M/s. Jubilant Foodworks Ltd., Noida V. DCIT, New Delhi

ITA 615/DEL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3986 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 05-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Proportionate interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : C : NEW DELHI BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER ITA NO.483/DEL/2016 ASSESSMENT YEAR : 2011-12 DCIT, CIRCLE-13(2), CR BUILDING, NEW DELHI. VS. JUBILANT FOOD WORKS PVT. LTD., B-214, PHASE-2, DISTRICT GAUTAM BUDH NAGAR, NOIDA. PAN: AABCD1821C ITA NO.615/DEL/2016 ASSESSMENT YEAR : 2011-12 JUBILANT FOOD WORKS PVT. LTD., B-214, PHASE-2, DISTRICT GAUTAM BUDH NAGAR, NOIDA. PAN: AABCD1821C VS. DCIT, CIRCLE-13(2), CR BUILDING, NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K.M. GUPTA, ADVOCATE DEPARTMENT BY : SMT. SIMRAN BHULLAR, CIT, DR DATE OF HEARING : 25.01.2018 DATE OF PRONOUNCEMENT : 25.01.2018 ITA NOS.483 & 615/DEL/2016 2 ORDER PER R.S. SYAL, VP: THESE TWO CROSS APPEALS - ONE FILED BY THE ASSESSE E AND THE OTHER BY THE REVENUE ARISE OUT OF THE ORDER PASSED BY THE CIT( A) ON 02.11.2015 IN RELATION TO THE ASSESSMENT YEAR 2011-12. 2. THE ONLY ISSUE RAISED IN THE ASSESSEES APPEAL I S AGAINST THE CONFIRMATION OF DISALLOWANCE OF RS.13 LAC MADE BY THE AO BY TREATIN G THE SAME AS NON-REFUNDABLE SECURITY DEPOSIT. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF PIZZAS AND RE LATED FAST FOOD PRODUCTS AND SELLS THE SAME THROUGH ITS RETAIL OUTLETS SPREAD TH ROUGHOUT THE COUNTRY. ON PERUSAL OF THE DETAILS FILED ALONG WITH THE RETURN, THE ASS ESSING OFFICER REQUIRED THE ASSESSEE TO FURNISH THE RECONCILIATION STATEMENT OF INCOME WITH FORM NO.26AS. SUCH RECONCILIATION STATEMENT WAS FILED, IN WHICH I T WAS SHOWN THAT A SUM OF RS.34,60,163/- WAS RECEIVED FROM TRAVEL FOOD SERVIC ES PVT. LTD., ON WHICH TDS WAS MADE TO THE TUNE OF RS.3,46,018/-. THE ASSESSI NG OFFICER FOUND THAT INCOME TO THE TUNE OF RS.20.19 LAC WAS DECLARED AND A SUM OF RS.13 LAC WAS SHOWN AS SECURITY AND NOT AS AN INCOME. ON BEING CALLED UPO N TO EXPLAIN AS TO WHY THE SUM OF RS.13 LAC BE NOT TREATED AS INCOME, THE ASSESSEE SUBMITTED THAT THE SECURITY DEPOSIT OF RS.13 LAC WAS FOR SECURING SUPPLIES AND AS PER PARA 6.3 OF THE ITA NOS.483 & 615/DEL/2016 3 AGREEMENT, THE AFORESAID SECURITY DEPOSITS WERE REF UNDABLE IN NATURE. NOT CONVINCED WITH THE ASSESSEES REPLY AND IN VIEW OF THE FACT THAT THE DEDUCTION OF TAX AT SOURCE WAS MADE ON THIS SUM OF RS.13 LAC AS PER THE ASSESSEES OWN ADMISSION, HE ADDED INCOME OF RS.13 LAC TO THE TOTAL INCOME. NO RELIEF WAS ALLOWED IN THE FIRST APPEAL. 4. HAVING HEARD BOTH THE SIDES AND PERUSED THE RELE VANT MATERIAL ON RECORD, IT IS OBSERVED THAT PAGE 233 OF THE PAPER BOOK IS RECONCI LIATION OF INCOME WITH THE AMOUNT SHOWN IN TDS CERTIFICATE SUBMITTED BY THE AS SESSEE BEFORE THE ASSESSING OFFICER. IN SUCH RECONCILIATION, INCOME OF RS.34,6 0,163/- HAS BEEN SHOWN TO HAVE BEEN RECEIVED FROM TRAVEL FOOD SERVICES PVT. LTD., WITH THE CORRESPONDING AMOUNT OF TAX DEDUCTED AT SOURCE FOR A SUM OF RS.3,46,018/ -. IN THE NEXT COLUMN, IT HAS BEEN MENTIONED THAT RS.20.19 LAC IS ON ACCOUNT OF F RANCHISEE FEE AND THE OTHER SUM OF RS.13 LAC IS A PART OF SECURITY DEPOSIT IN SCHED ULE 8 OF THE BALANCE SHEET. THUS, IT IS APPARENT THAT AS PER THE ASSESSEES OWN ADMIS SION, THERE WAS DEDUCTION OF TAX AT SOURCE ON THE SECURITY DEPOSIT TO THE TUNE OF RS .13 LAC, WHICH, IN NORMAL CIRCUMSTANCES, SHOULD HAVE BEEN CONSIDERED AS NON-R EFUNDABLE AND CONSEQUENTLY, THE INCOME IN THE HANDS OF THE ASSESSEE. THE LD. A R SUBMITTED THAT THE ASSESSEE COMMITTED A MISTAKE IN SHOWING AMOUNT OF RS.34.10 L AC AS INCOME AND TDS OF RS.3.46 LAC FROM TRAVEL FOOD SERVICES PVT. LTD. HE SUBMITTED THAT NO DEDUCTION OF TAX AT SOURCE WAS MADE FROM SECURITY DEPOSIT OF RS. 13 LAC WHICH WAS IN THE NATURE ITA NOS.483 & 615/DEL/2016 4 OF REFUNDABLE SECURITY DEPOSIT. HE TOOK US THROUGH CLAUSE 6.3 OF THE AGREEMENT WHICH, AS PER HIS UNDERSTANDING SHOWED THE AMOUNT T O BE NON-REFUNDABLE. HOWEVER, ON GOING THROUGH THIS CLAUSE, IT IS NOT BO RNE OUT AS TO WHETHER THE AMOUNT OF RS.13 LAC IS REFUNDABLE OR NOT INASMUCH AS THERE IS NO STIPULATION FOR THE REFUND OF THE AMOUNT. ADMITTEDLY, IF THERE HAS BEEN A DED UCTION OF TAX AT SOURCE, THEN, THE CORRESPONDING AMOUNT HAS TO BE TREATED AS INCOME IN THE HANDS OF THE ASSESSEE. SINCE THE CLAIM OF THE ASSESSEE IS THAT THE RECONCI LIATION STATEMENT WAS WRONGLY DRAWN, WE CONSIDER IT EXPEDIENT TO SET ASIDE THE IM PUGNED ORDER AND REMIT THE MATTER TO THE FILE OF ASSESSING OFFICER FOR EXAMINI NG THE ASSESSEES CLAIM WITH REFERENCE TO THE RELEVANT DETAILS. IF, ON SUCH EXA MINATION, IT IS FOUND THAT THERE WAS DEDUCTION OF TAX AT SOURCE ON THE SUM OF RS.13 LAC, THEN, OF COURSE, THE AMOUNT OF SECURITY DEPOSIT SHOULD BE TAKEN AS NON-REFUNDABLE AND CONSEQUENTLY REVENUE RECEIPT AND VICE VERSA. NEEDLESS TO SAY, THE ASSESSEE WILL BE ALLOWED A R EASONABLE OPPORTUNITY OF HEARING IN SUCH PROCEEDINGS. 5. THE ONLY ISSUE RAISED IN THE REVENUES APPEAL IS AGAINST THE DELETION OF DISALLOWANCE OF RS.30,68,700/- MADE BY THE ASSESSIN G OFFICER ON ACCOUNT OF INTEREST COST WHICH WAS NOT CAPITALIZED BY THE ASSE SSEE IN ITS CAPITAL WORK-IN- PROGRESS (CWIP) AMOUNTING TO RS.2,25,73,000/-. ITA NOS.483 & 615/DEL/2016 5 6. BRIEFLY STATED, THE FACTS OF THIS GROUND ARE THA T THE ASSESSEE WAS REQUIRED TO EXPLAIN AS TO WHY PROPORTIONATE INTEREST ON CAPITAL WORK IN PROGRESS (CWIP) SHOULD NOT BE DISALLOWED. IN RESPONSE TO THE SAME, THE ASSESSEE SUBMITTED THAT NO INTEREST COST WAS INCURRED BY THE ASSESSEE IN RESPE CT OF THE CWIP. NOT CONVINCED WITH THE ASSESSEES SUBMISSIONS, THE ASSESSING OFFI CER COMPUTED PROPORTIONATE INTEREST @ 12% OF OPENING CWIP OF RS.255.73 LAC AND THE RESULTANT AMOUNT OF RS.30,68,760/- WAS DISALLOWED FROM INTEREST EXPENDI TURE. THE LD. CIT(A) DELETED THE ADDITION BY OBSERVING THAT THE ASSESSEE HAD SUF FICIENT RESERVES AND CAPITAL ETC. THE REVENUE IS AGGRIEVED AGAINST THE DELETION OF AD DITION. 7. HAVING HEARD BOTH THE SIDES AND PERUSED THE RELE VANT MATERIAL ON RECORD, WE FIND FROM THE ASSESSEES BALANCE SHEET, A COPY OF W HICH HAS BEEN PLACED ON RECORD, THAT THERE WAS OPENING BALANCE OF TERM LOAN, UNDER THE HEAD `SECURED LOANS TO THE TUNE OF RS.8.00 CRORE, WHICH IS DIFFERENT FROM THE LOAN OF VEHICLE. THERE CAN BE NO DISPUTE THAT IF THE ASSESSEE HAS A COMMON POOL OF F UNDS AND SOME INVESTMENT IS MADE FROM IT, THE INFERENCE SHOULD BE DRAWN THAT TH E AMOUNT CAME OUT OF INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE IN THE NATUR E OF SHARE CAPITAL AND RESERVES ETC. IF, HOWEVER, SPECIFIC BORROWINGS ARE MADE FOR MAKING SUCH INVESTMENTS, THEN THE THEORY INVESTMENTS FROM COMMON FUNDS WILL CEA SE TO APPLY AND THE INTEREST ACTUALLY INCURRED ON LOAN TAKEN FOR THE PURPOSES OF INVESTMENT ETC. WOULD BE DISALLOWABLE IN TERMS OF PROVISO TO SECTION 36(1)(I II). THE LD. AR COULD NOT PLACE ITA NOS.483 & 615/DEL/2016 6 ON RECORD THE DETAILS OF TERM LOAN OF RS.8.0 CRORE APPEARING AS OPENING BALANCE IN THE BALANCE SHEET OF THE ASSESSEE WHICH STOOD CLEAR ED DURING THE YEAR. WE, THEREFORE, SET ASIDE THE IMPUGNED ORDER AND REMIT T HE MATTER BACK TO THE ASSESSING OFFICER FOR EXAMINING THE NATURE OF TERM LOAN. IF SUCH TERM LOAN IS FOUND TO BE RELATING TO CONSTRUCTION ACTIVITY WHICH HAS BEEN CA PITALIZED AS CWIP, THEN, THE INTEREST ACTUALLY PAID ON SUCH TERM LOAN SHOULD NOT BE ALLOWED AS DEDUCTION IN TERMS OF PROVISO TO SECTION 36(1)(III) AND VICE VERSA . NEEDLESS TO SAY, THE ASSESSEE WILL BE ALLOWED A REASONABLE OPPORTUNITY OF BEING H EARD IN SUCH PROCEEDINGS. 8. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON 25.01.20 18. SD/- SD/- [BEENA A. PILLAI] [R.S. SYAL] JUDICIAL MEMBER VICE PRESIDENT DATED, 25 TH JANUARY, 2018. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.