Assistant Commissioner of Income Tax, Circle - Agartala , Agartala V. Tripura Industrial Development Corporation Limited , Agartala

ITA 65/GTY/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6072 (ITAT-GUWAHATI)
• Duration Of Justice: 3 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 07-06-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A K BHARDWAJ
• Assessee Lawyers: D K BISWAS
• Keywords: Question of law
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL GUWAHATI BENCH, GUWAHATI BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER ITA NO. 65 / GAU / 2016 ASSESSMENT YEAR :2011-12 ACIT, CIRCLE-AGARTALA PARADISE CHOWMUHANI, CITY CENTRE, 5 TH FLOOR, AGARTALA, WEST TIPURA- 799001 V/S . TRIPURA INDSTRIAL DEV. CORP. LTD, NEHRU COMPLEX, KUNJABAN, AGARTALA-799006 [ PAN NO.AABTC 0865 A ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI A.K. BHARDWAJ, ADDL. CIT-DR /BY RESPONDENT SHRI D.K. BISWAS, ADVOCATE /DATE OF HEARING 10-07-2019 /DATE OF PRONOUNCEMENT 02-08-2019 / O R D E R PER BENCH:- THIS REVENUES APPEAL FOR ASSESSMENT YEAR2011-12 A RISES AGAINST THE COMMISSIONER OF INCOME TAX (APPEALS)-SHILLONGS ORD ER DATED 01.03.2016 PASSED IN CASE NO.AGT-06/2014-15, INVOLVING PROCEED INGS U/S 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. THE REVENUES SOLE SUBSTANTIVE GROUND CANVASSED IN THE INSTANT LIS SEEKS TO REVIVE THE TAXPAYERS INTEREST INCOME ADDI TION ON GRANT RECEIVED FROM THE CENTRAL GOVERNMENT RESULTING IN INTEREST DERIVE D AFTER INVESTMENT IN FIXED DEPOSITS IN ITS OWN HAND. THE ASSESSING OFFICER WAS OF THE VIEW THAT SINCE ITA NO.65/GAU/2016 A.Y. 2011-12 ACIT,CIR-AGARTALA VS. TRIPURA INDUSTRIAL DEV. CORP. LTD. PAGE 2 ASSESSEE FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING HA D MADE THE IMPUGNED FIXED DEPOSITS IN ITS OWN NAME THE CORRESPONDING IN TEREST INCOME DESERVES TO BE ASSESSED IN ITS HANDS. THE CIT(A) HAS REVERSED T HE SAID ADDITION IN HIS LOWER APPELLATE DETAILED DISCUSSION AS UNDER:- 5.GROUND NO. 4 IN THIS GROUND, APPELLANT IS CHALLENGING THE ADDITI ON OF RS.2,97,50,160/- AS ' INCOME FROM UNDISCLOSED INTEREST IN FIXED DEPOSIT '. 5.1 FACTS LEADING TO THE ADDITION MAY BRIEFLY BE SU MMARIZED. APPELLANT, DURING RELEVANT PERIOD, WAS A TOTALLY OWNED GOVT. COMPANY. BESIDES.JTS OWN BUSINESS ACTIVITIES IT WAS ACTING AS IMPLEMENTATION AGENCY OF CERTAIN PROJECTS OF THE CENTRAL GOVERNMENT. IN ITS CAPACITY AS AN IM PLEMENTING AGENCY, THE COMPANY RECEIVED FUNDS FROM THE GOVERNMENT WHICH HA D TO BE EXCLUSIVELY USED TILL THE LAST PIE TO EXECUTE THE SPECIFIC PROJ ECT. FUNDS RECEIVED FROM THE GOVERNMENTS OF TRIPURA OR THAT OF INDIA FOR EXECUTI ON OF PROJECTS WHICH WERE NOT FOR IMMEDIATE UTILIZATION WERE PARKED IN FIXED DEPOSITS, BONDS ETC. INTEREST ACCRUED FROM THOSE DEPOSITS WAS NOT SHOWN AS INCOME BY THE COMPANY. DURING THE YEAR, OUT OF TOTAL INTEREST-REC EIVED AMOUNTING TO RS.3,87,59,664/-ONLY A SUM OF RS. 90,08,904/- WAS S HOWN AS INCOME. FEAR OF THE COMPANY WAS THAT INTEREST EARNED FROM DEPOSITS MADE OUT OF GOVERNMENT FUNDS WERE CREDITED TO THE RESPECTIVE FUNDS AS THE CORPORATION DID NOT POSSESS ANY OWNERSHIP OF SUCH SURPLUS FUNDS. 5.2. AO WAS NOT IMPRESSED BY THE EXPLANATION GIVEN BY THE APPELLANT. REASONS GIVEN BY HIM FOR NOT ALLOWING THE CLAIM OF APPELLANT ARE SUMMARIZED BELOW: (I) IN THE NOTES ON ACCOUNT, IT WAS MENTIONED THAT INTEREST IN TERM DEPOSITS ARE RECOGNIZED AS INCOME ON ACCRUAL. THERE FORE ACCRUED- INTEREST SHOULD HAVE BEEN INCLUDED IN THE INCOME. (II) THERE WAS NO ARRANGEMENT WITH GOVERNMENT WHICH MANDATED THE ASSESSEE TO CREDIT INTEREST ACCRUED ON DEPOSITS TO RESPECTIVE PROJECT FUND. (III) SURPLUS FUND WAS AVAILABLE WITH ASSESSEE AND THE SAME WAS INVESTED WHICH YIELDED INTEREST AND THE INVESTMENTS WERE MADE IN THE NAME OF ASSESSEE. THUS THERE WAS NO REASON WHY THE SAME SHOULD NOT BE TAXED IN THE HAND OF ASSESSEE. (IV) AO RELIED ON THE DECISION OF THE HON'BLE TRIBU NAL IN CASE OF NATIONAL THERMAL POWER VS CIT [1988] 24 ITFI WHER EIN IT WAS HELD THAT-WHEN INCOME AROSE UNDER MERCANTILE SYSTEM OF A CCOUNTING, THAT ACCRUED INCOME CANNOT DISAPPEAR BY ANY CONSIDERATIO N OF SUBSEQUENT UTILIZATION OF SUCH INCOME. 5.3. THE MATTER HAS BEEN CAREFULLY CONSIDERED. MONE Y SANCTIONED TO APPELLANT FOR EXECUTION OF PROJECTS WAS NOT APPELLANT'S MONEY . IT HAD TO BE UTILIZED TO THE ITA NO.65/GAU/2016 A.Y. 2011-12 ACIT,CIR-AGARTALA VS. TRIPURA INDUSTRIAL DEV. CORP. LTD. PAGE 3 LAST PIE FOR EXECUTION OF THE PROJECTS. MERE FACT T HAT FDS WERE INVESTED IN APPELLANT'S NAME IS OF NO MOMENT AS THE AMOUNT OF F D AND THE INTEREST THERE ON WERE NOT TO BE USED FOR APPELLANT'S BUSINESS. AP PELLANT FURNISHED DETAILED WRITTEN SUBMISSION. IN A SIMILAR KIND OF SITUATION, THE HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS URBAN INFRASTRUCTUR AL DEVELOPMENT & FINANCE CORPORATION [2006] 155 TAXMANN 228 ( KAR) HAD DECID ED THIS KIND OF ISSUE IN FAVOUR OF ASSESSEE. RELEVANT PORTION OF THE DECISIO N IS REPRODUCED BELOW. 4. THE MATERIAL ON RECORD SHOWS THAT THE VERY PURP OSE OF CONSTITUTION OF THE ASSESSEE WAS TO ACT AS A NODAL AGENCY FOR IM PLEMENTATION OF MEGA-CITY SCHEME WORKED OUT BY THE PLANNING COMMISS ION. BOTH THE CENTRAL AND THE STATE GOVERNMENTS ARE EXPECTED TO P ROVIDE REQUISITE FINANCES FOR IMPLEMENTATION OF THE SAID PROJECT. TH E FUNDS FROM THE CENTRAL AND STATE GOVERNMENTS WILL FLOW DIRECTLY TO THE SPECIALISED INSTITUTIONS/NODAL AGENCIES AS GRANT AND THE NODAL AGENCY WILL CONSTITUTE A REVOLVING FUND WITH THE HELP OF CENTRA L AND STATE SHARES OUT' OF WHICH FINANCE COULD BE PROVIDED TO VARIOUS AGENCIES SUCH AS WATER, SEWERAGE BOARDS; MUNICIPAL' CORPORATIONS, ET C. THE OBJECTIVE IS TO CREATE AND MAINTAIN A FUND FOR THE .DEVELOPMENT OF INFRASTRUCTURAL ASSETS ON A CONTINUING BASIS AND, THEREFORE, THE AS SESSEE IS A NODAL AGENCY FORMED/CREATED BY THE GOVERNMENT OF KARNATAK A AS PER THE GUIDELINES; THERE IS NO PROFIT MOTIVE AS THE ENTIRE FUND ENTRUSTED ARID THE INTEREST ACCRUED THEREFROM ON DEPOSITS IN BANK THOU GHT IN THE NAME OF THE ASSESSEE HAS TO BE APPLIED ONLY FOR THE PURPOSE OF WELFARE OF THE NATIONAL STATES AS PROVIDED IN THE GUIDELINES; THE WHOLE OF THE FUND. BELONGS TO THE STATE EXCHEQUER AND THE ASSESSEE HAS TO CHANNELISE THEM TO THE OBJECTS OF CENTRALLY SPONSORED SCHEME O F INFRASTRUCTURAL DEVELOPMENT FOR MEGA-CITY OF BANGALORE. FUNDS OF WI NG OF THE GOVERNMENT' IS DISTRIBUTED TO THE OTHER WING OF THE GOVERNMENT FOR PUBLIC PURPOSE AS PER THE GUIDELINES ISSUED. THE MO NIES SO RECEIVED, TILL IT IS UTILISED, IS PARKED IN A BANK. THE FINDI NG RECORDED BY THE TRIBUNAL CLEARLY SHOWS THAT THE ENTIRE MONEY IN QUE STION IS RECEIVED FOR IMPLEMENTATION OF THE SCHEME WHICH IS FOR A PUBLIC PURPOSE AND THE SAID SCHEME IS IMPLEMENTED AS PER THE GUIDELINES OF THE CENTRAL GOVERNMENT FUND, THEREFORE, THE ASSESSEE IS ONLY AC TING AS A NODAL AGENCY OF CENTRAL GOVERNMENT JAR IMPLEMENTATION OF THESE PROJECTS, IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE WA S CURRYING ON ANY BUSINESS OR ACTIVITIES OF ITS OWN WHILE IMPLEMENTIN G THE SCHEME IN QUESTION. THE UNUTILISED MONEY, DURING WHICH THE PR OJECT, COULD NOT BE FULLY IMPLEMENTED, IS DEPOSITED IN A BANK TO EARN I NTEREST. THAT INTEREST EARNED IS ALSO AGAIN UTILISED FOR THE IMPLEMENTATIO N OF THE MEGA-CITY SCHEME WHICH IS ALSO PERMITTED UNDER THE SCHEME. TH EREFORE, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE FOR ANY PREVIOUS YEAR THE INTEREST ACCRUED ON BANK DEPOSITS CANNOT BE TREATED AS AN INCOME OF THE ASSESSEE AS THE INTEREST IS EARNED OUT OF THE M ONEY GIVEN BY THE GOVERNMENT OF INDIA FOR THE PURPOSE OF IMPLEMENTATI ON OF MEGA-CITY SCHEME. 5. THEREFORE, WE DO NOT FIND ANY ERROR IN THE CONCL USION REACHED BY THE TRIBUNAL THAT THERE WAS NO INCOME EARNED BY WAY OF INTEREST BY THE ITA NO.65/GAU/2016 A.Y. 2011-12 ACIT,CIR-AGARTALA VS. TRIPURA INDUSTRIAL DEV. CORP. LTD. PAGE 4 ASSESSEE AND SETTING ASIDE THE ORDER OF ASSESSING O FFICER WHICH IS AFFIRMED BY THE FIRST APPELLATE AUTHORITY. THE FIND ING GIVEN BY THE TRIBUNAL IS PURELY A QUESTION OF FACT. WE DO NOT FI ND ANY SUBSTANTIAL QUESTION OF LAW INVOLVED IN THIS APPEAL AND, THEREF ORE, THIS APPEAL IS LIABLE TO BE DISMISSED AT THE STAGE OF ADMISSION IT SELF.' THE FACTS CONTAINED IN THE CASE NOTED ABOVE AND THA T OF APPELLANT ARE SIMILAR. RESPECTFULLY FOLLOWING THE JUDGEMENT OF THE HON'BL E COURT, INTEREST THAT HAD ACCRUED ON THE FIXED DEPOSIT MADE OUT OF FUNDS RECE IVED FOR IMPLEMENTATION OF PROJECTS SANCTIONED BY THE GOVERNMENTS ARE NOT TO B E ASSESSED AS INCOME OF APPELLANT. GROUND NO. 4 IS DECIDED IN FAVOUR OF APPELLANT. 3. MR. BHARDWAJ VEHEMENTLY CONTENDS DURING THE COUR SE OF HEARING THAT ALTHOUGH CIT(A) HAS GONE BY HON'BLE KARNATAKA HIGH COURTS DECISION IN CIT VS. URBAN INFRASTRUCTURAL DEVELOPMENT & FINANCE COR PORATION (2006) 155 TAXMANN 228 (KAR) HOLDING THAT SUCH INTEREST INCOME ARISING ON GRANT-IN-AID FUNDS PARKED IN FIXED DEPOSITS IS NOT EXIGIBLE AS I NCOME THE SAME HAS TO BE CONSIDERED IN THE LIGHT OF CORRESPONDING GRANT-IN-A ID SCHEME UNDER WHICH THE ASSESSEE HAS RECEIVED THE CAPITAL AMOUNT. MR. BISWA S HAS PLACED BEFORE THE ASSESSEES DETAILED PAPER BOOK RUNNING INTO 39 PAGE S. HIS CASE IS THAT THE CIT(A) HAS EXAMINED ALL THE SAID GRANT-IN-AID SCHEM E DOCUMENTS WHILST COMING TO THE IMPUGNED CONCLUSION THAT THIS INTERES T INCOME IS NOT LIABLE TO BE ASSESSED IN ASSESSEES HANDS. THE FACT REMAINS THAT NEITHER THE ASSESSING OFFICER NOR THE CIT(A) HAVE EXAMINED THE CORRESPOND ING SCHEME CLAUSES REGARDING ASSESSEES GRANT-IN-AID WHICH STOOD PARKE D IN FIXED DEPOSIT IN ISSUE. BOTH PARTIES ARE FAIR ENOUGH AT THIS STAGE TO UNANI MOUSLY AGREE THAT WE OUGHT TO RESTORE THE INSTANT LIS BACK TO THE ASSESSING OF FICER FOR SCHEME-WISE ANALYSIS OF THE INTEREST INCOME IN ISSUE. WE APPREC IATE THIS UNANIMITY BETWEEN THE PARTIES DIRECT THE ASSESSING OFFICER TO ADJUDIC ATE AS TO WHETHER THE IMPUGNED INTEREST AMOUNTS ARE CHARGEABLE ASSESSEES HAND OR NOT AS PER THE SCHEME-WISE DETAILS. THE ASSESSEE IS DIRECTED TO FI LE ALL THE NECESSARY DETAILS BEFORE THE ASSESSING OFFICER WITHIN THREE EFFECTIVE OPPORTUNITIES OF HEARING. ITA NO.65/GAU/2016 A.Y. 2011-12 ACIT,CIR-AGARTALA VS. TRIPURA INDUSTRIAL DEV. CORP. LTD. PAGE 5 4. THIS REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES IN ABOVE TERMS. ORDER PRONOUNCED IN ACCORDANCE WITH RULE 34(3) OF T HE ITAT RULES BY PUTTING ON NOTICE BOARD 02/07/2019 SD/- SD/- ( #) (%& #) ( A.L.SAINI) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) GUWAHATI, *DKP '- 02 / 08 /201 9 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ACIT, CIRCLE-AGARTALA PARADISE CHOWMUHA NI, CITY CENTRE, 5 TH FL. AGARTALA, WEST T RIPURA-799001 2. /RESPONDENT-TRIPURA INDUSTRIAL DEV. CORP. LTD., NEH RU COMPLEX, KUNJABAN, AGARTALA-79900 6 3. 2 3 8 / CONCERNED CIT GUWAHATI 4. 3- / CIT (A) GUWAHATI 5. ; &&2, 2, 8 / DR, ITAT, GUWAHATI 6. A / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY (ON TOUR) 2,