GAMMA CONSTRUCTIONS P.LTD, MUMBAI V. ITO WD 3(3)(4), MUMBAI

ITA 530/MUM/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62452 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 25-04-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 25-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K JALALI
• Assessee Lawyers: CHETAN A KARIA
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH: MUMBAI BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.530/MUM/2012 (ASSESSMENT YEAR: 2005-06) M/S. GAMMA CONSTRUCTIONS P. LTD., 514, DALAMAL TOWER, PLOT NO.211, NARIMAN POINT, MUMBAI -400 021 ..... APPELLANT VS INCOME-TAX OFFICER 3(3)(4), MUMBAI .... RESPONDENT PAN : AAACG 5752 A APPELLANT BY: SHRI CHETAN A. KARIA RESPONDENT BY: SHRI R.K. JALALI DATE OF HEARING: 25.04.2012 DATE OF PRONOUNCEMENT: 25.05.2012 O R D E R R.S. PADVEKAR, JM: IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE IMPU GNED ORDER OF THE LD. CIT (A)-7, MUMBAI DATED 04.10.2011 FOR THE A.Y. 2005-06. THE SOLITARY ISSUE IS WHETHER THE A.O. WAS JUSTIFIED IN TREATING ` 4,35,812/- BEING INTEREST RECEIVED AS INCOME FROM OTHER SOURC ES. 2. THE FACTS ARE IN NARROW COMPASS. THE ASSESSEE F ILED THE RETURN OF INCOME FOR THE A.Y. 2005-06 DECLARING TOTAL INCOME AT ` NIL. AS OBSERVED BY THE A.O. THE MAIN ACTIVITIES OF THE ASS ESSEE COMPANY IS CONSTRUCTION AND DEVELOPMENT OF THE PROPERTIES. TH E A.O. HAS OBSERVED THAT THE COMPANY HAD PURCHASED LAND AT SAKINAKA, AN DHERI WAS AWAITING FOR PERMISSION TO START THE OPERATIONS. S OME EXPENDITURE IS MADE WHICH IS TREATED AS PROJECT DEVELOPMENT AND CO ST OF CAPITALIZED. THE ASSESSEE HAS SHOWN INTEREST ON THE FDR OF ` 4,35,812/- AS A BUSINESS INCOME. THE ASSESSEE STATED THAT IT IS IN PROCESS TO PROCURE LAND AT SAHAR, ANDHERI AND HAS INCURRED THE EXPEND ITURE IN CONNECTION WITH THE SAME. THE ASSESSEE AVAILED TERM LOAN FORM ICICI BANK FOR ITA NO.530/MUM/2012 M/S. GAMMA CONSTRUCTIONS P. LTD. 2 PURCHASE OF THE LAND. SINCE THE PAYMENT FOR THE LO AN WAS DELAYED, THE COMPANY DECIDED TO PARK MONEY IN BUSINESS AS SHORT TERM DEPOSIT WITH ICICI SO THAT BURDEN OF INTEREST ON THE TERM LOAN W OULD BE REDUCED IN THE INTERIM PERIOD. THE ASSESSEE AVAILED TERM LOAN FROM ICICI BANK FOR PURCHASE OF THE LAND. THE ASSESSEE KEPT THE FIXED DEPOSIT AT ICICI BANK FOR ` 9,01,00,000/- AND INTEREST ON THE MATURITY RECEIVE D ON THE SAID FIXED DEPOSIT IS TREATED AS BUSINESS INCOME BY REDU CING THE SAME AMOUNT FROM COST OF CONSTRUCTION OR WORK-IN-PROGRES S (W.I.P). THE ASSESSEE ALSO PLACED THE RELIANCE ON THE PLETHORA O F THE DECISIONS INCLUDING THE DECISIONS OF THE SUPREME COURT IN THE CASE OF CIT VS. BOKARO STEEL LTD. 236 ITR 215 AS WELL AS IN THE CAS E OF TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LTD. VS. CIT (1997) 227 I TR 172 (SC). IN SUM AND SUBSTANCE THE ARGUMENT OF THE ASSESSEE WAS THAT IT WAS TEMPORARY PARKING OF THE BUSINESS FUNDS WITH THE ICICI BANK T O REDUCE THE INTEREST BURDEN. THE A.O. DISTINGUISHED THE DECISI ON IN THE CASE OF BOKARO STEEL LTD. (SUPRA) AND REJECTED THE CONTENTI ON OF THE ASSESSEE AND ASSESSED THE SAID INTEREST UNDER THE HEAD INCO ME FROM OTHER SOURCES. THE LD. CIT (A) ALSO REJECTED THE CLAIM OF THE ASSESSEE. NOW, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. I HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIE S AND PERUSED THE RECORD. ON PERUSAL OF THE ORDERS OF THE AUTHORITIE S BELOW, I FIND THAT THE CORE FACT OF THE ISSUE IS NOT DISPUTED AND NOWHERE IT IS STATED THAT THE ASSESSEE HAS AVAILED TERM LOAN FACILITY FROM THE IC ICI BANK AND SINCE THERE WAS A DELAY, THE ASSESSEE DECIDED TO PLACED S HORT TERM DEPOSIT WITH ICICI OUT OF BUSINESS FUNDS WHEREBY BURDEN OF INTEREST COULD BE REDUCED IN THE INTERIM PERIOD. IN MY OPINION, IF I T IS THE FACT THEN IT IS PURELY A TEMPORARY PARKING OF THE BUSINESS FUNDS TI LL THE LOAN IS RELEASED BY THE ICICI. THE ASSESSEE REDUCED THE WO RK-IN-PROGRESS (WIP) TREATING THE SAME AS PART OF THE BUSINESS ACTIVITY. IN MY OPINION, AS THE CORE FACT HAS NOT BEEN DISPUTED I HAVE TO HOLD THAT THE INTEREST EARNED FROM THE ICICI BANK HAS NEXUS WITH THE BUSINESS OF THE ASSESSEE AND SAID CANNOT BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. ACCORDINGLY, I ALLOW THE GROUND TAKEN BY THE ASSESS EE. ITA NO.530/MUM/2012 M/S. GAMMA CONSTRUCTIONS P. LTD. 3 4. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 5TH MAY 2012. SD/- ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE: 25TH MAY 2012 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) 7, MUMBAI. 4) THE CIT -3, MUMBAI. 5) THE D.R. SMC BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN