MUMBAI INTEGRATED SEZ LTD ( FORMELRY KNOWN AS GUJARAT POSITRA PORT INFRASTRUCTURES LTD), MUMBAI V. DCIT CIR 2(2), MUMBAI

ITA 3928/MUM/2010

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3616 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 29-07-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 14-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANDRA VIJAY
• Section: 244A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI B BENCH, MUMBAI BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER. ITA. NO. 3928/MUM/2010 (ASSESSMENT YEAR: 2004-05) MUMBAI INTEGRATED SEZ LTD. APPELLANT (FORMERLY KNOWN AS GUJARAT POSITRA PORT INFRASTRUCTURES LTD. 1 ST FLOOR, JAI CENTRE, 34, P D MELLO ROAD, MASJID, MUMBAI - 400009 VS. DCIT, RESPONDENT CIRCLE-2(2), MUMBAI PAN: AABCG 2739C /BY APPELLANT : SHRI ANUJ KISNADWALA, /BY RESPONDENT : SHRI CHANDRA VIJAY, DR /DATE OF HEARING : 16.08.2016 /DATE OF PRONOUNCEMENT : 23.08.2016 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-5, MUMBAI, DAT ED 17.03.2010 FOR A.Y. 2004-05 ON FOLLOWING GROUNDS: ITA NO.3928/MUM/10 A.Y. 2004-05 [MUMBAI INTEGRATED SEZ LTD. VS. DCIT] PAGE 2 GROUND I: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE COMMISSIONER OF INCOME TAX (APPEALS) - V, ERRED IN UPHOLDING THE OBSERVATION OF THE DEPUTY COMM. OF INCOME TAX, CIRC LE 2(2), MUMBAI ('THE AO') THAT THE APPELLANT HAD NOT SET UP ITS BU SINESS AND NOT COMMENCED ITS OPERATIONS. 1. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD T HAT: A. THE ASSESSMENT CANNOT BE MADE BASED ON CONJUNCTURE, SURMISES AND/OR IMAGINATION; B. THE APPELLANT COMPANY IS FORMED FOR THE PURPOSE OF CARRYING OUT THE BUSINESS OF DEVELOPMENT AND OPERATION OF INFRAS TRUCTURE FACILITIES IN INDIA, INCLUDING DEVELOPING SPECIAL E CONOMIC ZONES; C. THE BUSINESS OF THE APPELLANT HAD ALREADY BEEN S ET UP AND THE PROJECT WAS IN THE DEVELOPMENT STAGE. D. FOR THE PURPOSE OF THE INCOME TAX ACT, IT IS SETTIN G UP ON THE BUSINESS THAT HAS TO BE CONSIDERED AND NOT THE COMM ENCEMENT. E. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE DEC ISION OF THE SUPREME COURT IN TUTICORIN ALKALIES CHEMICALS & FER TILIZERS LTD. VS. CIT (227 ITR 172) WOULD NOT APPLY. 2. THE APPELLANT, THEREFORE, PRAYS THAT IT BE HELD THAT THE APPELLANTS BUSINESS WAS ALREADY SET UP AND ACCORDINGLY THE RAT IO OF THE DECISION IN TUTICORIN ALKALIES CHEMICALS & FERTILIZ ERS LTD. (SUPRA) WOULD NOT BE APPLICABLE. GROUND II WITHOUT PRJUDICE ABOVE, 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE COMMISSIONER OF INCOME TAX (APPEALS) - V, ERRED IN UPHOLDING THE ORDER OF AO, IN ASSESSING INTEREST RECEIPT FROM STA FF LOANS AND DEPOSITS FOR LETTER OF CREDIT (LC)/ BANK GUARANTEE (BG) MARG IN AMOUNTING TO RS. 12,26,209/- AS INCOME FROM OTHER SOURCES BY REL YING ON THE DECISION OF THE SUPREME COURT IN THE CASE OF TUTICO RIN ALKALIES CHEMICALS & FERTILIZERS LTD. (SUPRA). 2. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD T HAT: A. THE APPELLANT COMPANY IS IN THE BUSINESS OF DEVELOP MENT AND OPERATION OF INFRASTRUCTURE FACILITIES IN INDIA, IN CLUDING DEVELOPING SPECIAL ECONOMIC ZONES; B. THE MARGIN MONEY ACCOUNT HAD BEEN OPENED TOWARDS LC FOR PROCUREMENT OF PROJECT MATERIAL (STEEL) WHICH WAS R EQUIRED FOR THE DEVELOPMENT OF THE PROJECT; C. THE PURCHASES OF THE MATERIALS IS REQUIRED FOR THE DEVELOPMENT OF THE PROJECT AT POSITRA IN GUJRAT; D. THE INTEREST ON DEPOSITS FOR MARGIN / LC & BO IS IN TRINSICALLY ITA NO.3928/MUM/10 A.Y. 2004-05 [MUMBAI INTEGRATED SEZ LTD. VS. DCIT] PAGE 3 LINKED WITH THE DEVELOPMENT OF ENTIRE PROJECT AND H ENCE SHOULD BE REDUCED FROM THE CAPITAL WORK IN PROGRESS. E. THE RATIO LAID DOWN BY THE DECISION OF THE SUPREME COURT IN BOKARO STEEL LTD. (236 ITR 315) IS SQUARELY APPLICA BLE TO THE FACTS OF THE APPELLANTS CASE. GROUND III WITHOUT PRJUDICE TO GROUND II ABOVE, 1. THE COMMISSIONER OF INCOME TAX (APPEALS) - V, ERRED IN UPHOLDING THE ORDER OF AO, IN DISALLOWING EXPENDITU RE IN RESPECT OF INTEREST AND BANK CHARGES ON LC & BG AMOUNTING TO RS. 12,26,209/- ON THE ALLEGED GROUND THAT THE EXPENDITURE IS NOT INEXTRICABLY LINKED TO EARNI NG THE INTEREST ON STAFF LOAN AND INTEREST ON DEPOSITS FOR MARGIN / LC & BG. 2. IN THE EVENT, THE ACTION OF THE AO IS UPHELD AND IN TEREST AMOUNTING TO 12,26,209/- IS ASSESSED AS INCOME FROM OTHER SOURCES, THE AO BE DIRECTED TO ALLOW DEDUCTION OF T HE EXPENDITURE INCURRED IN RELATION TO INTEREST AND BA NK CHARGES ON LC & BG UNDER SECTION 57(III) OF THE ACT, RESTRI CTED TO INTEREST RECEIPT. GROUND IV: INTEREST U/S. 234B, 234D AND 244A OF THE ACT. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE COMMISSIONER OF INCOME TAX (APPEALS) - V, ERRED IN UPHOLDING THE ORDER OF THE AO, OF LEVYING INTEREST U/S. 23413, 234D AND 244A OF THE ACT OF RS. 1,19,983/- 2. THE APPELLANT PRAYS THAT THE LEVY OF INTEREST U/S. 234B, 234D AND 244A OF THE ACT BE DELETED. GROUND V: THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER AND / O R AMEND ALL OR ANY OF THE FOREGOING GROUNDS OF APPEAL. 2. ISSUE BEFORE US IS THAT WHETHER ASSESSEES BUSIN ESS WAS ALREADY SET UP FOR CLAIMING CERTAIN DEDUCTION OR NO T. IN FACT CIT(A) BY FOLLOWING ITS OWN ORDER IN SIMILAR ISSUE DECIDED IN APPEAL ORDER NO.CIT(A)-5/ITO-4(1)/IT-99/09-10 DATED 7.01.2010 FOR A.Y. 2003-04 AGAINST THE ASSESSEE. ITA NO.3928/MUM/10 A.Y. 2004-05 [MUMBAI INTEGRATED SEZ LTD. VS. DCIT] PAGE 4 2.1 ON ALTERNATIVE CONTENTION, LEARNED AUTHORIZED REPRESENTATIVE HAS POINTED OUT THAT THIS ISSUE IS C OVERED BY ASSESSEES OWN CASE PASSED BY HONBLE ITAT A BENC H, AHMEDABAD IN ITA NO.804/AHD/2010 FOR A.Y. 2003-04 O RDER DATED 25.04.2014. MATTER HAS BEEN SET ASIDE TO THE AO WITH CERTAIN DIRECTION BY OBSERVING AS UNDER: 5.3 WE ARE ALSO OF THE OPINION THAT THE ASSESSEE I S EXPECTED TO PLACE ON RECORD THE PURPOSE OF DEPOSIT, UTILIZATION OF FU NDS AND MOST IMPORTATION FACT IS ALSO TO BE BROUGHT ON RECORD AB OUT THE NEXUS OF INTEREST EARNED AND INTEREST PAID. WE, THEREFORE, H EREBY HOLD THAT THE MATTER SHOULD GO BACK TO THE STAGE OF THE AO SO THA T THE PROCUREMENT OF FUNDS, ITS UTILIZATION AND THE SOURCE OF DEPOSIT HAS TO BE EXAMINE AFRESH BY THE AO SO THAT THE NEXUS CAN BE ESTABLISH ED IN RESPECT OF THE INTEREST EARNED AND INTEREST PAID. WITH THESE D IRECTIONS, THE GROUNDS RAISED BY THE ASSESSEE ARE PARTLY ALLOWED T HAT TOO FOR STATISTICAL PURPOSE. 6. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. 2.2 NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE O N BEHALF OF REVENUE. FACTS BEING SIMILAR, SO, FOLLOWING SAM E REASONING, WE RESTORE THE MATTER TO AO WITH SIMILAR DIRECTIONS . 3. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES AS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS THE 23 RD DAY OF AUGUST, 2016. SD/- SD/- ( RAJESH KUMAR ) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBE R MUMBAI: DATED 23/08/2016 TRUE COPY PRABHAT KESARWANI / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. / ASSESSEE 3. %&%'( ) / CONCERNED CIT 4. )- / CIT (A) ITA NO.3928/MUM/10 A.Y. 2004-05 [MUMBAI INTEGRATED SEZ LTD. VS. DCIT] PAGE 5 5.-./00'(, '( , %& / DR, ITAT, MUMBAI 6./4567 / GUARD FILE. BY ORDER / , / % , '( , %&