Kerala Industrial Revitalisation Fund Board, Trivandrum V. ACIT, Trivandrum

ITA 439/COCH/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61532 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 02-05-2012
• Assessment Year: misc
• Appeal Filed On: 03-08-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIJAYAN NAIR
• Assessee Lawyers: JAYASANKARAN NAMBIAR A K
• Keywords: Business income

Judgement Text

1 ITA NOS. 313 & 314/COCH/2009 ITA NOS 439 & 440/COCH/2009 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.TA NO. 313/COCH/2009 - A.Y. 2003-04 I.TA NO. 314/COCH/2009 - A.Y. 2006-07 I.TA NO. 439/COCH/2009 - A.Y. 2001-02 I.TA NO. 440/COCH/2009 - A.Y. 2002-03 KERALA INDUSTRIAL REVITALISATION FUND BOARD VS A.C .I.T., RANGE-1 5 TH FLOOR, CMD BUILDING THIRUVANANTHAPURAM C.V. RAMAN PILLAI ROAD THYCAUD, THIRUVANANTHAPURAM PAN : 000LK0056E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI JAYASANKARAN NAMBIAR A.K RESPONDENT BY : SHRI VIJAYAN NAIR DATE OF HEARING : 02-05-2012 DATE OF PRONOUNCEMENT : 25-05-2012 O R D E R PER N.R.S. GANESAN (JM) ALL THE APPEALS OF THE ASSESSEE RELATE TO ASSESSME NT YEARS 2001-02, 2002-03, 2003-04 AND 2006-07. SINCE COMMON ISSUES ARISE FOR CONSIDERATION WE HEARD THE SAME TOGETHER AND DISPOSE OF THE SAME BY THIS COMMON ORD ER. 2. SHRI JAYASANKARAN NAMBIAR A.K., THE LD.SENIOR CO UNSEL FOR THE ASSESSEE SUBMITTED THAT FOR THE ASSESSMENT YEAR 2003-04, THE ASSESSEE HAD RAISED GROUNDS RELATING TO SET OFF OF LOSSES COMPUTED FOR THE ASSESSMENT YEAR 2002-03 AS GROUND NO.14 AND IN GROUND NO.15, THE ASSESSEE HAD RAISED GROUND RELATING TO A SSESSABILITY OF THE HEAD UNDER WHICH THE INTEREST RECEIVED BY THE ASSESSEE ON DEPOSIT WI TH TREASURY AND BANK ACCOUNTS BEFORE 2 ITA NOS. 313 & 314/COCH/2009 ITA NOS 439 & 440/COCH/2009 THE COMMISSIONER OF INCOME-TAX(A). EVEN THOUGH THE ASSESSEE HAD RAISED SPECIFIC GROUNDS AS GROUNDS NO.14 & 15 FOR THE ASSESSMENT YE AR 2003-04, THE COMMISSIONER OF INCOME-TAX(A) HAS NOT DISPOSED OF THESE GROUNDS OF APPEAL. THEREFORE, ACCORDING TO THE LD.SENIOR COUNSEL FOR THE ASSESSEE, THESE TWO GROUN DS HAVE TO GO BACK TO THE FILE OF COMMISSIONER OF INCOME-TAX(A) FOR GIVING HIS DECISI ON. ON A QUERY FROM THE BENCH AS TO HOW THE INTEREST RECEIVED FROM BANK DEPOSITS AND TR EASURY COULD BE ASSESSED AS BUSINESS INCOME AFTER THE JUDGMENT OF THE APEX COUR T IN TUTICORIN ALKALIES CHEMICALS & FERTILISERS LTD 227 ITR 172 (SC) AND PANDIAN CHEMIC ALS LTD 262 ITR 278 (SC), THE LD.SENIOR COUNSEL POINTED OUT THAT THERE ARE OTHER DECISIONS WHICH DISTINGUISH THESE TWO JUDGMENTS OF THE APEX COURT. ACCORDING TO THE LD.C OUNSEL, SINCE THE COMMISSIONER OF INCOME-TAX(A) HAS NOT DISPOSED OF THESE TWO GROUNDS , THE MATTER MAY BE REMITTED BACK TO THE FILE OF THE COMMISSIONER OF INCOME-TAX(A) FO R GIVING DECISION BY THE CIT(A) ON MERIT. REFERRING TO THE OTHER GROUNDS OF APPEAL, T HE LD.SENIOR COUNSEL SUBMITTED THAT FOR THE ASSESSMENT YEARS 2002-03 AND 2006-07 THE AS SESSEE HAD RAISED GROUND RELATING TO ASSESSABILITY OF THE HEAD UNDER WHICH THE INTERE ST RECEIVED FROM DEPOSIT WITH BANK AND TREASURY. THIS GROUND HAS ALSO NOT BEEN DISPOS ED OF BY THE COMMISSIONER OF INCOME-TAX(A). A COMMON GROUND WAS RAISED IN ALL T HE APPEALS WITH REGARD TO THE ASSESSABILITY OF INTEREST ON THE NON PERFORMING ASS ET. ACCORDING TO THE LD.SENIOR COUNSEL, THE ASSESSEE IS A STATUTORY BODY ESTABLISH ED BY GOVERNMENT OF KERALA THROUGH AN ENACTMENT BY NAME KERALA INDUSTRIAL REVITALISATI ON FUND BOARD ACT, 1999. THE PURPOSE AND OBJECTS OF THE ESTABLISHMENT OF THE ASS ESSEE IS TO GIVE FINANCIAL ASSISTANCE TO AILING SICK PUBLIC SECTOR UNDERTAKING OF THE STA TE GOVERNMENT. ACCORDING TO THE LD.SENIOR COUNSEL, THE ACTIVITY OF THE ASSESSEE IS IN THE NATURE OF BANKING ACTIVITY IN FINANCING OTHER STATE GOVERNMENT COMPANIES AND THER EFORE AS PER THE NORMS OF THE RESERVE BANK OF INDIA WHEREVER THE INTEREST COULD N OT BE RECOVERED IT CANNOT BE RECOGNIZED FOR THE PURPOSE OF INCOME-TAX ACT. ACCO RDING TO THE LD.SENIOR COUNSEL, ON THE CONCEPT OF REAL INCOME, THE INCOME WHICH COULD NOT BE RECOVERED CANNOT BE TREATED AS INCOME ACCRUED TO THE ASSESSEE. ACCORDING TO TH E LD.SENIOR COUNSEL, THE METHOD OF ACCOUNTING, VIZ. MERCANTILE SYSTEM OF ACCOUNTING OR CASH SYSTEM OF ACCOUNTING, 3 ITA NOS. 313 & 314/COCH/2009 ITA NOS 439 & 440/COCH/2009 DETERMINES THE POINT AT WHICH THE ASSESSABILITY OF THE INCOME ACCRUES. THE LD.SENIOR COUNSEL FURTHER POINTED OUT THAT THE ASSESSEE IS FO LLOWING ACCOUNTING STANDARD-9 FOR THE REVENUE RECOGNITION, THEREFORE, WHEREVER THERE WAS A DOUBT TO RECOVER EVEN THE PRINCIPAL AMOUNT ADVANCED BY THE ASSESSEE, INTEREST ON SUCH AMOUNT CANNOT BE RECOGNIZED AS INCOME FOR THE PURPOSE OF THE INCOME- TAX ACT. ON A QUERY FROM THE BENCH WHETHER THE RESERVE BANK OF INDIA NORMS WOULD BE APPLICABLE TO THE ASSESSEE AND WHETHER ANY CIRCULAR ISSUED BY THE RESERVE BANK OF INDIA IS AVAILABLE, THE LD.SENIOR COUNSEL SUBMITTED THAT NO SPECIFIC CIRCULAR IS APPL ICABLE, HOWEVER, IN VIEW OF THE ACTIVITIES OF THE ASSESSEE IN FINANCING THE STATE G OVERNMENT ORGANIZATIONS, THE RESERVE BANK OF INDIA NORMS IN RESPECT OF NON FINANCIAL COR PORATIONS / FINANCIAL CORPORATIONS IS VERY MUCH APPLICABLE. ACCORDING TO THE LD.SENIOR C OUNSEL, SINCE THE SETTING OFF OF THE LOSS WAS NOT CONSIDERED BY COMMISSIONER OF INCOME-T AX(A) AND THIS GROUND RELATING TO RECOGNITION OF INCOME OF NON PERFORMING ASSET WOULD HAVE ITS OWN BEARING ON THE SET OFF OF THE LOSSES OF THE EARLIER YEAR. THEREFORE, ACCO RDING TO THE LD.SENIOR COUNSEL, THIS ISSUE MAY ALSO BE REMITTED BACK TO THE FILE OF THE COMMIS SIONER OF INCOME-TAX(A) FOR RE- CONSIDERATION. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE MATERIAL ON RECORD. THE ASSESSEE HAD RAISED A SPECIFIC GROUND FOR THE ASSESSMENT YEAR 2003-04 WITH REGARD TO SETTING OFF OF THE LOSS AND ASSESSABILITY OF THE HEAD UNDER WHICH THE INTEREST SAID TO BE RECEIVED FROM THE BANK DEPOSIT AND TREAS URY DEPOSIT. AS RIGHTLY POINTED OUT BY THE LD.SENIOR COUNSEL FOR THE ASSESSEE, THIS GRO UND WAS NOT DISPOSED OF BY THE COMMISSIONER OF INCOME-TAX(A). WHEN THE ASSESSEE H AS RAISED A SPECIFIC GROUND IT IS THE BOUNDEN DUTY OF THE COMMISSIONER OF INCOME-TAX(A) T O DISPOSE OF THE GROUND IN ONE WAY OR THE OTHER. AS RIGHTLY POINTED OUT BY THE LD .SENIOR COUNSEL, THIS GROUND OF APPEAL WAS NOT DECIDED BY THE COMMISSIONER OF INCOME-TAX(A ). THEREFORE, THIS TRIBUNAL IS OF THE OPINION THAT THE MATTER NEEDS TO BE CONSIDERED BY THE COMMISSIONER OF INCOME- TAX(A). THE ISSUE RELATING TO SET OFF OF LOSSES AL SO NEEDS TO BE RECONSIDERED. THEREFORE, THE ISSUE RELATING TO SET OFF OF LOSSES AND THE HEA D UNDER WHICH THE INTEREST RECEIVED 4 ITA NOS. 313 & 314/COCH/2009 ITA NOS 439 & 440/COCH/2009 FROM THE BANK DEPOSIT AND TREASURY DEPOSIT HAS TO B E ASSESSED FOR THE ASSESSMENT YEAR 2003-04 ARE REMITTED BACK TO THE FILE OF THE COMMIS SIONER OF INCOME-TAX(A). THE COMMISSIONER OF INCOME-TAX(A) SHALL CONSIDER THE SA ME ON MERIT IN THE LIGHT OF JUDGMENTS OF THE APEX COURT IN THE CASE OF TUTICORI N ALKALIES CHEMICALS & FERTILISERS LTD (SUPRA) AND PANDIAN CHEMICALS LTD (SUPRA) AS ALSO T HE JUDGMENT OF THE MADRAS HIGH COURT IN THE CASE OF SOUTH INDIA SHIPPING CORPORATI ON LTD 240 ITR 22 (MAD). IT IS OPEN TO THE ASSESSEE TO BRING TO THE NOTICE OF THE COMMISSI ONER OF INCOME-TAX(A) THE JUDGMENT OF THE APEX COURT OR ANY OTHER HIGH COURT, IF AVAIL ABLE DURING THE COURSE OF HEARING BEFORE THE COMMISSIONER OF INCOME-TAX(A). THE COMM ISSIONER OF INCOME-TAX(A) SHALL HEAR THE ASSESSEE AND TAKE INTO CONSIDERATION OTHER JUDGMENTS, IF ANY APPLICABLE AND THEREAFTER DECIDE THE SAME IN ACCORDANCE WITH LAW A FTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 4. IN RESPECT OF OTHER YEARS, THE ASSESSEE HAS RAIS ED A GROUND WITH REGARD TO TAXABILITY OF THE INCOME ON THE NON PERFORMING ASSE T. AS RIGHTLY SUBMITTED BY THE LD. SENIOR COUNSEL, THIS ISSUE WOULD HAVE ITS OWN BEARI NG ON THE GROUND OF APPEAL RAISED BY THE ASSESSEE WITH REGARD TO SETTING OFF OF THE LOSS FOR THE ASSESSMENT YEAR 2003-04. THEREFORE, THIS TRIBUNAL IS OF THE OPINION THAT THI S ISSUE ALSO NEEDS TO BE RECONSIDERED. ACCORDINGLY, THE ORDER OF THE LOWER AUTHORITY IS SE T ASIDE AND THE ISSUE IS REMITTED BACK TO THE FILE OF THE COMMISSIONER OF INCOME-TAX(A). THE COMMISSIONER OF INCOME-TAX(A) SHALL RECONSIDER THE ISSUE IN THE LIGHT OF THE MATE RIAL AVAILABLE ON RECORD AND THEREAFTER DECIDE THE SAME IN ACCORDANCE WITH LAW. IT IS MADE CLEAR THAT THIS TRIBUNAL IS NOT EXPRESSING ANY OPINION ON THE MERIT OF THE MATTER. IT IS OPEN TO THE COMMISSIONER OF INCOME-TAX(A) TO DECIDE THE ISSUE IN ACCORDANCE WIT H LAW AFTER HEARING THE ASSESSEE. 5. THE ASSESSEE HAS RAISED ONE MORE GROUND IN ALL T HE APPEALS WITH REGARD TO EXEMPTION U/S 10(23C)(IV) OF THE ACT. EVEN THOUGH THE ASSESSEE HAS RAISED A SPECIFIC GROUND BEFORE THIS TRIBUNAL NO ARGUMENT WAS ADVANCE D BY THE LD.SENIOR COUNSEL IN THE COURSE OF HEARING. THE LD.DR HAS ALSO NOT RAISED A NY ARGUMENT. SINCE NO ARGUMENT WAS 5 ITA NOS. 313 & 314/COCH/2009 ITA NOS 439 & 440/COCH/2009 RAISED BY BOTH PARTIES BEFORE THIS TRIBUNAL, WE ARE OF THE OPINION THAT THE ASSESSEE MAY NOT BE INTERESTED IN PROSECUTING THIS GROUND OF APP EAL. ACCORDINGLY, THE GROUND OF APPEAL RELATING TO CLAIM OF EXEMPTION U/S 10(23C)(I V) OF THE ACT IS REJECTED. 6. IN THE RESULT, ALL THE FOUR APPEALS OF THE ASSES SEE ARE PARTLY ALLOWED, FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25 TH MAY, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 25 TH MAY, 2012 PK/- COPY TO: 1. KERALA INDUSTRIAL REVITALISATION FUND BOARD, 5 TH FLOOR, CMD BLDG, C.V. RAMAN PILLAI ROAD, THYCAUD, THIRUVANANTHAPURAM. 2. THE A.C.I.T., RANGE-1, THIRUVANANATHAPURAM 3. THE COMMISSIONER OF INCOME-TAX(A)-I, TRIVANDRUM 4. THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH