M/s. INDIA VALUE FUND, MUMBAI V. ACIT - 15(3), MUMBAI

ITA 5100/MUM/2006

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55599 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 22-09-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 27-09-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: VRUSHALI KAMTH
• Section: 234B; 147

Judgement Text

1 ITA NO. 5100/MUM/2006 (ASST YEAR 2003-04 ) IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI I BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI J SUDHAKAR REDDY, AM & SHRI VIJAY PAL RAO, JM ITA NO. 5100/MUM/2006 (ASST YEAR 2003-04 ) INDIAN VALUE FUND F9C GRAND HAYATT PLAZA SANTACRUZ 9E) MUMBAI 55 VS THE ASST COMMR OF INCOME TAX 15(3), MUMBAI (APPELLANT) (RESPONDENT) PAN NO. AAAT14007K ASSESSEE BY MS VRUSHALI KAMTH REVENUE BY SHRI SANJIV DUTT DT.OF HEARING 22 ND SEPT 2011 DT OF PRONOUNCEMENT 28 TH SEPT 2011 PER VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 25 TH JULY 2006 FOR THE AY 2003-04. 2 THE ASSESSEE HAS FILED THE FOLLOWING CONCISE GROU NDS: I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD CIT(A) ERRED IN NOT ADJUDICATING THE GROUND CHALLENGING THE REOPEN ING OF THE ASSESSMENT U/S 147 OF THE I T ACT, 1961. THE APPELLANT SUBMITS THAT SUCH REOPENING IS BAD IN LAW AND SHOULD BE STRUCK DOWN AS INVALID. II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AN D IN LAW, THE LD CIT(A) ERRED IN NOT TREATING THE ENTIRE INCOME OF THE APPELLANT AS EXEMPT U/S 10(23FB) OF THE ACT. III) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AN D IN LAW, THE LD CIT(A) ERRED IN TREATING THE INTEREST ON FIXED DEPOSITS OF RS. 69 ,41,657/- AS TAXABLE IN THE HANDS OF THE APPELLANT. IV)THE LD CIT(A) ERRED IN NOT ADJUDICATING THE GROUN D RELATING TO INVESTMENT MADE BY THE APPELLANT IN QUALITY CARE INDIA LTD (Q UALITY CARE), SHIRINGAR FILMS PRIVATE LTD (SHRINAGAR FILMS) AND SHRINGAR CINEMAS PV T LTD (SHRINGAR CINEMAS) ON 2 ITA NO. 5100/MUM/2006 (ASST YEAR 2003-04 ) THE BASIS THAT O ADDITION HAS BEEN MADE BY THE ASSE SSING OFFICER ON ACCOUNT OF THIS INVESTMENT. THE LD CIT(A) OUGHT TO HAVE HELD THE QUALITY CARE, SHRINGAR FILMS AND SHRINGAR CINEMAS ARE VENTURE CAPITAL UNDERTAKINGS. V) WITHOUT PREJUDICE TO THE APPELLANTS CONTENTION IN GROUND NO.2, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED I NOT ADJUDICATING THE GROUND FOR ALLOWING DEDUCTION FOR EXP ENSE INCURRED BY THE APPELLANT WHILE TAXING THE INTEREST OF RS. 69,41,627 /- EARNED BY THE APPELLANT ON SHORT TERM BACK DEPOSITS UNDER THE HEAD INCOME FROM OTHER SOURCES HAVING TREATED THE INTEREST INCOME EARNED BY THE AP PELLANT AS TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES THE LD CIT (A) OUGHT TO HAVE ALLOWED DEDUCTION FOR EXPENSES INCURRED BY THE APPE LLANT. VI) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN CONFIRMING THE LEVY OF INTEREST UNDER SEC 234A OF THE ACT AD SEC 234B OF THE ACT. THE APPELLANT SUBMITS THAT INTEREST U/S 234A AN D 234B OF THE CT IS NOT LEVIABLE AND THEREFORE, THE SAME MAY BE DELETED/REFU NDED. WITHOUT PREJUDICE TO THE ABOVE, THE APPELLANT FURTH ER SUBMITS THAT, IF AT ALL INTEREST U/S 234A OF THE CT IS CHARGEABLE, IT OUGHT T O BE CHARGE FOR THE PERIOD FROM 1DEC 2003 (BEING THE DUE DATE FOR FURNISHING OF RE TURN OF INCOME BY A COMPANY0 TO 26 MARCH 2004,I.E. FOR A PERIOD OF FOUR MO NTHS.) 3 GROUND NO.1 IS REGARDING THE VALIDITY OF REOPENIN G OF THE ASSESSMENT. 4 THOUGH THE ASSESSEE HAS RAISED THE GROUND THAT TH E CIT(A) HAS NOT ADJUDICATED THIS ISSUE WHILE PASSING THE IMPUGNED O RDER; HOWEVER, THE ASSESSEE HAS NOT BROUGHT ANYTHING BEFORE US TO DEMONSTRATE AS TO HOW THE REOPENING IS NOT VALID. THEREFORE, IN THE ABSENCE OF ANY ILLEGALITY POINT O UT BY THE ASSESSEE IN THE REOPENING OF THE ASSESSMENT, WE REJECT THE GROUND OF THE ASSE SSEE. MOREOVER, WHEN THE MAIN ISSUE IN THE APPEAL OF THE ASSESSEE IS COVERED AND THE ASSESSEE HAS NOT TAKEN ANY STEP BEFORE THE CIT(A) FOR ADJUDICATING OF THIS IS SUE; WE DISMISS THE ISSUE AS THE SAME BECOME ACADEMIC IN NATURE. 5 GROUND NOS 2 & 3 REGARDING APPLICABILITY OF SECT ION10 (23FB) OF THE ACT. 6 WE HAVE HEARD THE LD AR OF THE ASSESSEE AS WELL A S THE LD DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE FIND THAT THIS VERY ISSUE WAS 3 ITA NO. 5100/MUM/2006 (ASST YEAR 2003-04 ) CONSIDERED AND ADJUDICATED BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2002-03 IN ITA NO.7157/MUM/2005 VID E ORDER DATED 5.11.2009 IN PARA 26 AS UNDER: FROM THE ABOVE CHART IT COMES CLEAR THAT AT THE BEGIN NING OF THE YEAR A SUM OF RS. 5.35 CRORES WAS LYING IN FDRS, THIS SEEMS TO HAVE BEEN INVESTED BY WITHDRAWING THESE AMOUNTS. ON 15.6.2001 WHEN THE LA ST AMOUNT OF RS. 32 CRORES WAS WITHDRAWN THERE REMAINED A BALANCE OF RS. 11,22,393/-. THEN LATER ON MORE AMOUNTS HAVE BEEN COLLECTED FROM THE INVESTO R AND THEN INVESTED ON VARIOUS DATES. WE AGREE WITH THE CONTENTION OF TH E LD COUNSEL FOR THE ASSESSEE THAT THERE WERE TWO OPTIONS AVAILABLE EITHER TO KEEP THE MONEY COLLECTED ONLY IN CURRENT ACCOUNT ON WHICH NO INTER EST IS PAYABLE BY THE BANK AND THUS LOOSE THE INTEREST OR TO KEEP THE MONE Y IN SWEEP IN ACCOUNTS BY WHICH IN BANKS AUTOMATICALLY CONVERTS THE RECEIPT S INTO FDRS WHICH CAN BE UTILIZED WHENEVER NEEDS BE THERE. WE FIND FORCE IN THE SUBMISSION O THAT THE CONTRIBUTION AND THE INVESTMENT CANNOT BE MATCHE D TO A PARTICULAR DATE. THE VENTURE CAPITAL FUND MAY INDENTIFY A PARTICULAR I NVESTMENT AND THEN HE WOULD ISSUE DRAW DOWN NOTICE. ON CONTRIBUTORS WHO H AVE AGREED TO CONTRIBUTE BUT SUCH CONTRIBUTION MAY COME IN STAGGE RED FASHION AD COME ON VARIOUS DATES. IN THE INTERVENING PERIOD IF SUCH MONI ES ARE KEPT TEMPORARILY IN THE FDRS NO FAULT CAN BE FOUND. THERE IS FURTHER FORC E IN THE ARGUMENT THAT NO INVESTOR WOULD GIVE MONEY TO THE VENTURE CAPITAL FUN D FOR JUST MAKING INVESTMENT IN FDRS BECAUSE ULTIMATELY EVEN IF SUCH INTEREST IS DISTRIBUTED TO SUCH INVESTORS THEN PASSED THROUGH CONCEPT WOULD B E APPLICABLE AND SUCH INCOME BECOMES TAXABLE IN THE HANDS OF INVESTOR. WE ARE UNABLE TO AGREE WITH THE SUBMISSION OF THE LD DR THAT THE MAIN PURPO SE OF THE VENTURE CAPITAL FUND WAS TO GENERATE INCOME FROM FDRS. MERELY BECAUSE FDRS ARE MADE FOR SHORT DURATION OF FEW MONTH THAT TOO, TO MATCH CONTRI BUTIONS WITH THE INVESTMENT IN THE INTERVENING PERIOD CANNOT LEAD TO THE CONCLUSION THAT ASSESSEE VENTURE CAPITAL FUND WAS MAINLY ENGAGED I THE BUSINESS OF INVESTING FUND IN FDRS. I THESE CIRCUMSTANCES, WE ARE OF THE OP INION THAT INTEREST IN THE CASE OF ASSESSEE IS EXEMPT U/S 10(23FB) AND THEREFO RE, WE SET ASIDE THE ORDER OF THE LD CIT(A) AND DIRECT THE ASSESSING OFFICER TO ALLOW THE DEDUCTION. 5.1 ACCORDINGLY, MAINTAINING THE PRINCIPLES OF CONS ISTENCY, WE FOLLOW THE ORDER OF THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESEES O WN CASE FOR 2002-03 AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 4 ITA NO. 5100/MUM/2006 (ASST YEAR 2003-04 ) 6 GROUND NO.4 IS REGARDING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INVESTMENT. 7 WE HAVE HEARD THE RIVAL CONTENTION AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THIS ISSUE HAS ALSO BEEN CONS IDERED BY THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN PARA 27 AS U NDER; 27. IN REGARD TO THE NEXT GROUND, DETAILED ARGUMENT WAS MADE BY BOTH THE PARTIES. THE QUESTION INVOLVED I THIS GROUND IS WHETH ER INVESTMENTS MADE BY THE ASSESSEE IN SHRINGAR FILMS PVT LTD AND SHRINGAR C INEMA PVT LTD ARE MADE IN THE VENTURE CAPITAL UNDERTAKING, INCOME FROM SUCH INV ESTMENTS WOULD BE EXEMPT AND SUCH VENTURE CAPITAL UNDERTAKING ITSELF HA S BEEN DEFINED IN SECTION 10(23FB). UNDER CLAUSE (II) OF SEC. 10(23FB ) VENTURE CAPITAL UNDERTAKING WAS ELIGIBLE IF IT WAS ENGAGED IN THE B USINESS OF PROVIDING SERVICES. ACCORDING TO THE ASSESSING OFFICER M/S S HRINGAR FILMS P LTD AND M/S SHRINGAR CINEMAS PVT LTD WERE NOT ENGAGED IN PROVIDI NG SERVICES AND THEREFORE, INCOME FROM SUCH VENTURE CAPITAL UNDERTAK ING WAS NOT EXEMPT. THIS VIEW HAS BEEN CONFIRMED BY THE LD CIT(A). HOWE VER, BEFORE US BOTH PARTIES AGREED THAT IN THIS YEAR NO INCOME HAS BEEN RE CEIVED FROM THERE. VENTURE CAPITAL UNDERTAKINGS AND NO ADDITION HAS BEE N MADE ACCORDINGLY. THEREFORE, WE ARE OF THE VIEW THAT THIS GROUND IS ONLY OF ACADEMIC NATURE AND DECLINED TO ADJUDICATE THE SAME AND LEAVE THIS QUE STION OPEN. 7.1 SINCE THIS ISSUE HAS ALREADY BEEN DECIDED BY TH E COORDINATE BENCH OF THE TRIBUNAL; THEREFORE, NO ADJUDICATION IS REQUIRED. 8 GROUND NO.5 IS ONLY AN ALTERNATIVE GROUND AND CON SEQUENTIAL TO THE GROUND NO.2 & 3 OF THE APPEAL OF THE ASSESSEE; THEREFORE, IN VIEW OF OUR FINDINGS IN GROUND NOS 2 &3, THIS GROUND HAS BECOME INFRUCTUOUS. 9 GROUND NO.6 IS REGARDING LEVY OF INTEREST U/S 234 A & 234B. 10 LEVY OF INTEREST IS CONSEQUENTIAL AND MANDATORY IN NATURE; THEREFORE, NO SPECIFIC ADJUDICATION IS REQUIRED. 5 ITA NO. 5100/MUM/2006 (ASST YEAR 2003-04 ) 11 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THE 28 TH , DAY OF SEPT 2011. SD/ SD/ ( J SUDHAKAR REDDY ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 28 TH SEPT 2011 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI