ANDHRA PRADESH EXPRESSWAY LTD, MUMBAI V. ASST CIT 14(1)(1), MUMBAI

ITA 663/MUM/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2673 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 19-07-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 30-01-2015
• Court: TRIBUNAL
• Department Lawyers: B S BIST
• Assessee Lawyers: D V LAKHANI
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & RAMLAL NEGI (JM) I.T.A. NO. 663 /MUM/ 20 1 5 (ASSESSMENT YEAR 20 1 0 - 11 ) ANDHRA PRADESH EXPRESSWAY LIMITED THE IL&FS FINANCIAL CENTRE PLOT NO. C - 22, G BLOCK BANDRA KURLA CO MPLEX BANDRA EAST MUMBAI - 400 051. VS. ACIT 14(1)(1) ROOM NO. 460 4 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. ( APPELLANT ) ( RESPONDENT ) PAN NO . AAFCA6343J ASSESSEE BY SHRI D.V. LAKHANI DEPARTMENT BY SHRI B.S. BIST DATE OF HEARING 19 . 7 . 201 6 DATE OF PRONOUNCEMENT 19. 7 . 201 6 O R D E R PER B.R. BASKARAN (AM) : - THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 06.11.2014 PASSED BY LD CIT(A) - 21, MUMBAI AND IT RELATES TO THE ASSESSMENT YEAR 2010 - 11. THE ASSESSE E IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN UPHOLDING THE ASSESSMENT OF INTEREST INCOME EARNED ON FIXED DEPOSITS UNDER THE HEAD INCOME FROM OTHER SOURCES, AS AGAINST THE CLAIM OF THE ASSESSEE TO ASSESS THE SAME AS BUSINESS INCOME. 2. WE HEARD THE P ARTIES AND PERUSED THE RECORD. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPING, OPERATION AND MAINTENANCE OF ROAD INFRASTRUCTURE. THE ASSESSEE EARNED INTEREST INCOME OF RS.7,25,778/ - AND OFFERED THE SAME UNDER THE HEAD BUSINESS. THE AO ASSESSED TH E SAME UNDER THE HEAD INCOME FROM OTHER SOURCES BY FOLLOWING THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILISERS LTD VS. CIT (227 ITR 172) ANDHRA PRADESH EXPRESSWAY LTD. 2 AND ALSO THE DECISION RENDERED BY THE JURISDICTIONAL HONBLE BOMBA Y HIGH COURT IN THE CASE OF GODAVARI SUGAR MILLS LTD VS. CIT (191 ITR 359). THE LD CIT(A) ALSO CONFIRMED THE SAME. AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 3. THE LD A.R SUBMITTED THAT THE FIXED DEPOSITS HAVE BEEN MADE OUT OF FUNDS G ENERATED FROM THE BUSINESS OF THE ASSESSEE AND HENCE THE INTEREST INCOME SHOULD BE ASSESSED UNDER THE HEAD BUSINESS. IN THIS REGARD, HE PLACED RELIANCE ON THE DECISION RENDERED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF LOK HOLDINGS (308 ITR 356) AND ALS O THE DECISION RENDERED BY THE CO - ORDINATE BENCH IN THE CASE OF M/S WEST GUJARAT EXPRESSWAY LTD (ITA NO. 1284/MUM/2011 DATED 27.02.2013). IN THE ALTERNATIVE, THE LD A.R SUBMITTED THAT THE ASSESSEE HAS BORROWED HUGE FUNDS AND THEY ARE REPAYABLE IN PREDETER MINED INSTALMENTS ON FIXED DATES. HENCE THE FUNDS, WHICH ARE IMMEDIATELY REQUIRED, WAS USED TO MAKE FIXED DEPOSITS SO THAT INTEREST BURDEN OF THE ASSESSEE ON THE LOANS SHALL BE REDUCED. FURTHER, THE ASSESSEE IS ALSO REQUIRED TO MAINTAIN THE ROADS CONSTRU CTED BY IT AND HENCE THE ASSESSEE HAS MADE THE DEPOSITS TO MEET SUCH CONTINGENCIES. ACCORDINGLY HE SUBMITTED THAT THE FIXED DEPOSITS HAVE BEEN MADE OUT OF BUSINESS EXIGENCIES AND HENCE THE INTEREST INCOME SHOULD BE ASSESSED UNDER THE HEAD INCOME FROM BUSI NESS. 4. ON THE CONTRARY, THE LD D.R PLACED HEAVY RELIANCE ON THE DECISION RENDERED BY LD CIT(A). 5. HAVING HEARD RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT THERE IS MERIT IN THE LATER SUBMISSIONS MADE BY LD A.R. FROM THE FINANCIAL STATEMENTS, WE NOTICE THAT THE ASSESSEE HAS BORROWED LOANS FOR EXECUTING THE PROJECT AND THE AMOUNT OF LOAN OUTSTANDING AS ON 31.3.2010 STAND AT RS.824.73 CRORES. THE LOAN TAKEN FROM BANKS ALONE STANDS AT RS.503.29 CRORES. IT IS AN ADMITTED FACT THAT THE TERM ANDHRA PRADESH EXPRESSWAY LTD. 3 LOANS HAVE TO BE REPAID IN FIXED INSTALLMENTS AND HENCE THERE IS MERIT IN THE CONTENTIONS OF THE ASSESSEE THAT IT WAS CONSTRAINED TO KEEP THE FUNDS IN FIXED DEPOSITS TO EARN INTEREST, WHICH WILL MEET A PORTION OF INTEREST BURDEN OF BANK LOANS. FURTHER, WE FIND MERI T IN THE CONTENTIONS OF THE ASSESSEE THAT IT HAD TO KEEP SOME SURPLUS FUNDS IN HAND IN ORDER TO MEET THE MAINTENANCE REQUIREMENTS OF THE ROADS. IN THESE SET OF FACTS, WE ARE OF THE VIEW THAT THERE WERE BUSINESS EXIGENCIES IN KEEPING THE FUNDS IN FIXED DEP OSITS AND HENCE THERE IS MERIT IN THE CONTENTIONS OF THE ASSESSEE THAT INTEREST INCOME EARNED ON THOSE FIXED DEPOSITS IS ASSESSABLE AS INCOME FROM BUSINESS. IN THE CASE OF LOK HOLDINGS (SUPRA), THE ASSESSEE THEREIN COLLECTED ADVANCES FROM THE CUSTOMERS WH O INTENDED TO PURCHASE THE FLATS IN THE PROPERTIES AS DEVELOPED BY THE ASSESSEE. SINCE THE CONSTRUCTION WAS GOING ON, THE SURPLUS FUNDS AVAILABLE WITH THE ASSESSEE OUT OF THE ADVANCES SO RECEIVED WAS DEPOSITED IN FIXED DEPOSITS. THE HONBLE JURISDICTIONA L BOMBAY HIGH COURT, AFTER CONSIDERING THE DECISION OF HONBLE SUPREME COURT RENDERED IN THE CASE OF TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LTD (SUPRA), HELD THAT THE INTEREST INCOME IS ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS. 6. IN VIEW OF THE FOREGOING DISCUSSIONS, WE SET ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO ASSESS THE INTEREST INCOME EARNED ON FIXED DEPOSITS DURING THE YEAR UNDER CONSIDERATION AS BUSINESS INCOME OF THE ASSESSEE. 7. IN THE RESULT, T HE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 19 .7.2016 SD/ - SD/ - (RAMLAL NEGI ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 19 / 7 / 20 1 6 ANDHRA PRADESH EXPRESSWAY LTD. 4 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) ITAT, MUMBAI PS