Tidel Park Limited, CHENNAI V. ACIT, CHENNAI

ITA 388/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95897 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 28-07-2015
• Assessment Year: 2000-2001
• Appeal Filed On: 23-02-2015
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: VIRAM VIJAYARAGHAVAN
• Keywords: Opportunity of being heard; Capital receipt
• Section: 143(3)

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . , . , BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI V. DURGA RAO, JUD ICIAL MEMBER ./ I.T.A.NO. 38 8/MDS/2015 / ASSESSMENT YEAR :200 0 - 0 1 M/S. TIDEL PARK LIMITED, NO.4, RAJIV GANDHI SALAI, TARAMANI, CHENNAI 600 113. [PAN: AABCT0666R] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE III(2), CHENNAI 600 034. ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI VIRAM VIJAYARAGHAVAN, ADVOCATE / RESPONDENT BY : SHRI S. DASGUPTA, JCIT / DATE OF HEARING : 29 . 07 .201 5 / DATE OF P RONOUNCEMENT : 19 . 0 8 .201 5 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) II I, C HENNAI DATED 20 . 1 0.201 4 RELEVANT TO THE ASSESSMENT YEAR 20 0 0 - 0 1 . 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS A JOINT VENTURE OF M/S. TAMILNADU INTEGRATED DEVELOPMENT CORPORATION AND M/S. ELECTRONIC CORPORATION OF TAMILNADU. THIS PROJECT WAS CONCEIVED F OR THE PROMOTION OF SOFTWARE DEVELOPMENT IN TERMS OF CREATING INFRASTRUCTURE. THE COMPANY WAS INCORPORATED ON 02.12.1997. CERTIFICATE FOR COMMENCEMENT OF I.T.A. NO. 38 8 /M/ 1 5 2 BUSINESS WAS EFFECTIVE FROM 20.04.1998. LETTER OF INTENT FOR JOINT VENTURE WAS ISSUED ON 14.01.1999 AN D THE PROJECT WAS APPROVED BY THE CENTRAL GOVERNMENT ON 24.05.1999. THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME BY ADMITTING NIL INCOME. THE RETURN FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT ON 12.10.2001 AND THEREAF TER, THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ON 28.02.2003 BY DETERMINING THE INTEREST INCOME IS A REVENUE RECEIPT ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES AS AGAINST THE CLAIM OF CAPITAL RECEIPT BY FOLLOWING THE RATIO LAI D DOWN BY THE HON BLE SUPR E ME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LTD. V. CIT 227 ITR 172 . THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) AND THE LD. CIT(A) CONFIRMED THE ORDER PASSED BY THE ASSESSING OFFICER. T HE ASSESSEE PREFERRED FURTHER APPEAL BEFORE THE ITAT AND RELIED ON THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. FRANCO TOSI INGEGNERIA 241 ITR 268. T HE ITAT VIDE ITS ORDER IN I.T.A. NO. 1814/MDS/2003 DATED 22.02.2007 REMITTED THE MATTER BACK TO THE ASSESSING OFFICER TO DECIDE THE ISSUE DE NOVO. THE ITAT FURTHER DIRECTED THE ASSESSING OFFICER TO DECIDE THE ALTERNATIVE PLEA RAISED BY THE ASSESSEE IN THE LIGHT OF DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF CIT V. BOKARO STEELS LTD. 236 ITR 315. I.T.A. NO. 38 8 /M/ 1 5 3 3. IN PURSUANCE TO THE DIRECTIONS GIVEN BY THE ITAT, THE ASSESSEE WAS GIVEN AN OPPORTUNITY OF BEING HEARD VIDE LETTER DATED 04.09.2007 AND COMPLETED THE ASSESSMENT ON 24.12.2007. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HA S OBSERVED THAT THE ASSESSEE HAS RAISED FUNDS THROUGH VARIOUS SOURCES I.E., DEBENTURES AND TERM LOANS FROM VARIOUS BANKS. FUNDS WHICH ARE NOT UTILIZED IMMEDIATELY FOR THE CONSTRUCTION OF THE TIDEL PARK PROJECT AND THE FUNDS ARE INVESTED IN VARIOUS SECURITI ES LIKE ICICI BANK, PNB GILTS, ETC. THE ASSESSEE HAS RECEIVED INTEREST INCOME FROM THE ABOVE SECURITIES. THEREFORE, THE ASSESSING OFFICER HAS HELD THAT INTEREST INCOME RECEIVED FROM THE SECURITIES IS NOT INEXTRICABLY LINKED WITH THE SETTING UP OF BUSINESS OR CONSTRUCTION ACTIVITY OF THE TIDEL PARK AND THE RECEIPT OF THE INTEREST INCOME IS NOT DIRECTLY LINKED WITH CONSTRUCTION ACTIVITIES. THE ASSESSING OFFICER, BY FOLLOWING THE DECISION IN THE CASE OF CIT V. BOKARO STEELS LTD. (SUPRA), HELD THAT THE INTEREST INCOME RECEIVED BY THE ASSESSEE IS REVENUE IN NATURE AND TREATED AS INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES . 4. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) AND THE LD. CIT(A) CONFIRMED THE ORDER PASSED BY THE ASSESSING OFFI CER. 5. ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSING OFFICER HAS FAILED TO FOLLOW T HE DIRECTIONS OF THE ITAT AND NOT CONSIDERED THE I.T.A. NO. 38 8 /M/ 1 5 4 DECISION IN THE CASE OF CIT V. FR ANCO TOSI INGEGNERIA (SUPRA).HE HAS FURTHER SUBMITTED THAT ONCE THE ASSESSEE HAS SET UP BUSINESS, IT IS ELIGIBLE TO CLAIM EXPENDITURE EVEN WITHOUT COMMENCEMENT OF THE BUSINESS. THEREFORE, THE ASSESSEE HAS ALREADY SET UP ITS BUSINESS WITH EFFECT FROM 14.01. 1999 AND SUBMITTED THAT THE EXPENDITURE INCURRED BY THE ASSESSEE HAS TO BE ALLOWED. 6. ON THE OTHER HAND, THE LD. DR HAS STRONGLY SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 7. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSESSEE COMPANY IS A JOINT VENTURE OF M/S. TAMILNADU INTEGRATED DEVELOPMENT CORPORATION AND M/S. ELECTRONIC CORPORATION OF TAMILNADU. THIS PROJECT WAS CONCEIVED FOR THE PROMOTION OF SOFTWARE DEVELOPMENT IN TERMS OF CR EATING INFRASTRUCTURE. THE COMPANY WAS INCORPORATED ON 02.12.1997. CERTIFICATE FOR COMMENCEMENT OF BUSINESS WAS EFFECTIVE FROM 20.04.1998. LETTER OF INTENT FOR JOINT VENTURE WAS ISSUED ON 14.01.1999 AND THE PROJECT WAS APPROVED BY THE CENTRAL GOVERNMENT ON 24.05.1999. 8. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAS RAISED FUNDS THROUGH VARIOUS SOURCES I.E., DEBENTURES AND TERM LOANS FROM VARIOUS BANKS. FUNDS WHICH ARE NOT UTILIZED IMMEDIATELY FOR THE CONSTRUCTION OF TH E TIDEL PARK PROJECT AND THE FUNDS ARE INVESTED IN I.T.A. NO. 38 8 /M/ 1 5 5 VARIOUS SECURITIES LIKE ICICI BANK, PNB GILTS, ETC. THE ASSESSEE HAS RECEIVED INTEREST INCOME FROM THE ABOVE SECURITIES. THEREFORE, THE ASSESSING OFFICER, BY FOLLOWING THE DECISION OF THE HON BLE SUPREME C OURT IN THE CASE OF CIT V. BOKARO STEELS LTD. (SUPRA), HAS OBSERVED THAT THE INTEREST INCOME IS NOT IN ANY WAY CONNECTED WITH THE CONSTRUCTION OF TIDAL PARK PROJECT. HE FURTHER OBSERVED THAT THE INTEREST INCOME RECEIVED FROM THE SECURITIES IS NOT AT ALL IN EXTRICABLY LINKED WITH THE SETTING UP OF BUSINESS OR CONSTRUCTION ACTIVITY OF THE TIDAL PARK. THE RECEIPT OF INTEREST INCOME IS NOT AT ALL DIRECTLY LINKED TO THE CONSTRUCTION ACTIVITIES AND ACCORDINGLY, THE ASSESSING OFFICER HAS HELD THAT THE INTEREST INCO ME RECEIVED BY THE ASSESSEE IS REVENUE IN NATURE AND TREATED T HE INCOME AS INCOME FROM OTHER SOURCES . ON APPEAL, THE LD. CIT(A) CONFIRMED THE ORDER PASSED BY THE ASSESSING OFFICER. THE OBJECTION OF THE LD. COUNSEL FOR THE ASSESSEE IS THAT THE ASSESSING O FFICER HAS FAILED TO CONSIDER THE JUDGEMENT OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. FRANCO TOSI INGEGNERIA (SUPRA). WE FIND THAT IN THE ABOVE CASE, THE HON BLE MADRAS HIGH COURT , BASED ON THE FINDINGS GIVEN BY THE TRIBUNAL, HAS OBSER VED THAT IT IS CLEAR FROM THE FINDING OF THE TRIBUNAL THAT THE ASSESSEE HAD IN FACT COMMENCED OPERATIONS ON 13.04.1981, AND INCURRED EXPENDITURE AND THE EXPENDITURE SO INCURRED WAS PURSUANT TO THE LETTER OF INTENT GRANTED TO IT BY THE NEYVELI LIGNITE CORP ORATION. THE ASSESSEE IS, THEREFORE, ENTITLED TO REGARD THE EXPENDITURE SO INCURRED AS THE EXPENDITURE INCURRED BY IT DURING THE PREVIOUS YEAR RELEVANT TO THE I.T.A. NO. 38 8 /M/ 1 5 6 ASSESSMENT YEAR 1981 - 82. WE FIND THAT THE ABOVE JUDGEMENT HAS NO APPLICATION TO THE FACTS T O THE PRESENT CASE FOR THE REASON THAT THE ASSESSEE HAS NOT ABLE TO ESTABLISH EITHER BEFORE THE AUTHORITIES BELOW OR EVEN BEFORE US THAT THE ASSESSEE HAS ALREADY COMMENCED ITS OPERATIONS . 9. THOUGH THE ASSESSING OFFICER HAS NOT SPECIFICALLY CONSIDERED THE JU DGMENT OF THE HON BLE MADRAS HIGH COURT IN THE CASE OF CIT V. FRANCO TOSI INGEGNERIA (SUPRA), HOWEVER, THE ASSESSING OFFICER HAS CONSIDERED THE JUDGMENT OF THE HON BLE SUPREME COURT IN THE CASE OF CIT V. BOKARO STEELS LTD. (SUPRA) AND HELD THAT THE INTERE ST INCOME EARNED THROUGH SHORT TERM DEPOSITS BY INVESTING THE BORROWED CAPITAL AS INCOME NOT CONNECTED WITH THE CONSTRUCTION AND BUSINESS ACTIVITY OF THE ASSESSEE. THE VERY SAME ISSUE HAS ALSO BEEN CONSIDERED BY THE HON BLE SUPREME COURT IN THE CASE OF TUT ICORIN ALKALI CHEMICALS AND FERTILIZERS LTD. V. CIT (SUPRA) AND HELD THAT THE INTEREST EARNED BY ASSESSEE BEFORE COMMENCEMENT OF BUSINESS ON SHORT TERM DEPOSITS WITH BANKS OUT OF TERM LOANS SECURED FROM FINANCIAL INSTITUTIONS IS INCOME CHARGEABLE UNDER THE HEAD INCOME FROM OTHER SOURCES AND WOULD NOT GO TO REDUCE THE INTEREST PAYABLE BY THE ASSESSEE WHICH WOULD BE CAPITALIZED AFTER THE COMMENCEMENT OF COMMERCIAL PRODUCTION. I N THE PRESENT CASE, THE ASSESSEE HAS FAILED TO SUBSTANTIATE THAT THE ASSESSEE HAS ALREADY COMMENCED ITS BUSINESS OPERATIONS . THEREFORE, KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO BY FOLLOWING THE DECISION OF I.T.A. NO. 38 8 /M/ 1 5 7 THE HON BLE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CH EMICALS AND FERTILIZERS LTD. V. CIT (SUPRA), WE ARE OF THE OPINION THAT THE INTEREST INCOME EARNED BY THE ASSESSEE IS AN INCOME CHARGEABLE UNDER THE HEAD INCOME FROM OTHER SOURCES . THUS, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. 10 . IN THE RESULT , THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 19 TH OF AUGUST , 2015 AT CHENNAI. SD/ - SD/ - ( A. MOHAN ALANKAMONY ) ACCOUNTANT MEMBER ( V. DURGA RAO ) JUDICIAL MEMBER CHENNAI, DATED, THE 19. 0 8 .201 5 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.