ITO, New Delhi V. M/s Smart Digivision Pvt. Ltd., New Delhi

ITA 3717/DEL/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1252 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 12-02-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 18-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUKHVEER CHOUDHARY
• Assessee Lawyers: VENKATESH
• Keywords: Capital receipt

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH G GG G : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND SHRI SHRI SHRI SHRI I.C.SUDHIR I.C.SUDHIR I.C.SUDHIR I.C.SUDHIR, JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER ITA NO. ITA NO. ITA NO. ITA NO.3717/DEL/2012 3717/DEL/2012 3717/DEL/2012 3717/DEL/2012 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2009 2009 2009 2009- -- -10 1010 10 INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, WARD WARD WARD WARD- -- -9(1), 9(1), 9(1), 9(1), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. VS. VS. VS. VS. M/S SMART DIGI M/S SMART DIGI M/S SMART DIGI M/S SMART DIGIVISION PVT.LTD., VISION PVT.LTD., VISION PVT.LTD., VISION PVT.LTD., 8, COMMERCIAL COMPLEX, 8, COMMERCIAL COMPLEX, 8, COMMERCIAL COMPLEX, 8, COMMERCIAL COMPLEX, MASJID MOTH, GK MASJID MOTH, GK MASJID MOTH, GK MASJID MOTH, GK- -- -II, II,II, II, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 048. 110 048. 110 048. 110 048. PAN : AALCS1437P. PAN : AALCS1437P. PAN : AALCS1437P. PAN : AALCS1437P. (APPELLANT) (RESPONDENT) CROSS CROSS CROSS CROSS- -- -OBJECTION OBJECTION OBJECTION OBJECTION NO. NO. NO. NO.333/DEL/2012 333/DEL/2012 333/DEL/2012 333/DEL/2012 ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : 2009 2009 2009 2009- -- -10 1010 10 M/S SMART DIGIVISION PVT.LTD., M/S SMART DIGIVISION PVT.LTD., M/S SMART DIGIVISION PVT.LTD., M/S SMART DIGIVISION PVT.LTD., 8, COMMERCIAL COMPLEX 8, COMMERCIAL COMPLEX 8, COMMERCIAL COMPLEX 8, COMMERCIAL COMPLEX, ,, , MASJID MOTH, GK MASJID MOTH, GK MASJID MOTH, GK MASJID MOTH, GK- -- -II, II,II, II, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 048. 110 048. 110 048. 110 048. PAN : AALCS1437P. PAN : AALCS1437P. PAN : AALCS1437P. PAN : AALCS1437P. VS. VS. VS. VS. INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, WARD WARD WARD WARD- -- -9(1), 9(1), 9(1), 9(1), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SUKHVEER CHOUDHARY, DR. ASSESSEE BY : SHRI VED JAIN, CA AND SHRI VENKATESH, ADVOCATE. ORDER ORDER ORDER ORDER PER G. PER G. PER G. PER G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VP VPVP VP : : : : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE O RDER OF LEARNED CIT(A)-XII, NEW DELHI DATED 4 TH APRIL, 2012 FOR THE AY 2009-10. 2. THE ONLY GROUND RAISED BY THE REVENUE READS AS UNDE R:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.1,65,81,054/ - UNDER ITA-3717/D/2012 & C.O.333/D/2012 2 THE HEAD INCOME FROM OTHER SOURCES BY TREATING IT P RE- OPERATIVE INCOME EARNED. 3. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERI AL PLACED BEFORE US. WE FIND THAT THE LEARNED CIT(A) HAS ALLO WED THE RELIEF TO THE ASSESSEE FOLLOWING THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. JAYPEE DSC VENTURES LTD. (2011) 335 ITR 132 (DELHI), WHEREIN IT WAS HELD AS UNDER:- AS IS NOTICEABLE FROM THE STIPULATIONS IN THE AGREEME NT, THE PERFORMANCE GUARANTEE BY WAY OF BANK GUARANTEE WAS REQUIRED FOR FAITHFUL PERFORMANCE OF ITS OBLIGATIONS. THE NON-SUBMISSION OF THE GUARANTEE WOULD HAVE ENTAILED I N TERMINATION OF THE AGREEMENT AND NHAI WOULD HAVE BE EN AT LIBERTY TO APPROPRIATE BID SECURITY. THAT APART, THE RELEASE OF SUCH PERFORMANCE SECURITY DEPENDED UPON CERTAIN CONDITIONS. THUS, IT IS CLEARLY EVINCIBLE THA T THE BANK GUARANTEE WAS FURNISHED AS A CONDITION PRECEDENT TO ENTERING THE CONTRACT AND FURTHER IT WAS TO BE KEPT ALIVE TO FULFILL THE OBLIGATIONS. QUITE APART FROM THE ABOVE , THE RELEASE OF THE SAME WAS DEPENDENT ON THE SATISFACTION OF CERTAIN CONDITIONS. THUS, THE PRESENT CASE IS NOT ONE WHERE THE ASSESSEE HAD MADE THE DEPOSIT OF SURPLUS MONEY LYING IDLE WITH IT IN ORDER TO EARN INTEREST; ON THE CONTRARY, THE AMOUNT OF INTEREST WAS EARNED FROM FIXE D DEPOSIT WHICH WAS KEPT IN THE BANK FOR FURNISHING THE BANK GUARANTEE. IT HAD AN INEXTRICABLE NEXUS WITH SECURIN G THE CONTRACT. THE VIEW EXPRESSED BY THE TRIBUNAL CANNOT BE FOUND FAULT WITH. THE TRIBUNAL WAS THEREFORE JUSTIFI ED IN HOLDING THAT THE INTEREST EARNED BY THE ASSESSEE ON THE FDRS HAS INTRINSIC AND INSEGGREGABLE NEXUS WITH THE WORK UNDERTAKEN AND, THEREFORE, THE INTEREST EARNED BY TH E ASSESSEE IS CAPITAL IN NATURE AND SHALL GO TOWARDS ADJUSTMENT AGAINST THE PROJECT EXPENDITURE AND THE SAM E CANNOT BE ASSESSED AS INCOME FROM OTHER SOURCES. 4. AFTER CONSIDERING THE ARGUMENTS OF BOTH THE SIDES AN D THE FACTS OF THE CASE, WE ARE OF THE OPINION THAT THE ABOVE DE CISION OF HON'BLE JURISDICTIONAL HIGH COURT IS SQUARELY APPLICABLE TO T HE FACTS OF THE ASSESSEES CASE WHICH IS EVIDENT FROM THE ASSESSEES LETTER DAT ED 1 ST ITA-3717/D/2012 & C.O.333/D/2012 3 NOVEMBER, 2011 WRITTEN TO THE ASSESSING OFFICER AND REP RODUCED IN THE ASSESSMENT ORDER. FOR READY REFERENCE, THE SAME IS REPR ODUCED BELOW:- AS THE MAIN ACTIVITY OF THE COMPANY IS TO PROVIDE IP TV SERVICE ALL OVER INDIA FOR WHICH COMPANY HAS BEEN AWA RDED LICENSE BY BSNL GOVT. OF INDIA. FOR GETTING THE LIC ENSE THE COMPANY HAS TO GIVE A BANK GUARANTEE TO BSNL GOVT. O F INDIA FOR ISSUING THE BANK GUARANTEES THE REQUIRE MAR GIN MONEY IN THE FORM OF FDR ONLY. ACCORDING THE COMPA NY HAS TO MAKE A FDR OF RS.19.31 CRORE AND THE SAME HAS BEEN PLEDGED WITH THE BANK AS MARGIN MONEY FOR ISSUING THE BANK GUARANTEE. THE COMPANY HAS EARNED INTEREST OF RS.16501064/- ON FDR PLEDGED WITH BANK AS MARGIN MONE Y FOR ISSUING BANK GUARANTEE. THE SAME HAS BEEN SHOWN UNDER MISCELLANEOUS INCOME IN THE SCHEDULE 4 OF THE ACCOUNTS AND BEING SET OFF WITH THE PREOPERATIVE EXPE NSES. THE PROJECT IS NOT COMMENCED DURING THE CURRENT FINA NCIAL YEAR. HENCE NO PROFIT & LOSS ACCOUNT IS PREPARED RATH ER A STATEMENT OF PREOPERATIVE EXPENSES (PENDING ALLOCATION ) IS PREPARED AS PER SCHEDULE 4 OF THE ANNUAL ACCOUNTS FOR ALL THE EXPENSES AND INTEREST EARNED ON FRD HAS BEEN SET OFF WITH THE EXPENSES. THIS IS, THEREFORE, NOT A CASE WHERE ANY SURPLUS SHARE CAPITAL MONEY WHICH WAS LYING IDLE HAD BEEN DEPOSITED IN THE BANK FOR THE PURPOSE OF EARNING INTEREST. THE DE POSIT OF MONEY IN PRESENT CASE WAS DIRECTLY LINKED WITH THE BUSINESS ACTIVITY OF THE COMPANY. THE SAME IS INTRICATE LY CONNECTED WITH THE BUSINESS ACTIVITY OF THE COMPANY. HENCE ANY INCOME EARNED ON SUCH DEPOSIT WAS INCIDENTAL TO THE BUSINESS OPERATION ACTIVITY. THE INTEREST WAS A CAPITAL RECEIPT, WHICH WOULD GOT REDUCE THE COST OF ASSET. HENCE INTEREST EARNED SHOULD NOT FORM PART OF PROFIT & LOSS ACCOUNT AND ACCORDINGLY CAN NOT BE TAXED AS INCOME. 5. SINCE THE FACTS IN THE CASE OF THE ASSESSEE ARE IDEN TICAL TO THE FACTS BEFORE THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF JAYPEE DSC VENTURES LTD. (SUPRA), IN OUR OPINION, LEARNED CI T(A), RIGHTLY RELYING UPON THE ABOVE DECISION, DELETED THE ADDITIO N. WE, THEREFORE, ITA-3717/D/2012 & C.O.333/D/2012 4 UPHOLD THE ORDER OF LEARNED CIT(A) AND DISMISS THE APP EAL FILED BY THE REVENUE. 6. IN THE CROSS-OBJECTION, THE ASSESSEE HAS RAISED THE FOL LOWING GROUNDS:- 1(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ASSESSMENT IS BAD IN THE EYE OF LAW AND ON FACTS AND UNSUSTAINABLE IN VIEW OF THE FACT THAT THE ASSESSEE HAVI NG SET UP THE BUSINESS IS ENTITLED TO CLAIM ALL THE EXPEND ITURE OF RS.11,25,88,953/- DURING THE YEAR WHILE COMPUTING THE INCOME FOR THE YEAR UNDER CONSIDERATION. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ASSESSEE HAVING INCURRED AN EXPENDITURE OF RS.11,25,88,953/- IN THE COURSE OF ITS BUSINESS IS ENTITLE D TO DEDUCTION OF THE SAME WHILE COMPUTING ITS INCOME. 7. HOWEVER, AT THE TIME OF HEARING BEFORE US, IT WAS STATED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT IF THE REVENUES AP PEAL WOULD BE DISMISSED ON MERITS, THE ASSESSEE SHALL NOT PRESS THE CROSS-OB JECTION. 8. SINCE WE HAVE ALREADY DISMISSED THE REVENUES APPEAL , WE TREAT THE CROSS-OBJECTION FILED BY THE ASSESSEE AS NOT PRESSED A ND, ACCORDINGLY, THE SAME IS DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE AS WELL A S THE CROSS- OBJECTION OF THE ASSESSEE ARE DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 15 TH FEBRUARY, 2013. SD/- SD/- ( (( (I.C.SUDHIR I.C.SUDHIR I.C.SUDHIR I.C.SUDHIR) )) ) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT DATED : 15.02.2013 VK. ITA-3717/D/2012 & C.O.333/D/2012 5 COPY FORWARDED TO: - 1. REVENUE : INCOME TAX OFFICER, WARD INCOME TAX OFFICER, WARD INCOME TAX OFFICER, WARD INCOME TAX OFFICER, WARD- -- -9(1), NEW DELHI. 9(1), NEW DELHI. 9(1), NEW DELHI. 9(1), NEW DELHI. 2. ASSESSEE : M/S SMART DIGIVISION PVT.LTD., M/S SMART DIGIVISION PVT.LTD., M/S SMART DIGIVISION PVT.LTD., M/S SMART DIGIVISION PVT.LTD., 8, COMMERCIAL COMPLEX, MASJID MOTH, GK 8, COMMERCIAL COMPLEX, MASJID MOTH, GK 8, COMMERCIAL COMPLEX, MASJID MOTH, GK 8, COMMERCIAL COMPLEX, MASJID MOTH, GK- -- -II, II,II, II, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 048. 110 048. 110 048. 110 048. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR