ITO, New Delhi V. M/s. Jaypee DSC Venture Ltd., Gurgaon

ITA 4394/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3925 (ITAT-DELHI)
• Duration Of Justice: 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 23-02-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 30-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MONGA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI K.G. BANSAL ITA NO. 4394/DEL/2010 ASSTT. YR: 2004-05 INCOME-TAX OFFICER, VS. M/S JAYPEE DSC VENTURE LT D., WARD 10(1), NEW DELHI. (NOW KNOWN AS DELHI GURGAON SUPER CONNECTIVITY LTD. DUNDEHERA GURGAON DELHI BORDER KM-24, MILESTONE, NH-8, GURGAON. PAN/GIR NO. AABCJ0969R (APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI A.K. MONGA SR DR RESPONDENT BY : SHRI K. SAMPATH ADV. O R D E R PER R.P. TOLANI, J.M : THIS IS REVENUES APPEAL AGAINST CIT(A)S ORDER DA TED 21-6-2010 RELATING TO A.Y. 2004-05. SOLE EFFECTIVE GROUND RAI SED IS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) HAS ERRED IN DELETING ADDITION MADE OF RS. 26,60,678/- ON A/C OF INCOME FROM OTHER SOURCE, ACC RUED FROM INTEREST ON FDR. 2. LEARNED DR SUPPORTED THE ORDER OF AO. 3. LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, CONTENDS THAT THE SAME ISSUE CAME UP BEFORE ITAT IN ASSESSEES OWN CA SE FOR A.Y. 2003-04 WHEREIN THE ITAT DELHI BENCH C IN ITA NO. 3/DEL/2 007 VIDE ORDER DATED 20-11-2008 HAS OBSERVED AS UNDER: 2 10. THE MORE APPROPRIATE CASES APPLICABLE TO THE F ACTS OF THE PRESENT CASE WILL BE THE DECISIONS OF HONBLE SUPRE ME COURT IN THE CASE OF CIT V. KARNAL CO-OPERATIVE SUGAR MILLS LTD. (SUPRA) AND CIT V. BOKARO STEEL LTD. (SUPRA). BOTH THESE CA SES HAVE BEEN RELIED UPON BY THE LD. AR. 11. IN THE CASE OF CIT V. KARNAL CO-OPERATIVE SUGAR MILLS LTD. (SUPRA) THE MONEY WAS DEPOSITED BY THE ASSESSE E TO OPEN A LETTER OF CREDIT UNDER THE TERMS OF AGREEMENT WITH THE SUPPLIER OF MACHINES. THUS IT WAS FOUND BY HONBLE SUPREME COUR T THAT IT WAS NOT A CASE WHERE SURPLUS SHARE CAPITAL MONEY LY ING IDLE AND UNUSED WAS DEPOSITED IN THE BANK. THE MONEY WAS DEP OSITED OUT OF NECESSITY FOR THE PURPOSE OF ACQUIRING AN AS SET. THUS HONBLE SUPREME COURT REJECTED THE PLEA OF THE DEPA RTMENT THAT UNUTILIZED AND SURPLUS MONEY WAS DEPOSITED BY THE A SSESSEE. IT WAS FOUND THAT ACTIVITY OF THE DEPOSIT MONEY OUT O F SHARE CAPITAL WAS AN ACTIVITY INCIDENTAL TO THE ACQUISITI ON OF ASSET. THE DEPOSIT OF MONEY WITH THE BANK WAS WITH A DEFINITE PURPOSE TO EXECUTE AN AGREEMENT FOR THE PURPOSE OF ACQUIRING THE MACHINES. THUS IT WAS FOUND THAT THERE WAS A DIRECT NEXUS BETWEEN THE PURCHASE OF MACHINERY AND THE DEPOSIT O F MONEY IN THE BANK AND IT WAS HELD THAT SUCH NEXUS SHALL BRIN G ABOUT A PRESUMPTION IN ASSESSEES FAVOUR THAT THE MONEY WAS DEPOSITED NOT WITHOUT A PURPOSE BUT WITH THE OBJECT OF ACQUIR ING MACHINES FROM THE SUPPLIER AND, THEREFORE, INTEREST INCOME B EING DIRECTLY RELATABLE TO THE TERMS OF CONTRACT FOR ACQUIRING A BUSINESS ASSET SHOULD GO TO REDUCE THE COST OF ASSET. 12. EXAMINING THE FACTS OF THE PRESENT CASE IN THE LIGHT OF THE ABOVE DECISION OF HONBLE SUPREME COURT AS IT HAS A LREADY BEEN HELD THAT IT IS NOT A CASE WHERE UNUTILIZED AN D SURPLUS MONEY WAS DEPOSITED BY THE ASSESSEE TO EARN INTERES T, THE ACTIVITY OF DEPOSITING MONEY WAS INCIDENTAL TO THE BUSINESS OF THE ASSESSEE AS FDRS WERE REQUIRED TO BE KEPT TO EN TER INTO THE AGREEMENT FOR COMMENCEMENT OF THE PROJECT AND, THUS , THE MAKING OF FDR WITH THE BANK WAS WITH A DEFINITE PUR POSE AND OBJECT AND INTEREST EARNED BY THE ASSESSEE ON THE F DRS MUST GO TO REDUCE THE PRE-PRODUCTION EXPENSES. IN THE CASE OF CIT V. BOKARO STEEL LTD. (SUPRA) THE COMPANY EARNED INTERE ST FROM ADVANCES MADE TO THE CONTRACTORS BY THE ASSESSEE FO R THE 3 PURPOSE OF FACILITATING THE WORK OF CONSTRUCTION AN D IT WAS HELD BY HONBLE SUPREME COURT THAT SUCH RECEIPT WAS DIRE CTLY CONNECTED WITH OR IS INCIDENTAL TO THE WORK OF CONS TRUCTION OF ITS PLANT UNDERTAKEN BY THE COMPANY AND IT WAS HELD THA T T HE AMOUNTS WHICH ARE INEXTRICABLY LINKED WITH THE PROC ESS OF SETTING UP OF PLANT AND MACHINERY WILL GO TO REDUCE THE COST OF ITS ASSETS AS THESE ARE RECEIPTS OF CAPITAL NATURE AND CANNOT BE TAXED AS INCOME. 12. APPLYING THE RATIO OF ABOVE MENTIONED TWO DECIS IONS OF HONBLE SUPREME COURT AND IN VIEW OF ABOVE DISCUSSI ON, WE HOLD THAT THE INTEREST EARNED BY THE ASSESSEE ON FD R BEING CAPITAL IN NATURE SHALL GO TO REDUCE THE PROJECT EX PENDITURE PENDING ALLOCATION AND THE SAME CANNOT BE ASSESSED AS INCOME FROM OTHER SOURCES. 13. IN THE RESULT, THE CHARGEABILITY OR OTHERWISE O F INTEREST EARNED BY THE ASSESSEE ON FDRS AS INCOME FROM OTHER SOURCES IS DECIDED IN FAVOUR OF THE ASSESSEE AND IT IS HELD THAT THE SAME CANNOT BE ASSESSED AS INCOME FROM OTHER SOURCES. 3.1. REVENUES APPEAL AGAINST THE AFORESAID ORDER O F ITAT, HAS BEEN DISMISSED BY THE HONBLE DELHI HIGH COURT VIDE ITS ORDER DATED 11-3-2011 IN ITA NO. 357/2010. 3.2. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION TH E CIT(A) HAS ALLOWED THE RELIEF BY RELYING ON THE ORDER OF THE ITAT FOR A.Y. 2003-04 (SUPRA). THE IMPUGNED PROJECT IS STILL UNDER COMPLETION, THEREFO RE, THE RATIO OF TRIBUNALS JUDGMENT AND SUBJECT HIGH COURT JUDGMENT IS SQUAREL Y APPLICABLE. CIT(A) HAVING FOLLOWING TRIBUNALS ORDER FOR EARLIER YEAR, THERE IS NO INFIRMITY IN THE ORDER OF CIT(A). 4. WE HAVE HEARD RIVAL SUBMISSIONS AND HAVE GONE TH ROUGH THE ENTIRE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE PROJ ECT IN QUESTION WAS NOT 4 COMPETED IN THE YEAR UNDER CONSIDERATION. THE ITAT HAS ALREADY DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE TO THE EFFECT THAT INTEREST EARNED BY THE ASSESSEE ON THESE FDRS SHOULD GO TO REDUCE THE PROJ ECT EXPENSES. CIT(A) HAVING FOLLOWED THIS ORDER OF THE ITAT, WHICH HAS B EEN UPHELD BY THE HIGH COURT, WE SEE NO REASON TO INTERFERE IN THE ORDER O F CIT(A) AND THE SAME IS UPHELD. 5. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 30-05-2011. SD/- SD/- ( K.G. BANSAL ) ( R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30-05-2011. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR