The Plantation Corporation of Kerala Ltd, Kottayam V. The ACIT, Kottayam

ITA 550/COCH/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7276 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 23-12-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A DHANARAJ
• Assessee Lawyers: IYPE JOHN
• Keywords: Rule of consistency; Capital expenditure
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI CHANDRA POOJARI, AM & GEORGE GEORGE K., JM ITA NO. 550/COCH/2015 ( ASSESSMENT YEAR : 2 0 1 0 - 11) THE PLANTATION CORPORATION OF KERALA LTD., MUTTAAMBALAM, KOTTAYAM. [PAN : AAACT 7596H] VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1, KOTTAYAM. (ASSESSEE - APPELLANT) (REVENUE - R ESPONDENT) ASSESSEE BY SHRI IYPE JOHN, CA REVENUE BY SHRI A. DHANARAJ SR. DR DATE OF HEARING 27 / 0 6 /2018 DATE OF PRONOUNCEMENT 11 / 0 7 /2018 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A), KOTTAYAM DATED 20/01/2016 AND PERTAINS TO THE ASSES SMENT YEAR 2009-10. 2. THE FIRST GROUND IS WITH REGARD TO DISALLOWANCE OF CLAIM OF EXPENSES OF RS.26,01,772/- IN RESPECT OF INCOME FROM INTEREST. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE W AS NOT ABLE TO EXPLAIN SATISFACTORILY EXCEPT FURNISHING OF AN ORDER OF THE CIT(A)-IV, KOCHI DT. ITA NO. 550/COCH/2015 2 22/08/2006 PERTAINING TO AY 2002-03. THE ASSESSING OFFICER DID NOT ACCEPT THIS REFERENCE FOR THE REASON THAT COPY OF THE TRIBUNAL ORDER IN WHICH THE CIT(A) HAS RELIED ON, WAS NOT PRODUCED BEFORE HIM WITHOUT WHIC H HE COULD NOT APPRECIATE AS TO WHAT COULD HAVE BEEN THE RATIONALE BEHIND THE AL LOWANCE OF INTEREST OVERHEAD EXPENSES OF 10%. AS PER PROVISIONS OF SEC. 57(III) OF THE ACT, WHAT CAN BE ALLOWED AS A DEDUCTION AGAINST INCOME FROM OTHER SO URCES IS AN EXPENDITURE (NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE) LAID OU T AND EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNING S UCH INCOME. THUS, THE ONUS IS SQUARELY ON THE ASSESSEE TO SUBSTANTIATE THAT THE E XPENSES CLAIMED AGAINST THE INTEREST INCOME HAS BEEN EXPENDED WHOLLY AND EXCLUS IVELY FOR THE PURPOSE OF EARNING THE SAID INCOME. IN THE ABSENCE OF ANY EV IDENCE TO SUGGEST THAT THE AMOUNT OF RS.26,01,772/- HAS BEEN EXPENDED TOWARDS EARNING SUCH INTEREST INCOME, THE ASSESSING OFFICER DISALLOWED THE CLAIM AND MADE AN ADDITION OF RS.26,01,772/- TO THE TOTAL INCOME OF THE ASSESSEE. 4. ON APPEAL, SINCE THE ASSESSEE WAS NOT ABLE TO S UBSTANTIATE THAT THE EXPENSES CLAIMED AGAINST THE INTEREST INCOME HAD BEEN EXPEND ED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING THE INCOME OF RS.26,01,7 72/-, THE CIT(A) AFFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. ITA NO. 550/COCH/2015 3 5. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. THE LD. AR SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 1156(COCH)/1987 DATE D 12 TH JANUARY, 1993 FOR THE ASSESSMENT YEAR 1985-86 WHEREIN IT WAS HELD AS UNDER: 5. THE LAST ISSUE BEFORE US IS WHETHER THE ASSESS EE WOULD BE ENTITLED TO CLAIM PROPORTIONATE EXPENSES OF RS.8,53,473 IN COMP UTING THE INCOME UNDER THE HEAD OTHER SOURCES. THE ASSESSEE COMPANY HAD SUBSTANTIATED DEPOSITS WITH KERALA GOVERNMENT TREASURY. AGAINST THE INTEREST RECEIPTS OF RS.17,24,921/- THE ASSESSEE HAD CLAIMED RS.8,53,473 BEING THE PROPORTIONATE OVERHEAD EXPENSES. THE ITO ALLOWED O NLY 5% OF THE TOTAL RECEIPT AS DEDUCTION. THE CIT(A) DID NOT INTERFERE IT IS AGREED BEFORE US THAT ON AN IDENTICAL ISSUE THE TRIBUNAL HAD ALLOWED 10% OF THE RECEIPTS AS DEDUCTION IN THE ASSESSEES OWN CASE FOR THE ASSESS MENT YEAR 1984-85 VIDE ORDER DATED 24/12/1992 IN ITA NO. 1069(COCH)/1 987. ACCORDINGLY, WE HOLD THAT THE ASSESSEE WOULD BE ENTITLED TO DEDUCTI ON OF 10% OF THE INTEREST RECEIPTS. 6. THE LD. DR SUBMITTED THAT THE ASSESSEE HAS NOT SUBSTANTIATED THE INCURRING OF EXPENDITURE FOR THE PURPOSE OF EARNING THE INTER EST INCOME. BEING SO, IT IS TO BE DISALLOWED. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE RECORD. ADMITTEDLY, IN THE EARLIER ORDER FOR THE ASSESSMENT YEAR 1985-86 IN ITA NO.1156/COCH/1987, THE TRIBUNAL VIDE ORDER DATED 12 TH JANUARY, 1993 OBSERVED THAT 10% OF TOTAL RECEIPTS IS TO BE CONSIDERED AS DEDUCTION TOWARDS I NCURRING OF EXPENDITURE FOR EARNING SUCH INTEREST INCOME. THE CONTENTION OF TH E LD. AR RAISED DURING THE HEARING WAS THAT IN THE ABSENCE OF ANY CHANGE IN TH E CIRCUMSTANCES, THE ITA NO. 550/COCH/2015 4 REVENUE SHOULD HAVE FELT BOUND BY THE PREVIOUS DECI SIONS AND NO ATTEMPT SHOULD HAVE BEEN MADE TO REOPEN THE QUESTION. HE RELIED UP ON SOME AUTHORITIES IN SUPPORT OF THIS STAND. THE FULL BENCH OF THE MADRAS HIGH COURT IN THE CASE OF T.M.M, SANKARALINGA NADAR & BROS. VS. CIT (1929) 4 ITC 226 EXPRESSED THE FOLLOWING OPINION : 'THE PRINCIPLE TO BE DEDUCTED FROM THESE TWO CASES IS THAT WHERE THE QUESTION RELATING TO ASSESSMENT DOES NOT VARY WITH THE INCOME EVERY YEAR BUT DEPENDS ON THE NATURE OF THE PROPERTY OR ANY OTHER QUESTION ON WHICH THE RIGHTS OF THE PARTIES TO BE TAXED ARE BASED, E.G., WHETHER A CERTAIN PROPERTY IS TRUST PROPERTY OR NOT, IT HAS NOTHING TO DO WITH TH E FLUCTUATIONS IN THE INCOME; SUCH QUESTIONS, IF DECIDED BY A COURT ON A REFERENC E MADE TO IT WOULD BE RES JUDICATA IN THAT THE SAME QUESTION CANNOT BE SUBSEQ UENTLY AGITATED.' ONE OF THE DECISIONS REFERRED TO BY THE FULL BENCH WAS THE CASE OF HOYSTEAD VS. COMMISSIONER OF TAXATION (1926) AC 155 (PC). SPEAKI NG FOR THE JUDICIAL COMMITTEE, LORD SHAW STATED : 'PARTIES ARE NOT PERMITTED TO BEGIN FRESH LITIGATIO NS BECAUSE OF NEW VIEWS THEY MAY ENTERTAIN OF THE LAW OF THE CASE, OR NEW VERSIO NS AS TO WHAT SHOULD BE A PROPER APPREHENSION BY THE COURT OF THE LEGAL RESUL T EITHER OF THE CONSTRUCTION OF THE DOCUMENTS OR THE WEIGHT OF CERTAIN CIRCUMSTA NCES. IF THIS WERE PERMITTED LITIGATION WOULD HAVE NO END, EXCEPT WHEN LEGAL ING ENUITY IS EXHAUSTED. IT IS A PRINCIPLE OF LAW THAT THIS CANNOT BE PERMITTED, AND THERE IS ABUNDANT AUTHORITY REITERATING THAT PRINCIPLE. THIRDLY, THE SAME PRINC IPLE NAMELY, THAT OF A SETTING TO REST RIGHTS OF LITIGANTS, APPLIES TO THE CASE WHERE A POINT, FUNDAMENTAL TO THE DECISION TAKEN OR ASSUMED BY THE PLAINTIFF A ND TRAVERSABLE BY THE DEFENDANT, HAS NOT BEEN TRAVERSED. IN THAT CASE ALS O A DEFENDANT IS BOUND BY THE JUDGMENT, ALTHOUGH IT MAY BE TRUE ENOUGH THAT SUBSE QUENT LIGHT OR INGENUITY MIGHT SUGGEST SOME TRAVERSE WHICH HAD NOT BEEN TAKE N.' THESE OBSERVATIONS WERE MADE IN A CASE WHERE TAXATI ON WAS IN ISSUE. THIS COURT IN PARASHURAM POTTERY WORKS CO. LTD. VS. ITO 1977 CTR (SC) 32 : (1977) 106 ITR 1 (SC) STATED : 'AT THE SAME TIME, WE HAVE TO BEAR IN MIND THAT THE POLICY OF LAW IS THAT THERE MUST BE A POINT OF FINALITY IN ALL LEGAL PROC EEDINGS, THAT STALE ISSUES ITA NO. 550/COCH/2015 5 SHOULD NOT BE REACTIVATED BEYOND A PARTICULAR STAGE AND THAT LAPSE OF TIME MUST INDUCE REPOSE IN AND SET AT REST JUDICIAL AND QUASI-JUDICIAL CONTROVERSIES AS IT MUST IN OTHER SPHERES OF HUMAN ACTIVITY.' ASSESSMENTS ARE CERTAINLY QUASI-JUDICIAL AND THESE OBSERVATIONS EQUALLY APPLY. 7.1 WE ARE AWARE OF THE FACT THAT, STRICTLY SPEA KING, RES JUDICATA DOES NOT APPLY TO IT PROCEEDINGS. AGAIN, EACH ASSESSMENT YEAR BEIN G A UNIT, WHAT IS DECIDED IN ONE YEAR MAY NOT APPLY IN THE FOLLOWING YEAR BUT WH ERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS H AS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTIES HAVE ALLOWED THAT POSI TION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WOULD NOT BE AT ALL APPRO PRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. 7.2 THE LD. DR SUBMITTED THAT THE FACTS OF THIS CASE BEING VERY SPECIAL, NOTHING SHOULD BE SAID IN A MANNER WHICH WOULD HAVE GENERAL APPLICATION. WE ARE INCLINED TO ACCEPT THIS SUBMISSION AND WOULD LIKE T O STATE IN CLEAR TERMS THAT THE DECISION IS CONFINED TO THE FACTS OF THE CASE AND M AY NOT BE TREATED AS AN AUTHORITY ON ASPECTS WHICH HAVE BEEN DECIDED FOR GE NERAL APPLICATION. 7.3. WE HAVE CAREFULLY GONE THROUGH THE ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 1985-86 IN ITA NO.1156/COCH/1987 DA TED 12 TH JANUARY, 1993 IN ASSESSEES OWN CASE AS DISCUSSED IN PARA 5 OF THIS ORDER. IN THAT YEAR, THE EXPENDITURE WAS ALLOWED DEDUCTION AT 10% OF TOTAL R ECEIPTS WHICH WAS BASED ON ITA NO. 550/COCH/2015 6 THE EARLIER ORDER OF THE TRIBUNAL FOR THE ASSESSMEN T YEAR 1984-85. THERE WAS NO DISCUSSION IN THE ORDER REGARDING THE REASON FOR AD OPTION OF 10% OF TOTAL RECEIPTS TOWARDS INCURRING OF EXPENDITURE. EVEN IF FOR THE P URPOSE OF CONSISTENCY, THE EARLIER ORDER IS FOLLOWED, IT SHALL BE INCUMBENT UP ON THE TRIBUNAL TO DISCUSS THE MATERIAL FACTS AND PLEADING ON RECORD WHILE DECIDIN G THE ISSUE AND DISSENTING WITH THE ORDER OF THE ASSESSING OFFICER. THE TRIBU NAL HAS FAILED TO EXERCISE THE JURISDICTION VESTED IN IT. ON THIS SCORE, THE RIGHT OF THE ASSESSEE SEEMS TO BE NOT PROTECTED BY THE PRINCIPLE OF CONSISTENCY. THE SUP REME COURT IN THE CASE OF ASSISTANT CCT JT. (2011) (4) (SC) 35 HAS HELD THAT IT SHALL BE OBLIGATORY ON THE PART OF THE JUDICIAL OR QUASI-JUDICIAL AUTHORITY TO PASS A REASONED ORDER WHILE EXERCISING STATUTORY JURISDICTION. THE SAME VIEW W AS REITERATED BY THE SUPREME COURT IN THE CASE OF K.R. DEB VS. CCE AIR 1971 (SC) 1447 AND UNION OF INDIA VS. K.D. PANDEY (2002) 10 SCC 471. 7.4 THE SUPREME COURT IN A CASE REPORTED IN SANT OSH HAZARI VS. PURUSHOTTAM TIWARI (DEAD.) BY LRS (2001) 170 CTR (SC) 160 : (20 01) 2 JT (SC) 407 BY LEARNED REPRESENTATIVES HELD AS UNDER: 'THE APPELLATE COURT HAS JURISDICTION TO REVERSE O R AFFIRM THE FINDINGS OF THE TRIAL COURT. FIRST APPEAL IS A VALUABLE RIGHT OF TH E PARTIES AND UNLESS RESTRICTED BY LAW, THE WHOLE CASE IS THEREIN OPEN FOR HEARING BOTH ON QUESTIONS OF FACT AND LAW. THE JUDGMENT OF THE APPELLATE COURT MUST, THEREFORE, REFLECT ITS CONSCIOUS APPLICATION OF MIND, AND RECORD FINDINGS SUPPORTED BY REASONS, ON ALL THE ISSUES ARISING ALONG WITH THE CONTENTIONS P UT FORTH, AND PRESSED BY THE PARTIES FOR DECISION OF THE APPELLATE COURT.' . ............... WHILE REVERSING A FINDING OF FACT THE APPELLATE COU RT MUST COME INTO CLOSE QUARTERS WITH THE REASONING ASSIGNED BY THE TRIAL C OURT AND THEN ASSIGN ITS ITA NO. 550/COCH/2015 7 OWN REASONS FOR ARRIVING AT A DIFFERENT FINDING. TH IS WOULD SATISFY THE COURT HEARING A FURTHER APPEAL THAT THE FIRST APPELLATE C OURT HAD DISCHARGED THE DUTY EXPECTED OF IT.' 7.5 RELIANCE PLACED BY THE LEARNED COUNSEL FOR TH E ASSESSEE TO ALLOW THE APPEAL SEEMS TO BE NOT SUSTAINABLE. A PERUSAL OF THE ORDER PASSED BY THE TRIBUNAL SHOWS THAT THE APPEAL HAS BEEN ALLOWED WITHOUT RECO RDING A FINDING WITH REGARD TO ARGUMENT ADVANCED OR DISPUTE RAISED. IT IS SETTL ED LAW THAT A JUDGMENT SHALL BE BINDING ONLY IN CASE THE DISPUTE IS IDENTICAL BA SED ON SAME SET OF FACTS. THE JUDGMENT SHOULD BE CONSIDERED IN REFERENCE TO THE C ONTEXT KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF EACH CASE. IT IS NOT BOR NE OUT FROM THE ORDER OF THE TRIBUNAL THAT THE QUESTION CROPPED UP FOR ADJUDICAT ION IN THAT CASE WAS ADJUDICATED BY THE TRIBUNAL. 7.6 IN OUR OPINION THE ASSESSEE IS A LIMITED COMP ANY WHICH IS REQUIRED TO MAINTAIN BOOKS OF ACCOUNTS AND REQUIRED TO BE AUDIT ED BOTH UNDER THE COMPANY ACT AS WELL AS UNDER SECTION 44AB OF THE INCOME TAX ACT. IT IS PRIMARY DUTY OF THE ASSESSEE TO PLACE NECESSARY EVIDENCE TO CLAIM E XPENDITURE WHICH WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING SUCH INTEREST INCOME. FURTHER, IN THE PRESENT CASE, THE ASSESSEE HAS NOT LED ANY EVIDENCE REGARDING EXPENDITURE INCURRED TO EARN SUCH INTEREST INCOME. THE ASSESSEE HAS ONLY RELIED ON THE ORDER OF THE TRIBUNAL (SUPRA) AND CLAIMED 10 % OF THE TOTAL INTEREST ITA NO. 550/COCH/2015 8 INCOME TO BE ALLOWED AS EXPENDITURE INCURRED TOWARD S EARNING OF SUCH INTEREST INCOME. BUT THERE IS NO BASIS FOR SUCH ESTIMATION. THE ASSESSMENT IN THIS YEAR WAS MADE U/S. 143(3) OF THE ACT BY CALLING FOR DETA ILS LIKE BOOKS OF ACCOUNTS ETC. AND IT WAS NOT BEST JUDGMENT ASSESSMENT. THEN, IT I S THE DUTY OF THE ASSESSEE TO PRODUCE NECESSARY EVIDENCE IN SUPPORT OF THE CLAIM OF THE ASSESSEE. IT IS THE PRIMARY DUTY OF THE ASSESSEE TO DISCHARGE THE BURDE N CAST ON IT WHICH IT FAILED TO DO SO. SIMPLY, THE ASSESSEE CANNOT CLAIM DEDUCTION ON ESTIMATED BASIS. THE BASIS ON WHICH THE TRIBUNAL HAD COME TO ITS CONCLUS ION FOR THE ASSESSMENT YEAR 1985-86 WOULD NOT HELP THIS ISSUE. IN OUR OPINION, IT IS APPROPRIATE TO REMIT THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER TO ALLOW THAT EXPENDITURE SUPPORTED BY VOUCHERS AND BILLS FOR INCURRING OF THAT EXPENDITUR E. ACCORDINGLY, THE ISSUE IN DISPUTE IS REMITTED TO THE FILE OF THE ASSESSING OF FICER FOR FRESH CONSIDERATION. THUS, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSES. 8. THE NEXT GROUND IS WITH REGARD TO THE ADDITION OF RS.3,72,64,177/- AS INTEREST ACCRUED. 9. THE FACTS OF THE CASE ARE THAT THE ASSESSEE CL AIMED INTEREST INCOME ARISING OUT OF FIXED DEPOSITS IN BANKS IS A HYPOTHETICAL IN COME ON WHICH TAX CANNOT BE LEVIED. FOR THIS PROPOSITION, THE LD. AR RELIED ON THE ORDER OF THE HIGH COURT OF KERALA IN THE CASE OF M/S. KERALA STATE HORTICULTUR E PRODUCTS CORPORATION AND KERALA STATE COCONUT DEVELOPMENT CORPORATION (233 I TR 228). THE CIT INVOKED ITA NO. 550/COCH/2015 9 POWERS U/S. 263 ON THE ASSESSMENT COMPLETED BY THE ASSESSING OFFICER PERTAINING TO THE ABOVE ASSESSEE-CORPORATIONS. THE CIT HAD INVOKED POWERS U/S. 263 OF THE ACT DIRECTING THE ASSESSING OFFICER TO MAKE FRESH ASSESSMENT WHICH WAS QUASHED BY THE ITAT WHICH WAS ACCEPTED BY THE DEPARTMENT. WHILE EXAMINING THE ABOVE ORDERS, IT WAS OBSERVED THAT TH E ISSUES INVOLVED IN THE ABOVE MENTIONED CASES AND THE INSTANT CASE ARE NOT SIMILAR. IN THE FORMER CASES, LOANS TO THESE CORPORATIONS WERE ADVANCED PU RSUANT TO ORDERS OF GOVT. OF KERALA AND THE ASSESSEE-COMPANY HAD NOT RECEIVED AN Y INTEREST ON THESE ADVANCES. IN THE PRESENT CASE, INTEREST INCOME WAS ACCRUED ON FIXED DEPOSITS WITH BANK WHICH ABIDES A CERTAINTY AND IT CANNOT BE TREATED AS A HYPOTHETICAL INCOME. ACCORDING TO THE CIT(A) ALL THE CASE LAWS R ELIED UPON BY THE LD AR HAS NO APPLICABILITY IN THE INSTANT CASE. HENCE, THE C IT(A) REJECTED THE CLAIM OF THE ASSESSEE THAT THE ADMISSION OF INTEREST INCOME WILL BE ON RECEIPT BASIS WHICH WAS ALLOWED BY THE TRIBUNAL AND DISALLOWED THE CLAIM. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE RECORD. ADMITTEDLY, THIS ISSUE WAS CONSIDERED BY THE HIGH COURT OF KERA LA IN ASSESSEES OWN CASE IN ITA NO. 121/2016 DATED 20/12/2017 FOR THE ASSESSMEN T YEAR 2009-10 IN THE REVENUES APPEAL AGAINST THE ORDER OF THE TRIBUNAL IN ITA NO. 56/COCH/2016 DATED 13/05/2016. THE HIGH COURT DECIDED THE ISS UE AGAINST THE ASSESSEE AND IN FAVOUR OF THE DEPARTMENT BY OBSERVING AS UNDER: ITA NO. 550/COCH/2015 10 6. IN THE INSTANT CASE, THE ASSESSEE, IN THE BOOKS OF ACCOUNTS SHOWED THE INTEREST INCOME OF RS. 4,84,25,103/ - AS ACCRUED, BUT RETURNED ONLY RS.1,60,33,548. THE COMPUTATION IN TH E RETURN EXCLUDED RS.3,23,91,555/- ON THE GROUND THAT THE SAME WAS NO T RECEIVED. THE DEPOSITOR IS ENTITLED TO GET INTEREST AS AND WHEN I T BECOMES DUE, WHICH MAY BE MONTHLY, QUARTERLY, HALF YEARLY, YEARLY OR AT THE END OF THE TERM OF DEPOSIT, WHICH IS AT THE OPTION OF THE DEPOSITOR. IT IS ALSO TRITE THAT ON THE OPTION BEING EXERCISED, TO SO DEFFER THE RECEIPT, THE BANK PAYS CUMULATIVE INTEREST. THE ASSESSEE, AS IS SEEN FROM THE ASSESSMENT ORDER; PRODUCED NO EVIDENCE TO SUBSTANTIATE THE CLAIM THAT THE INTEREST WAS NOT PAYABLE IN THE ASSESSMENT YEAR, BUT MERELY ASSERTED THAT THE INTER EST ACCRUED WAS NOT ENTIRELY RECEIVED. IF AT ALL THE MATURITY PERIOD OR THE EXPIRY DATE DID NOT FALL IN THE RELEVANT ASSESSMENT YEAR, IT CANNOT BE SAID THAT THE INTEREST WAS NOT DUE. THE INTEREST THAT ACCRUED IN THE RELEVANT YE AR IS FOR THE AMOUNTS THAT ALREADY REMAINED IN DEPOSIT WITH THE BANK AND ON THE DEPOSITORS ASKING, IT IS PAYABLE. AS WAS OBSERVED THE PERIOD OF DEPOSIT B EING THE OPTION OF THE DEPOSITOR THE RECEIPT STOOD DEFFERRED AT THE BEHEST OF THE ASSESSEE. AS A COROLLARY THERE CANNOT BE A CLAIM MADE OF HYPOTHETICAL INCOME OR THERE BEING NO CORRESPONDING LIABILITY TO PAY. IF THE ASS ESSEE CHOSE TO CLOSE THE DEPOSIT PREMATURELY ON ANY DATE, THEN THE BANK IS LIABLE TO PAY WHATEVER INTEREST THAT IS ACCRUED TILL THAT DATE. INTEREST F OR THE PERIOD, IN WHICH THE AMOUNTS STOOD IN DEPOSIT, ACCRUES ON THE CLOSE OF THE PREVIOUS YEAR AND IF IT SO ACCRUES, IT BECOMES THE INCOME OF THAT PARTIC ULAR ASSESSMENT YEAR, LIABLE TO BE TAXED IN THAT YEAR. 7. YET ANOTHER ARGUMENT OF THE LEARNED COUNSEL FO R THE RESPONDENT IS THAT UNDER SECTION 194A OF THE ACT, IT IS THE OBLIGATION OF THE BANKER TO PAY TAX ON THE INTEREST DUE. THE FAILURE ON THEIR PART HAS NOW RESULTED IN ACTION AGAINST THE ASSESSEE. IN VIEW OF THE FACT THAT THE ASSESSEE HAD EXERCISED THE OPTION TO LET THE INTEREST ACCUMULATE TO THE DE POSIT AND THEREBY EARNED AND THEREBY EARNED COMPOUND INTEREST BY THE END OF THE DEPOSIT TERM, IT WOULD NOT MULCT ANY LIABILITY ON THE BANK TO PAY TA X ON PERIODICAL ACCRUAL OF INTEREST TO THE INCOME TAX AUTHORITIES. THE BANK'S LIABILITY TO DEDUCT TAX AT SOURCE ARISES ONLY WHEN IT PAYS THE INTEREST. THE A MOUNT THAT IS TO BE RECEIVED AS INTEREST, IS KNOWN TO THE ASSESSEE AND WAS ACCOUNTED, AS INCOME ACCRUED BY WAY OF INTEREST IN THE ACCOUNT BO OKS OF THE ASSESSEE FOLLOWING THE MERCANTILE SYSTEM. THE INTEREST INCOM E THAT ACCRUED CANNOT, BY ANY STRETCH OF IMAGINATION, BE TERMED AS HYPOTHE TICAL INCOME. 8. THE RELIANCE PLACED BY THE ASSESSEE ON AN EARLIER DECISION OF THIS COURT IN ITA NOS, 1 14, 173 AND 244 OF 2010 DATED 13-07-2010 WILL NOT I N ANY WAY HELP THE ASSESSEE. IN THAT CASE, LOANS DUE TO T HE ASSESSEE WERE TREATED AS ADVANCE MADE FOR INVESTMENTS IN EQUITY I .E., FOR PURCHASE OF ITA NO. 550/COCH/2015 11 SHARES. IT WAS HELD THAT SO LONG AS THE DEPARTMENT HAD NO CASE THAT ANY INTEREST ACCRUED TO THE ASSESSEE, THERE WAS NO SCOP E FOR ASSESSMENT. IN THAT CASE, THE PLANTATION CORPORATION GAVE SOME ADV ANCES TO TWO OTHER COMPANIES UNDER THE KERALA GOVERNMENT PURSUANT TO G OVERNMENT ORDERS AND NO INTEREST WAS RECEIVED OR AGREED TO BE PAID B Y THE LOANEE COMPANIES. THE PLANTATION CORPORATION WENT BY THE I NSTRUCTIONS OF THE GOVERNMENT AND THE BOARD OF DIRECTORS OF THE PLANTA TION . CORPORATION TOOK A DECISION TO CONVERT THE LOAN INTO EQUITY SHARES. T HE SITUATION IN THIS CASE IS NOT SIMILAR. THE DEPOSITS IN BANK FOR DEFINITE P ERIODS AT DEFINITE INTEREST RATES GENERATE INTEREST AT THE AGREED RATES. IN FAC T, INCOME TAX WAS ALSO PAID ON THE INTEREST INCOME, WHICH WAS RECEIVED SUB SEQUENTLY, BUT NOT DURING THE SUBJECT ASSESSMENT YEAR, WHEN IT ACCRUED . HENCE, WE DO NOT AGREE WITH THE FINDINGS OF THE INCOME TAX APPELLATE TRIBUNAL THAT THE INTEREST INCOME ON BANK DEPOSITS IS HYPOTHETICAL INCOME AND THAT THE ASSESSEE IS ENTITLED TO GET THE INTERE ST EXCLUDED FROM ASSESSMENT. THE QUESTION RAISED IS THUS ANSWERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. THE APPEAL IS THE REFORE, ALLOWED AND THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL IS S ET ASIDE AND THE ASSESSMENT IS RESTORED. PARTIES LEFT TO SUFFER THEI R COSTS. 11. IN VIEW OF THE ABOVE JUDGMENT OF THE HIGH COU RT, WHEREIN THE ISSUE WAS DECIDED AGAINST THE ASSESSEE AND IN FAVOUR OF THE D EPARTMENT, WE ARE INCLINED TO DISMISS THIS GROUND OF APPEAL OF THE ASSESSEE. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE S IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 11 TH JULY, 2018. SD/- SD/- (GEORGE GEORGE K.) (CHAND RA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 11 TH JULY, 2018 ITA NO. 550/COCH/2015 12 GJ COPY TO: 1. THE PLANTATION CORPORATION OF KERALA LTD., MUTTA AMBALAM, KOTTAYAM. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE -1, KOTTAYAM. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS),KOTTAYAM . 4. THE PR. COMMISSIONER OF INCOME-TAX, KOTTAYAM. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRA R) I.T.A.T. , COCHIN