITIONAL EVIDENCE AND PASS A SPEAKING ORDER. FURTHER THE ASSESSEE SHOULD BE PROVIDED ADE QUATE OPPORTUNITY OF HEARING AND SHALL SUBMIT THE INFORMA TION EXPEDITIOUSLY. HENCE, THE GROUNDS OF APPEAL OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH JUNE, 2019. SD/- SD/- (B.R. BASKARAN) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE : BENGALURU D A T E : 12/06/2019 SRINIVASULU, SPS ITA NO.2618/BANG/2019 PAGE 7 OF 7 COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)- 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL BANGALORE