Hitech Automotive Systems (India) Pvt Ltd, Chennai V. DCIT, Corp Cir 2(2), Chennai

ITA 610/CHNY/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 2202 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 11-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G CHANDRABABU
• Keywords: Principle of natural justice; Capital expenditure; Set aside
• Section: 234B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , ! . , ! ' BEFORE SHRI DUVVURU RL REDDY, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NO.610/CHNY/2019 ( / ASSESSMENT YEAR: 2014-15) M/S. HITACHI AUTOMOTIVE SYSTEMS (INDIA) PVT. LTD. PLOT NO.17, ONE HUB CHENNAI, PANCHANTHIRUTHI VILLAGE, MANAMATHY PO. THIRUPORUR TALUK, KANCHEEPURAM VS THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-2(2) CHENNAI. PAN:AACCH 9517N ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. ASHIK SHAH, C.A /RESPONDENT BY : MR. G.CHANDRABABU, ADDL CIT /DATE OF HEARING : 27.01.2021 /DATE OF PRONOUNCEMENT : 09.03.2021 / O R D E R PER G.MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST ORDER OF LEARNED CIT(A)-5, CHENNAI DATED 10.12.201 8 AND PERTAINS TO ASSESSMENT YEAR 2014-15. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE LEARNED CIT(A) AND LEARNED ASSESSING OF FICER (HEREINAFTER REFERRED TO AS LOWER AUTHORITIES) HAVE ERRED IN FINALIZING AN ORDER OF ASSESSMENT WHICH SUFFERS FRO M LEGAL DEFECTS SUCH AS BEING PASSED IN VIOLATION OF PRINCI PLES OF NATURAL JUSTICE MID IS DEVOID OF MERITS WITHOUT APPRECIATIN G THE FACTS INVOLVED AND DOCUMENTS SUBMITTED IN PROPER AND HAS BEEN COMPLETED WITHOUT ADEQUATE INQUIRIES. 2 ITA NO.610/CHNY/2019 2. THE LEARNED LOWER AUTHORITIES HAVE, IN THE FACT S AND CIRCUMSTANCES OF THE CASE AND IN LAW, ERRED IN TAXI NG THE INTEREST RECEIVED ON THE FIXED DEPOSITS EARMARKED FOR OBTAINING LAND ON LEASE AS INCOME FROM OTHER SOURCES. 3 . THE LEARNED LOWER AUTHORITIES HAVE IN THE FACT S AND CIRCUMSTANCES OF THE CASE AND IN LAW, ERRED IN NOT FOLLOWING THE ORDERS OF THE HONOURABLE SUPREME COURT AND OTHER H IGH COURTS ON THIS MATTER ON SIMILAR ISSUE. THE SAID AC T OF THE LEARNED AO IS AGAINST THE PRINCIPLES OF JUDICIAL DI SCIPLINE. 4. THE LEARNED LOWER AUTHORITIES HAVE IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW ERRED IN NOT FOLLOWING THE RULING OF SUPREME COURT IN THE CASE OF TUTICORIN AL KALI CHEMICALS & FERTILIZERS LTD. WITHOUT APPRECIATING T HE FACTUAL DIFFERENCES. 5. THE LOWER AUTHORITIES HAVE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, ERRED IN NOT CONSIDERING THE FACTUAL AND LEGAL SUBMISSIONS PLACED BY THE APP ELLANT. 6. THE AO ERRED IN LEVYING INTEREST UNDER SECTIO N 234B OF THE ACT. 3. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE COMPAN Y IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADIN G AUTOMOTIVE ENGINE COMPONENTS. DURING THE YEAR UNDER CONSIDERATION, ASSESSEE WAS IN THE PROCESS OF SETTI NG UP OF MANUFACTURING FACILITY AT CHENNAI. FOR THIS PURPOSE , IT HAS BROUGHT IN SHARE CAPITAL FOR THE PURPOSE OF OBTAIN ING LAND ON LEASE. THERE WAS A SIGNIFICANT LAG BETWEEN INCORPOR ATION OF 3 ITA NO.610/CHNY/2019 COMPANY AND OBTAINING LEASE OF LAND FOR CONSTRUCTIO N OF MANUFACTURING FACILITY. DUE TO UNPRECEDENTED DELAY IN OBTAINING LEASE, ASSESSEE WAS NOT ABLE TO UTILIZE FUNDS FULL Y AND HENCE, REMAINING UNUTILIZED FUNDS WERE PARKED IN TEMPORARY FIXED DEPOSITS. THE ASSESSEE HAS EARNED INTEREST ON FIXE D DEPOSITS AMOUNTING TO ` 3,45,81,977/- AND SINCE INTEREST INCOME IS INEXTRICABLY LINKED WITH CAPITAL EXPENDITURE, SAME HAS BEEN REDUCED FROM WORK IN PROGRESS. THE ASSESSING OFFICE R WAS NOT CONVINCED WITH EXPLANATION OF THE ASSESSEE AND ACCO RDING TO HIM, INTEREST EARNED FROM FIXED DEPOSITS FROM BANK S IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES , IRRESPECTIVE OF FACT WHETHER FUNDS ARE RAISED FOR THE PURPOSE OF CAPITAL EXPENDITURE OR NOT. HENCE, REJECTED THE ARG UMENTS OF THE ASSESSEE AND ASSESSED INTEREST ON FIXED DEPOSITS UN DER THE HEAD INCOME FROM OTHER SOURCES. 4. BEING AGGRIEVED BY ASSESSMENT ORDER, ASSESSEE PREFERRED AN APPEAL BEFORE LEARNED CIT(A). BEFORE L EARNED CIT(A), ASSESSEE HAS FILED VARIOUS DETAILS, HOWEVER , LEARNED CIT(A) HAS DISPOSED OFF APPEAL FILED BY ASSESSEE W ITHOUT CONSIDERING SUBMISSIONS MADE BY ASSESSEE IN THE LIG HT OF 4 ITA NO.610/CHNY/2019 VARIOUS EVIDENCES INCLUDING CERTAIN JUDICIAL PRECE DENTS. AGGRIEVED BY LEARNED CIT(A)S ORDER, ASSESSEE IS I N APPEAL BEFORE US. 5. THE LEARNED AR , AT THE TIME OF HEARING, SUBMITT ED THAT LEARNED CIT(A) HAS DISPOSED OFF APPEAL FILED BY ASS ESSEE WITHOUT CONSIDERING VARIOUS EVIDENCES FILED DURING THE COURSE OF APPELLATE PROCEEDINGS TO PROVE THAT THERE IS INEXT RICABLE LINK BETWEEN FUNDS AND INTEREST EARNED FROM FIXED DEPOSI TS AND CONSEQUENTLY, SAME CANNOT BE ASSESSED UNDER THE HEA D INCOME FROM OTHER SOURCES. ALTHOUGH, THE ASSESSEE H AS FILED VARIOUS DETAILS, LEARNED CIT(A) HAS NOT TAKEN INTO CONSIDERATION ANY EVIDENCE AND HENCE, APPEAL MAY BE SET ASIDE TO THE FILE OF LEARNED CIT(A) FOR FRESH ADJUDICATION. 6. THE LEARNED DR, ON THE OTHER HAND, FAIRLY AGREED THAT ISSUE MAY BE SET ASIDE TO THE FILE OF LEARNED CIT(A ) . 7. WE HAVE HEARD BOTH PARTIES, PERUSED MATERIALS AV AILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITI ES BELOW. THE ASSESSEE HAS REDUCED INTEREST EARNED ON TEMPORA RY FIXED 5 ITA NO.610/CHNY/2019 DEPOSITS WITH BANK FROM WORK IN PROGRESS ON THE G ROUND THAT FUNDS PARKED IN TEMPORARY FIXED DEPOSITS IS HAVING INEXTRICABLE LINK WITH PROJECT OF SETTING UP OF MANUFACTURING FA CILITY AND CONSEQUENTLY, SAME CANNOT BE ASSESSED UNDER THE HEA D INCOME FROM OTHER SOURCES. THE ASSESSING OFFICER HA S ASSESSED INTEREST INCOME UNDER THE HEAD INCOME FRO M OTHER SOURCES BY FOLLOWING THE DECISION OF HONBLE SUPREM E COURT IN THE CASE OF M/S. TUTICORIN ALKALI CHEMICALS & FERTI LIZERS LTD . (1997) 93 TAXMANN 502, BY HOLDING THAT SOURCE OF F UNDS WHICH IS USED FOR MAKING FIXED DEPOSITS IS NOT RELEVANT T O DECIDE HEAD OF INCOME AND WHICH IS NATURE OF INCOME DECIDES HEA D OF INCOME AND ACCORDINGLY, ASSESSED INTEREST INCOME UN DER THE HEAD INCOME FROM OTHER SOURCES. THE PLEA OF LEARNED AR FOR ASSESSEE IS THAT ALTHOUGH, ASSESSEE HAS FILED VARIO US EVIDENCES BEFORE LEARNED CIT(A) IN LIGHT OF CERTAI N JUDICIAL PRECEDENTS TO PROVE NEXUS BETWEEN FUNDS PARKED WITH FIXED DEPOSITS AND INTEREST INCOME EARNED FROM FIXED DEP OSITS, BUT LEARNED CIT(A) HAS NOT CONSIDERED ANY EVIDENCES FIL ED BY ASSESSEE. WE FIND THAT LEARNED CIT(A) HAS SIMPLY UP HELD ORDER PASSED BY ASSESSING OFFICER BY FOLLOWING JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF M/S. TUTICORIN ALKALI CHEMICALS & 6 ITA NO.610/CHNY/2019 FERTILIZERS LTD (SUPRA), EVEN THOUGH ASSESSEE HAS C ITED SUBSEQUENT DECISION OF HONBLE SUPREME COURT IN TH E CASE OF CIT VS. M/S. BOKARO STEEL LTD. (1999) 236 ITR 315 A ND DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF INDIAN O IL PANIPAT POWER CONSORTIUM LTD. VS. ITO 315 ITR 255(DEL), WH ERE COURTS AFTER CONSIDERING DECISION OF M/S. TUTICORIN ALKAL I CHEMICALS & FERTILIZERS LTD (SUPRA), HELD THAT IF FUNDS KEPT I N FIXED DEPOSITS IS HAVING INEXTRICABLE LINK WITH PROJECT, THEN INTE REST EARNED ON SHORT TERM DEPOSITS SHOULD BE REDUCED FROM WORK IN PROGRESS, BUT CANNOT BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. ALTHOUGH, ASSESSEE HAS CITED THOSE JUDGEME NTS, LEARNED CIT(A) HAS NOT CONSIDERED JUDGEMENTS CITED BY ASSESSEE BEFORE DECIDING THE ISSUE. THEREFORE, WE A RE OF THE CONSIDERED VIEW THAT ISSUE NEEDS TO GO BACK TO THE FILE OF LEARNED CIT(A) TO DECIDE THE ISSUE IN LIGHT OF VAR IOUS EVIDENCES FILED BY ASSESSEE INCLUDING DECISION OF HONBLE SU PREME COURT IN THE CASE OF M/S.BOKARO STEEL LTD. HENCE, WE SET ASIDE THE ISSUE TO THE FILE OF LEARNED CIT(A) TO DECIDE THE I SSUE AFRESH IN ACCORDANCE WITH LAW. 7 ITA NO.610/CHNY/2019 8. IN THE RESULT, APPEAL FILED BYASSESSEE IS TREAT ED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH MARCH, 2021 SD/- SD/- ( . ) ( . ) (DUVVURU RL REDDY) (G.MANJUNATHA ) ! $ / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER ! /CHENNAI, ' /DATED 9 TH MARCH, 2021 DS )* +* /COPY TO: 1. APPELLANT 2. RESPONDENT 3. , () /CIT(A) 4. , /CIT 5. * 1 /DR 6. /GF .