ACIT, CIR-31, KOLKATA, Kolkata V. West Bengal Housing Board, Kolkata

ITA 284/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9199 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 03-11-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 17-02-2014
• Court: TRIBUNAL
• Keywords: Business income; Business expenditure; Source of fund
• Section: 143(3); 80IB; 10B; 56

Judgement Text

1 ITA NO. 284/KOL/14 WEST BENGAL HOUSING BOARD IN THE INCOME TAX APPELLATE TRIBUNAL,ABENCH, KOLKATA BEFORE: SHRI M.BALAGANESH, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO. 284/KOL/2014 A.Y 2009-10 ASSTT. COMMISSIONER OF VS. WEST BENGAL HOUSING INCOME TAX, CIR-31 BOARD , PAN: AAAJW0019K KOLKATA (APPELLANT) (RESPONDENT) APPEARANCES BY : SHRI SAURABH KUMAR, ADDL.CIT, LD. DR FOR TH E REVENUE SHRI D.C. MODAK, LD.AR FOR THE ASSESSEE DATE OF HEARING : 06-03-2017 DATE OF PRONOUNCEMENT : 22-03-2017 O R D E R SHRI S.S. VISWANETHRA RAVI, JM :- THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DT: 12-12- 2013 PASSED BY THE COMMISSIONER OF INCOME TAX (APPE ALS), XIX, KOLKATA FOR THE ASSESSMENT YEAR 2009-10. 2. THE APPELLANT REVENUE HAS RAISED AS MANY AS FOU R GROUNDS OF APPEAL, AMONGST WHICH THE ONLY EFFECTIVE GROUND IS TO BE DECIDED IS AS TO WHETHER THE CIT-A JUSTIFIED IN TREATING THE INTEREST ACCRUED ON FIXED DEPOSITS AS INCOME FROM B USINESS IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 2 ITA NO. 284/KOL/14 WEST BENGAL HOUSING BOARD 3. DURING THE COURSE OF SCRUTINY OF RETURN, THE AO FOUND THAT THE ASSESSEE CLAIMED INTEREST ON FIXED DEPOSIT MADE OUT OF ACCUMULATED PROFITS AND RESERVES IS INCOME DERIVED FROM INDUSTRIAL UNDERTAKING AS DEDUCTION. THE AO ALSO FO UND THAT THE ASSESSEE SUFFERED A LOSS FROM HOUSING PROJECT AND I NCOME FROM OTHER SOURCES. IN EXPLANATION, THE ASSESSEE FILED R EVISED COMPUTATION CLAIMING THAT THE INTEREST INCOME AS IT S BUSINESS INCOME. ACCORDING TO AO, THE FILING OF REVISED COMP UTATION IS AN AFTERTHOUGHT. SINCE THE ASSESSEE DID NOT CLAIM THE DEDUCTION U/S. 80IB(10) OF THE ACT IN ITS ORIGINAL RETURN, TH EREBY THE ASSESSEE HAS TAKEN A CHANCE TO CLAIM OF ADMISSIBILI TY OF RS.259,14,135/- U/S. 80IB(10) OF THE ACT SHOWING TH E SAME DERIVED FROM ITS BUSINESS OPERATION AND ABOVE DEDUC TION CLAIMED U/S. 80IB AS PER THE REVISED COMPUTATION W AS DISALLOWED BY THE AO AND TO THAT EFFECT AN ORDER U/ S.143(3) OF THE ACT WAS PASSED ON 28-12-2011. 4. AGGRIEVED BY SUCH ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT-A AND CONTENDED THAT THE W EST BENGAL HOUSING BOARD CAME INTO EXISTENCE IN THE YEAR 1972 BY AN ORDER UNDER THE WEST BENGAL STATE LEGISLATURE. IT COMMENC ED THE BUSINESS OF HOUSING PROJECT FROM JULY, 1973. AT THE INITIAL STAGE, THE HOUSING DEPARTMENT, GOVT. OF WEST BENGAL ALLOTTED SEVERAL SEMI FINISHED PROJECTS TO THE ASSESSEE WHIC H WERE SUBSEQUENTLY COMPLETED BY THE ASSESSEE AND SOLD TO THE GENERAL PUBLIC ON FULL PAYMENT/EMI BASIS. AT THE IN ITIAL STAGE GOVT. OF WEST BENGAL ADVANCED SOME LOAN TO THE ASSE SSEE. SIMILARLY, HOUSING AND URBAN DEVELOPMENT CORPORATIO N(DELHI) ALSO ACCORDED FINANCIAL ASSISTANCE IN THE FORM OF L OAN FOR 3 ITA NO. 284/KOL/14 WEST BENGAL HOUSING BOARD CONDUCTING AND CONSTRUCTION OF SEVERAL PROJECTS AND SUCH LOANS WERE DULY REPAID BY THE ASSESSEE. THE MODUS OPERAND I OF THE ASSESSEE IS THAT THE STATE GOVERNMENT ALLOTS LANDS FOR DIFFERENT PROJECTS AND THE ASSESSEE UNDERTAKES DIFFERENT PROJ ECTS ON SUCH LANDS FOR CONSTRUCTING LIG/MIG AND HIG FLATS. THE A SSESSEE ALSO CARRIES ON SEVERAL PROJECTS IN JOINT SECTORS AS PER THE INSTRUCTION OF THE STATE GOVERNMENT. 5. THE ASSESSEE SUBMITTED THAT THE NET PROFIT AS PE R REVENUE ACCOUNT IS SHOWN UNDER DIFFERENT HEADS LIKE INCOME FROM HOUSE PROPERTY, INCOME FROM OTHER SOURCE AND BUSINESS INC OME AND IT IS ONLY SHOWN FOR COMPLYING WITH THE STATUTORY REQU IREMENTS WHICH GOVERN THE HOUSING BOARD. THE FINANCIAL STATE MENTS ARE PREPARED AFTER COMPLYING WITH THE LEGAL REQUIREMENT S BUT FROM THE OPERATIONAL POINT OF VIEW ALL THE INCOME, DISCL OSED UNDER WHATEVER HEAD ARE THE INTEGRAL PARTS OF ITS ONLY BU SINESS I.E HOUSING PROJECT AND FOR THE PURPOSE OF THE INCOME TAX ACT THE INCOME OF THE ASSESSEE IS TO BE CONSIDERED AS AND O NLY THE PROFITS DERIVED FROM THE HOUSING PROJECTS. THE ASSE SSEE CLAIMED THAT THE COMPUTATION OF INCOME AS FILED BY THE ASSE SSEE EXHIBITS POSITIVE INCOME AND SUCH INCOME IS FROM TH E HOUSING PROJECT ELIGIBLE FOR DEDUCTION U/S.80IB(10). 6. THE CIT-A CONSIDERING THE SUBMISSIONS OF ASSESSE E WAS OF THE OPINION THAT THE SAID INTEREST ACCRUED ON FIXED DEPOSITS, WHICH WERE MADE OUT FROM BUSINESS FUNDS AVAILABLE W ITH THE ASSESSEE AND THE SAME IS INCIDENTAL TO BUSINESS ACT IVITY OF ASSESSEE BEING ELIGIBLE FOR DEDUCTION U/S. 80IB OF THE ACT AND DIRECTED THE AO TO ALLOW THE CLAIM OF THE ASSESSEE. RELEVANT 4 ITA NO. 284/KOL/14 WEST BENGAL HOUSING BOARD FINDING OF THE CIT-A ON THIS ISSUE IS REPRODUCED HE REIN BELOW FOR BETTER UNDERSTANDING:- 9.3 THE MOOT POINT HERE IS THAT WHETHER THE ACCRUED INTEREST IS TO BE TREATED AS INCOME FROM THE BUSINESS WHICH IS ENTITLED FOR E XEMPTION U/S 80IB(10) OF THE ACT OR INCOME FROM OTHER SOURCES. THE APPELLANT HAS SHOWN THE INTEREST ACCRUED ON THE FIXED DEPOSITS AS BUSINESS INTEREST. ON THE CONTRARY THE AO TREATED THE INTEREST AS INCOME FROM OTHER SOURCES. IT IS OFTEN OVERLOOKED THAT SECTION 56, PROVIDING FOR INCOME FROM OTHER SOURCES , IS A RESIDUARY ONE. IT IS ONLY WHEN AN INCOME DOES NOT FALL UNDER ANY OF THE OTHER REGULAR SOURCES OF INCOME THAT THE NEED ARISES FOR INVOKING SECTION 56 OF THE ACT. WHERE A PERSON HAS ONLY ONE SOURCE OF INCOME, WHICH IS BUSI NESS, THERE COULD HARDLY BE ANY OTHER INFERENCE. IN THE CASE OF SNAM PROGETT I S.P.A. VS. ADD!. CIT [1981J 132 ITR 70 THE DELHI HIGH COURT TOOK A BROAD VIEW AND CONSIDERED INTEREST AS INCIDENTAL TO BUSINESS INCOME, BECAUSE IT CANNOT BE PRESUMED THAT THE ASSESSEE HAS COME ALL THE WAY FROM ITALY T O MAKE BANK DEPOSITS ON INDIA, WHEN IT WAS CLEAR THAT THE COMPANY WAS ES TABLISHED FOR CARRYING ON BUSINESS. 9.4 IN THE CASE OF CIT VS. TAMIL NADU DAIRY DEVEL OPMENT CORPORATION LTD [1995] 216 ITR 535 (MAD.), THE MADRAS HIGH COURT HA S HELD, FOLLOWING THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT VS . CALCUTTA NATIONAL BANK LTD. [1959J 37 ITR 171 (SC) THAT 'BUSINESS' IS A WO RD OF VERY WIDE CONNOTATION WITH THE RESULT THAT IT SHOULD ORDINARI LY BE TREATED AS BUSINESS INCOME. EXCEPT WHERE THE INVESTMENTS ARE INDEPENDEN T OF BUSINESS MADE OUT OF SURPLUS FUNDS IN LONG TERM DEPOSITS, THERE IS NO POSSIBILITY OF ASSESSING THE SAME AS OTHERWISE - TIRUPATI WOOLEN MILLS LTD. 193 ITR 252 (CAL.), CIT VS. AP INDUSTRIAL CORPORATION 175 ITR 361 (AP); CIT VS. EAST INDIA HOTELS LTD. 207 ITR 881 (CAL); AND THE FACT THAT THE PURPO SE OF THE ASSESSEE IN INVESTING IN FIXED DEPOSITS IS TO MAKE AVAILABLE FU NDS FOR ITS HOUSING PROJECTS AND THEREFORE THE INTERESTS ON SUCH DEPOSITS SHOULD BE TREATED AS THE BUSINESS INCOME OF THE ASSESSEE. NOT ONLY THAT THER E IS NO GAINSAYING THE FACT THAT THE INVESTMENT WAS MADE OUT OF THE BUSINE SS FUND AVAILABLE WITH THE ASSESSEE, THE ASSESSEE IS ALSO ENTITLED TO TREA T THE INTEREST INCOME AS THE INCOME FROM BUSINESS. I AM OF THE FIRM VIEW THA T THE TERM BUSINESS IS A WORD OF VERY WIDE IMPORT AND BY NO MEANS TO BE DETE RMINED IN A LIMITED SCOPE AND HAS TO BE CONSIDERED WITH REFERENCE TO EA CH PARTICULAR KIND OF ACTIVITY AND OCCUPATION OF THE ASSESSEE CONCERNED. UPON THE PECULIAR FACTS OF THIS CASE, I AM OF THE OPINION THAT THE INTEREST AC CRUED ON THE FIXED DEPOSITS OF THE APPELLANT WHICH WERE MADE OUT OF THE BUSINES S FUNDS AVAILABLE WITH IT BEFORE THE SAME WERE UTILIZED FOR ACTUAL BUSINESS A ND, AS SUCH, THE SAME IS TO BE CONSIDERED AS INCIDENTAL TO THE BUSINESS ACT IVITY OF THE APPELLANT AND THUS THE INTEREST ON THE FIXED DEPOSITS SHOULD BE TREATED AS BUSINESS INCOME THUS QUALIFYING FOR DEDUCTION U/S. 80IB OF T HE ACT. THE AO IS DIRECTED TO ALLOW THE DEDUCTION AS CLAIMED BY THE APPELLANT U/S.80IB IN THIS REGARD. THIS GROUND IS TREATED AS BEING ALLOWED. 7. THE LD.DR HAS RELIED ON THE ORDER OF THE AO. 8. ON THE OTHER HAND, THE LD.AR OF THE ASSESSEE REI TERATED THE SAME SUBMISSION AS MADE BEFORE THE CIT-A AND SU PPORTED THE ORDER OF THE CIT-A AND RELIED ON THE DECISION O F THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF TIRUPATI WOOLEN MILLS LTD 193 ITR 252(CAL). 5 ITA NO. 284/KOL/14 WEST BENGAL HOUSING BOARD 9. HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE DID NOT CLAIM THE DEDUCTION U/S. 80IB OF THE ACT IN ITS ORIGINAL RETU RN. BUT, HOWEVER, IN EXPLANATION OFFERED BEFORE THE AO, THE ASSESSEE CLAIMED DEDUCTION U/S. 80IB(10) OF THE ACT TOWARDS THE ACCRUED INTEREST ON FIXED DEPOSITS FILED IN THE REVISED COM PUTATION OF INCOME SHOWING THE SAID INTEREST INCOME AS ITS BUSI NESS INCOME. ADMITTEDLY, THE ASSESSEE SHOWN THE SAID INC OME AS INCOME FROM OTHER SOURCES IN THE ORIGINAL RETURN. W E FIND THAT THE AO HAS ALLOWED DEDUCTION UNDER SIMILAR CIRCUMST ANCES U/S. 143(3) FOR THE AY 2006-07 BASED ON INTEREST INCOME. THE LD.AR ARGUED THAT ONLY BUSINESS FUNDS WERE UTILISED FOR M AKING DEPOSITS, WHICH FETCHED INTEREST INCOME. WE FIND FO RCE IN THE SUBMISSIONS OF THE LD.AR OF THE ASSESSEE THAT THE N ET PROFIT AS PER REVENUE ACCOUNT THE ASSESSEE SHOWN UNDER THE DI FFERENT HEADS I.E. INCOME FROM HOUSE PROPERTY, INCOME FROM OTHER SOURCES AND INCOME FROM BUSINESS. FINANCIAL STATEME NTS ARE PREPARED AFTER COMPLETING ALL THE LEGAL REQUIREMENT S. BUT, FROM THE OPERATIONAL POINT OF VIEW ALL THE INCOME WERE D ISCLOSED UNDER WHATEVER SOURCES ARE THE INTEGRAL PARTS OF AS SESSEES BUSINESS. IN THIS REGARD, WE MAY REFER TO THE DECIS ION AS RELIED ON BY THE LD.AR OF THE ASSESSEE IN THE CASE OF SUPRA. RELEVANT FINDING IN THIS REGARD IS REPRODUCED HEREIN BELOW:- 'THE ONLY ACTIVITY WHICH THE ASSESSEE-COMPANY HAD I N THE CALCUTTA OFFICE DURING THE RELEVANT PREVIOUS YEAR CONSISTED OF DERIVING SOME I NTEREST ON FIXED DEPOSITS. IT COULD NOT BE SAID THAT THIS ACTIVITY WAS IN THE NATURE OF A B USINESS ACTIVITY. CONSIDERING THE NATURE OF LOANS, THE FREQUENCY OF TRANSACTIONS AS WELL AS THE IRREGULARITY, IT IS HELD THAT THIS AMOUNT HAD TO BE ASSESSED AS INCOME FROM OTHER SOUR CES. THE APPELLANT COMPANY, THEREFORE, WAS ENTITLED ONLY TO SUCH EXPENDITURE WH ICH WAS INCURRED IN CONNECTION WITH EARNING OF INCOME FROM OTHER SOURCES. ON THE FACTS OF THE CASE, IT CANNOT BE SAID THAT THE DISALLOWANCE MADE BY THE INCOME-TAX OFFICER WAS UNJ USTIFIED PARTICULARLY KEEPING IN VIEW THE FACT THAT A MAJOR PORTION OF THE EXPENDITURE IS ON ACCOUNT OF INTEREST ON LOANS WHICH 6 ITA NO. 284/KOL/14 WEST BENGAL HOUSING BOARD HAVE BEEN UTILISED FOR SETTING UP THE NEW FACTORY W HICH HAD NOT STARTED DURING THE YEAR. THE CLAIM OF THE APPELLANT IS, THEREFORE, DISALLOWE D.' AGGRIEVED BY THE ORDER OF THE COMMISSIONER OF INCOM E-TAX (APPEALS), THE ASSESSEE WENT UP IN APPEAL BEFORE THE TRIBUNAL. THE TRIBUNAL OBSE RVED THAT THE BUSINESS ACTIVITIES MAY CONSIST OF PURCHASE AND SALE RESULTING IN PROFIT OR LOSS. THE ABSENCE OF SUCH ACTIVITIES DURING THE YEAR MAY NOT NECESSARILY MEAN THAT THE B USINESS ACTIVITIES HAVE COME TO A STANDSTILL. THE ERECTION OF THE PLANT AT SONEPAT IN HARYANA IS NOTHING BUT A BUSINESS ACTIVITY AND THE ASSESSEE IS BUSY IN THE SAID ACTIV ITY DURING THE YEAR UNDER CONSIDERATION. THE TRIBUNAL FURTHER FOUND THAT THE COMPANY UTILISE D ITS COMMERCIAL ASSETS WHICH WERE LYING IN THE FORM OF SURPLUS CASH EARNING INTEREST. SUCH EARNING, ACCORDING TO THE TRIBUNAL, ARISING FROM UTILISATION OF COMMERCIAL AS SETS WOULD BE BUSINESS INCOME AND IT WOULD NOT BE CORRECT TO SAY THAT THE INCOME IN QUES TION WAS 'INCOME FROM OTHER SOURCES'. THE TRIBUNAL, IN THAT VIEW, WAS OF THE OP INION THAT THE INCOME DERIVED FROM THE UTILISATION OF COMMERCIAL ASSETS WOULD BE INCOME FR OM BUSINESS. THE TRIBUNAL, ON THE QUESTION OF BUSINESS LOSS, FOUND THAT, FOR THE ASSE SSMENT YEAR UNDER CONSIDERATION, THERE WAS INCOME FROM COMMERCIAL ASSETS AND, THEREFORE, T HE QUESTION OF NOT ALLOWING EXPENSES DID NOT ARISE. THE EXPENSES WERE BUSINESS EXPENSES AND SHOULD HAVE BEEN ALLOWED. SINCE, ACCORDING TO THE TRIBUNAL, THE ASSE SSEE WAS CARRYING ON BUSINESS DURING THE YEAR, THE TRIBUNAL ON THAT BASIS OBSERVED THAT IT WOULD BE MORE APPROPRIATE TO SAY THAT ASSESSEES INCOME FROM BUSINESS WAS LESS THAN T HE EXPENDITURE INCURRED BY IT. BUSINESS LOSS RESULTS PRECISELY FOR SUCH REASON AND TO DISALLOW BUSINESS LOSS MERELY BECAUSE THE INCOME IS LESS THAN THE EXPENDITURE MAK ES LITTLE SENSE. THE TRIBUNAL FOR THAT REASON, ALLOWED THE ASSESSEES CLAIM OF BUSINESS LOS S. THE ONLY QUESTION IS WHETHER THE TRIBUNAL WAS JUSTI FIED IN HOLDING THAT INTEREST INCOME SHOULD BE ASSESSED UNDER THE HELD 'BUSINESS'. FROM NARRATION OF FACTS, IT WILL EVIDENT THAT THE FINDINGS OF THE TRIBUNAL THAT THE ASSESSEE IN FACT WAS CARRYING ON BUSINESS HAS NOT BEEN CHALLENGED BY THE REVENUE. THAT APART, THE FACT REMAINS THAT ALTHOUGH THE INCOME WAS EARNED BY WAY OF INTEREST FROM THE FIXED DEPOSITS, THE INCOME-TAX OFFICER ALLOWED THE EXPENDITURE INCURRED BY THE ASSESSEE TO THE EXTENT OF THE INTEREST INCOME WHICH WOULD GO TO SHOW THAT THE INCOME-TAX OFFICER MUST CONSIDER THE EXPENDITURE IN CONNECTION WITH CARRYING ON BUSINESS, OTHERWISE, HE WOULD BE ALLOWED ONLY THE EXPENDITURE WHICH WAS INCURRED IN CONNECTION WITH E ARNING OF THE INTEREST INCOME. THIRDLY, THE TRIBUNAL FOUND AS FACT THAT EARNING OF INTEREST INCOME AROSE FROM THE UTILISATION OF COMMERCIAL ASSETS. THE TRIBUNAL FOUN D THAT FUNDS UTILISED IN MAKING FIXED DEPOSITS WITH THE BANK WHERE THE BUSINESS FUNDS LYI NG TEMPORARILY IN SURPLUS WITH THE ASSESSEE. ON THESE FACTS, THE INCOME DERIVED FROM THE UTILISA TION OF THE COMMERCIAL ASSETS WOULD BE INCOME FROM BUSINESS. 10. RESPECTFULLY FOLLOWING THE ABOVE IN THE CASE OF SUPRA, WE HOLD THAT THE INTEREST EARNED ON FIXED DEPOSITS MADE OUT FRO M ACCUMULATED PROFITS AND RESERVES IS THE INCOME, WHICH DERIVED FROM ASSE SSEES BUSINESS ACTIVITY. THEREFORE, THE ASSESSEE IS ELIGIBLE TO CL AIM DEDUCTION U/S. 80IB(10) OF THE ACT. THEREFORE, WE FIND NO INFIRMIT Y IN THE ORDER OF THE CIT-A AND IT IS JUSTIFIED. THE GROUNDS RAISED BY TH E REVENUE ARE DISMISSED. 7 ITA NO. 284/KOL/14 WEST BENGAL HOUSING BOARD 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN OPEN COURT ON 22 /03/ 2017 SD/- SD/- M.BALAGANESH S. S.VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 22 -0 3-2017 *PP/SPS: COPY OF THE ORDER FORWARDED TO: 1 . THE APPELLANT/REVENUE: THE ASSTT. COMMISSIONER OF INCOME TAX, CIR-31, 10B MIDDLETON ROW, KOL-71 (4 TH FLOOR). 2 THE RESPONDENT/ASSESSEE: WEST BENGAL HOUSING BOARD , ABASAN, 105 S.N BANERJEE ROAD, KOLKATA-14. 3 4. THE CIT(A) THE CIT 5 . DR, KOLKATA BENCH 6 . GUARD FILE . BY ORDER, ASSTT. REGISTRAR