Ambur Economic Development Organisation Limited, CHENNAI V. DCIT, CHENNAI

ITA 326/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64333 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 24-09-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 15-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: D ANAND
• Keywords: Condonation of delay
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE SHRI ABRAHAM P.GEORGE, ACCOUNTANT ME MBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NO.326/MDS/2012 (ASSESSMENT YEAR: 2006-07 ) AMBUR ECONOMIC DEVELOPMENT ORGANISATION LTD., AKBER RIFA & CO, C-8, ORCHARD MANOR APARTMENTS, NO.3, DIWAN RAMA ROAD, PURASAIWALKAM, CHENNAI-84. PAN: AAFCA3014L VS. DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE1(1), CHENNAI. (APPELLANT) (RESPONDENT) APPELLANT BY : MR. D.ANAND, ADVOCATE RESPONDENT BY : MR. S.DASGUPTA, JCIT DATE OF HEARING : 24 TH SEPTEMBER, 2012 DATE OF PRONOUNCEMENT : 24 TH SEPTEMBER, 2012 O R D E R PER VIKAS AWASTHY, JM: THE APPEAL HAS BEEN FILED BY THE ASSESSEE IMPUGNING THE ORDER OF THE COMMISSIONER OF INCOME TAX, CHENN AI, DATED 30 TH SEPTEMBER, 2010 PASSED UNDER SECTION 263 OF THE INCOME TAX ACT RELEVANT TO THE ASSESSMENT YEAR 2 006-07. 2. THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSE E WITH THE DELAY OF 512 DAYS. THE ASSESSEE HAS FILED AN A PPLICATION FOR CONDONATION OF DELAY. THE APPLICATION IS SUPPOR TED BY AN ITA NO.326/MDS/2012 2 AFFIDAVIT CITING REASONS CAUSING DELAY IN FILING OF THE PRESENT APPEAL. THE REASON EXPLAINED BY THE ASSESSEE FOR D ELAY IN FILING OF THE APPEAL IS THAT IT HAS BEEN PURSUING W RONG FORUM FOR REDRESSAL OF ITS GRIEVANCE AGAINST THE ORDER PA SSED BY THE CIT UNDER SECTION 263 OF THE ACT. 3. THE D.R. HAS NOT STRONGLY OBJECTED TO THE APPLIC ATION FOR CONDONATION OF DELAY FILED BY THE ASSESSEE. 4. IT HAS BEEN REPEATEDLY HELD BY THE HONBLE HIGH COURTS AND THE HONBLE APEX COURT THAT WHERE THE APPELLANT HAS BEEN PROSECUTING THE MATTER BONAFIDE AND WITH DUE D ILIGENCE BEFORE THE WRONG COURT, DELAY CAUSED IN FILING OF T HE APPEAL HAS TO BE CONDONED. THE HONBLE SUPREME COURT OF IN DIA IN THE CASE OF RAMNATH SAO VS. GOBARDHAN SAO REPORTED AS 2002 (3) SCC 195 WHILE ADJUDICATING ON ISSUE RELATI NG TO DELAY IN FILING OF APPEAL HAS HELD THAT ACCEPTANCE OF EXPLANATION FURNISHED SHOULD BE THE RULE AND REFUSA L AN EXCEPTION MORE SO WHEN NO NEGLIGENCE OR INACTION O R WANT OF BONAFIDE CAN BE IMPUTED TO THE DEFAULTING PARTY. H OWEVER, BY TAKING A PEDANTIC AND HYPER-TECHNICAL VIEW OF THE M ATTER THE EXPLANATION FURNISHED SHOULD NOT BE REJECTED WHEN STAKES ARE ITA NO.326/MDS/2012 3 HIGH AND /OR ARGUABLE POINTS OF FACTS AND LAW ARE I NVOLVED IN THE CASE , CAUSING ENORMOUS LOSS AND IRREPARABLE IN JURY TO THE PARTY AGAINST WHOM THE LIS TERMINATES EITHER BY DEF AULT OR INACTION AND DEFEATING VALUABLE RIGHT OF SUCH A PA RTY TO HAVE THE DECISION ON MERIT. WHILE CONSIDERING THE MATTER COURTS HAVE TO STRIKE A BALANCE BETWEEN RESULTANT EFFECT O F THE ORDER IT IS GOING TO PASS UPON THE PARTIES EITHER WAY. THEREFORE, IN THE INTEREST OF JUSTICE AND EQUITY, THE DELAY OF 51 2 DAYS IN FILING OF THE APPEAL IS CONDONED AND THE APPEAL IS ADMITTED TO BE HEARD ON MERITS. 5. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY REGISTERED UNDER SECTION 25 OF THE COMPANIE S ACT, 1956. THE ASSESSEE IS A SPECIAL PURPOSE VEHICLE UND ER INDUSTRIAL INFRASTRUCTURE UPGRADATION SCHEME OF GO VERNMENT OF INDIA. IT HAS BEEN PROVIDING TRAINING AS WELL AS FINANCIAL SUPPORT TO VARIOUS LEATHER UNITS. IT HAS BEEN RECEI VING FUNDS FROM LEATHER CONSORTIUM TO ACHIEVE ITS OBJECTIVES A ND IMPROVE LEATHER SECTOR. 6. THE ASSESSEE FILED ITS RETURN OF INCOME RELEVANT TO THE ASSESSMENT YEAR 2006-07 ON 27.11.2006 ADMITTING TOT AL ITA NO.326/MDS/2012 4 INCOME AS NIL. THE RETURN OF THE ASSESSEE WAS PROC ESSED UNDER SECTION 143(1) AND THEREAFTER NOTICE UNDER SE CTION 143(2) WAS ISSUED TO THE ASSESSEE ON 3.10.2007. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT UNDER S ECTION 143(3) OF THE ACT ON 30.7.2008 ACCEPTING THE INCOME RETURNED BY THE ASSESSEE. SUBSEQUENTLY, THE COMMISSIONER OF INCOME TAX ISSUED NOTICE UNDER SECTION 263 OF THE ACT ON T HE GROUND THAT A SUM OF ` 28,57,063/- RECEIVED BY THE ASSESSEE TOWARDS INTEREST HAS BEEN WRONGLY CAPITALIZED BY THE ASSES SEE AS WORK-IN-PROGRESS. THE CIT FURTHER OBSERVED THAT THE ASSESSING OFFICER WITHOUT CONSIDERING THE ABOVE ASP ECT OF THE MATTER, COMPLETED THE ASSESSMENT WHICH IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE ASS ESSEE FILED WRITTEN SUBMISSIONS AGAINST THE NOTICE SENT BY THE CIT. HOWEVER, THE CIT REJECTING THE SUBMISSIONS PASSED T HE IMPUGNED ORDER DATED 30.9.2012 UNDER SECTION 263. T HE CIT DIRECTED THE ASSESSING OFFICER TO MODIFY THE ASSESS MENT IN ACCORDANCE WITH THE DECISION OF HONBLE SUPREME COU RT OF INDIA IN THE CASE OF M/S. TUTICORIN ALKALI CHEMICAL S LTD. ITA NO.326/MDS/2012 5 REPORTED AS 227 ITR 172 KEEPING IN MIND THE POINT R AISED BY HIM. AGGRIEVED AGAINST THE ORDER OF THE CIT, THE ASSESS EE HAS COME IN APPEAL BEFORE THE TRIBUNAL. 7. SHRI D.ANAND, ADVOCATE APPEARING ON BEHALF OF TH E ASSESSEE SUBMITTED THAT THE ASSESSEE IS A NON-PROFI T ORGANIZATION. IT IS FUNDED BY GOVERNMENT OF INDIA A ND LEATHER TANNERIES. THE FUNDS ARE UTILIZED FOR SETTING UP OF EFFLUENT TREATMENT PLANTS FOR TANNERIES. HE STRONGLY SUPPORT ED THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT T HE ORDER OF THE ASSESSING OFFICER IS NEITHER ERRONEOUS NOR PREJ UDICIAL TO THE INTEREST OF THE REVENUE. THE COUNSEL FOR THE A SSESSEE SUBMITTED THAT ENTIRE EXPENDITURE INCURRED NET OF T HE INCOME RECEIVED WHICH INCLUDES THE INTEREST AMOUNTING TO ` 28,57,063/- IS CAPITALIZED UNDER THE HEAD PROJECT IN PROGRESS. THE CIT HAS ERRED IN DISALLOWING THE SAM E BY WRONGLY RELYING ON THE JUDGEMENT OF THE HONBLE SUP REME COURT OF INDIA IN THE CASE OF M/S. TUTICORIN ALKALI CHEMICALS LTD. REPORTED AS 227 ITR 172. IN ORDER TO SUPPORT H IS CONTENTIONS, THE COUNSEL FOR THE ASSESSEE RELIED ON THE ITA NO.326/MDS/2012 6 JUDGEMENT IN THE CASE OF CIT VS. BOKARO STEEL LTD. REPORTED AS 236 ITR 315 AND CIT VS. KARNAL CO-OPERATIVE SUGA R MILLS LTD., REPORTED AS 243 ITR 2 (SC). THE LEARNED COUNS EL HAS ALSO RELIED ON THE JUDGEMENT OF THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. R EPORTED AS 243 ITR 83 TO SAY THAT THE CIT HAS WRONGLY ASSUMED THE JURISDICTION UNDER SECTION 263 OF THE ACT. THE COU NSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS PARKED AN AMOUNT OF ` 9,70,00,000/- IN FIXED DEPOSITS WITH THE BANKS WHE RE IT HAD EARNED INTEREST OF ` 28,57,063/- DURING THE FINANCIAL YEAR 2005-06 WHICH WAS DULY REFLECTED IN THE RETURN OF I NCOME FILED FOR THE RELEVANT ASSESSMENT YEAR. THE AMOUNT PARKED AS FIXED DEPOSIT DID NOT BELONG TO THE ASSESSEE AS IT WAS C OLLECTED FOR EXECUTION OF THE PROJECTS OF THE COMMON EFFLUENT TR EATMENT PLANTS AND THE AMOUNT OF THE FIXED DEPOSITS ALONG WITH INTEREST THEREON WAS UTILIZED IN THE SAID PROJECTS. 8. ON THE OTHER HAND, SHRI DASGUPTA REPRESENTING TH E DEPARTMENT SUBMITTED THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE JUDGEMENT OF THE HONBLE SU PREME COURT OF INDIA IN THE CASE OF TUTICORIN ALKALI CHE MICALS LTD. ITA NO.326/MDS/2012 7 (SUPRA). HE STRONGLY SUPPORTED THE ORDER OF THE CIT AND SUBMITTED THAT THE ORDER OF THE ASSESSING OFFICER I S ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 9. WE HAVE HEARD THE SUBMISSIONS OF BOTH THE PARTIE S AND HAVE PERUSED THE ORDER OF THE CIT AND THE JUDGEMENT S CITED BY THE RESPECTIVE PARTIES. THE ASSESSEE COMPANY IS A NON- PROFIT MAKING ORGANIZATION. THE ASSESSEE IS PRIMARI LY INCORPORATED FOR THE PURPOSE OF EXECUTION OF COMMON EFFLUENT TREATMENT PLANTS IN LEATHER INDUSTRIES SITUATED IN THE STATE OF TAMIL NADU. ADMITTEDLY, THE ASSESSEE IS NOT GENERAT ING FUNDS ON ITS OWN AND IS SURVIVING ON THE GRANTS RECEIVED FROM GOVERNMENT OF INDIA AND THE CONTRIBUTION FROM THE P ROMOTERS FOR THE EXECUTION OF THE PROPOSED PROJECTS. DUE TO DELAY IN THE EXECUTION OF THE PROPOSED PROJECT ON SCHEDULE, THE ASSESSEE PARKED AN AMOUNT OF ` 9,70,00,000/- IN FIXED DEPOSITS WITH THE BANK TO BE USED FOR THE PROJECT AS AND WHEN THE SAM E IS INITIATED. ON THE SAID DEPOSITS, INTEREST ACCRUED TO THE TUNE OF ` 28,57,063/- DURING THE FINANCIAL YEAR 2005-06 WHIC H WAS DULY DECLARED IN THE RETURN OF INCOME FILED BY THE ASSESSEE. AS PER THE CONTENTIONS OF THE ASSESSEE THE PROJECT IS IN THE ITA NO.326/MDS/2012 8 PROCESS OF COMMISSIONING, THEREFORE, THE INTEREST A MOUNT WAS SHOWN AS WORK-IN-PROGRESS. WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE HAS RIGHTLY CAPITALIZED THE INTER EST AND HAS SHOWN AS WORK-IN-PROGRESS. IT HAS NOT BEEN DENIED BY THE REVENUE THAT THE PROJECTS FOR SETTING UP OF COMMON EFFLUENT TREATMENT PLANTS WERE IN THE PROCESS OF COMMISSIONI NG.THE ASSESSEE IN ORDER TO SUPPORT HIS CONTENTION HAS REL IED ON THE JUDGEMENT OF THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF BOKARO STEEL LTD. (SUPRA), WHEREIN THE HONBLE A PEX COURT HAS HELD THAT IF THE ASSESSEE RECEIVES ANY AMOUNTS WHICH ARE INEXTRICABLY LINKED WITH THE PROCESS OF SETTING UP OF ITS PLANT & MACHINERY, SUCH RECEIPTS WILL GO TO REDUCE THE COST OF ITS ASSETS. THESE RECEIPTS ARE CAPITAL IN NATURE AN D CANNOT BE TAXED AS INCOME. THE HONBLE APEX COURT WHILE DELIVERING THE JUDGEMENT IN THE SAID CASE HAS ALSO TAKEN INTO CONSIDERATION THE JUDGEMENT RENDERED IN THE CASE TU TICORIN ALKALI CHEMICALS LTD (SUPRA). THE HONBLE APEX COU RT SUBSEQUENTLY IN THE CASE OF KARNAL CO-OPERATIVE SUG AR MILLS LTD. (SUPRA) BY RELYING ON THE JUDGEMENT OF BOKARO STEEL LTD. HAS REITERATED THE SIMILAR VIEW. WE ARE OF THE CONS IDERED ITA NO.326/MDS/2012 9 OPINION THAT THE CASE OF THE ASSESSEE IS SQUARELY C OVERED BY THE JUDGEMENTS OF HONBLE SUPREME COURT OF INDIA IN THE CASE OF BOKARO STEEL LTD.(SUPRA) AND KARNAL CO-OPERATIV E SUGAR MILLS LTD. (SUPRA). THE FACTS OF TUTICORIN ALKALI C HEMICALS LTD. CASE ARE DISTINGUISHABLE. THEREFORE, THE LAW LAID D OWN BY THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF TUTI CORIN ALKALI CHEMICALS LTD.(SUPRA) CANNOT BE APPLIED IN THE FACT S AND CIRCUMSTANCES OF THE PRESENT CASE. IN TUTICORIN AL KALI CHEMICALS LTD.(SUPRA) THE ISSUE WAS WITH REGARD TO UTILIZATION OF SURPLUS FUNDS IN THE CASE OF THE ASSESSEE. IN T HE SAID CASE THE SURPLUS FUNDS WERE INVESTED TO EARN INTEREST. T HE INTEREST THUS EARNED WAS HELD TO BE REVENUE IN NATURE AND WA S THUS ACCORDINGLY ORDERED TO BE TAXED. WHEREAS, IN THE P RESENT CASE THE FUNDS PARKED IN THE BANK WERE NOT SURPLUS RATHER THEY WERE BEING UTILIZED FOR SETTING UP OF EFFLUENT TREATMENT PLANTS FOR TANNERIES. THEREFORE, THE INTEREST EARNE D ON FIXED DEPOSITS HAS BEEN RIGHTLY CAPITALIZED BY THE ASSESS EE. 10. THE SECOND ISSUE RAISED BY THE ASSESSEE IN ITS GROUND OF APPEAL IS WITH REGARD TO ASSUMPTION OF JU RISDICTION BY THE CIT UNDER SECTION 263. THE HONBLE SUPREME C OURT IN ITA NO.326/MDS/2012 10 THE CASE OF MALABAR INDUSTRIAL CO. LTD. REPORTED AS 243 ITR 83(SC) HAS HELD THAT THE COMMISSIONER HAS TO BE SATISFIED OF TWIN CONDITIONS, NAMELY, (I) THE ORDER OF THE AS SESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENT I.E. IF THE ORDER OF THE INCOME-TAX OFFICER IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS N OT ERRONEOUS BUT IS PREJUDICIAL TO THE REVENUE RECOURSE CANNOT BE HAD TO SECTION 263(1) OF THE ACT. IN THE PRESENT CASE, THE ASSESSING OFFICER HAD ACCE PTED THE CONTENTIONS OF THE ASSESSEE AND HAD COMPLETED T HE ASSESSMENT BY ACCEPTING THE RETURN FILED BY THE ASS ESSEE. THE CIT BY EXERCISING HIS JURISDICTION UNDER SECTIO N 263 RAKED UP THE ISSUE OF INTEREST ON FIXED DEPOSITS WHETHER TO BE CAPITALIZED OR NOT. AS HAS ALREADY BEEN HELD THAT T HE ASSESSEE HAD RIGHTLY CAPITALIZED THE INTEREST, THE ASSESSMENT ORDER SOUGHT TO BE REVISED IS NOT ERRONEOUS AT ALL. IT IS A TRITE LAW THAT EVERY LOSS OF REVENUE HAS A CONSEQUENCE O F AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE REVENUE FOR THE REASON THAT TWO VIEWS ITA NO.326/MDS/2012 11 ARE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN TH E ONE WHICH IS IN FAVOUR OF THE ASSESSEE. THE VIEW TAKEN BY THE ASSESSING OFFICER CANNOT BE HELD TO BE ERRONEOUS O R PREJUDICIAL TO THE INTEREST OF THE REVENUE, UNLESS IT IS UNSUSTAINABLE IN LAW. 11. IN VIEW OF OUR ABOVE FINDINGS, THE ORDER OF THE CIT PASSED UNDER SECTION 263 IS SET ASIDE AND THE APPE AL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON MONDAY, THE 24 TH DAY OF SEPTEMBER, 2012 AT CHENNAI. SD/- SD/- (ABRAHAM P.GEORGE) (VIK AS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 24 TH SEPTEMBER, 2012. SOMU COPY TO: (1) APPELLANT (4) CIT(A) (2) RESPONDENT (5) D.R. (3) CIT (6) G.F.