SIKAR BIKANER HIGHWAY LIMITED, MUMBAI V. ITO 14(3)(4), MUMBAI

ITA 6936/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8347 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2014-2015
• Appeal Filed On: 04-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Capital expenditure
• Section: 143(3); 234B; 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER I.T.A. NO.6936/MUM/2018 (ASSESSMENT YEAR: 2014-15) SHRI BIKANER HIGHWAY LTD. THE IL & FS FINANCIAL CENTRE, PLOT C-2, G-BLOCK, BKC, BANDRA EAST, MUMBAI-400051 PAN : AACCJ3827H VS. ITO 14(3)(4 ) AB 482(1), 4 TH FLOOR, AAYAKAR BHAVAN, MUMBAI-400020 APPELLANT RESPONDENT APPELLANT BY : SHRI SANDEEP BHALLA WITH SHRI SAURABH SHAH (AR) RESPONDENT BY : SHRI SMITI SAMANT (CIT-DR) DATE OF HEARING : 20.01.2020 DATE OF PRONOUNCEMEN T : 20.01.2020 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER 1. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ASS ESSMENT ORDER DATED 08.10.2018 UNDER SECTION 143(3) R.W.S. 144C(13), PA SSED IN PURSUANCE OF DIRECTION OF DISPUTE RESOLUTION PANEL-2, MUMBAI (LD . DRP) DATED 10.09.2018 FOR ASSESSMENT YEAR 2014-15. THE ASSESSE E HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE LEA RNED DISPUTE RESOLUTION PANEL (DRP) HAS ERRED IN DIRECTING THE ASSESSING OF FICER TO TREAT THE SUM OF INR 7,48,970/- UNDER THE HEAD INCOME FROM OTHER SOU RCES INSTEAD OF BUSINESS INCOME. THE APPELLANT PRAYS THAT THE CONCL USION REACHED BY THE ASSESSING OFFICER (AO) AS DIRECTED BY DISPUTE RESOL UTION PANEL (DRP) ARE ERRONEOUS AND SHALL BE DELETED. ITA NO. 69 36 MUM 2018-SHRI BIKANER HIGHWAY LTD. 2 2. ON THE FACTS & CIRCUMSTANCES OF THE CASE, THE AP PELLANT PRAYS THAT THE SUM OF INR 7,48,970/- MAY BE REDUCED FROM THE TOTAL VAL UE OF CAPITAL WORK IN PROGRESS, AS THE SAID INCOME IS IN THE NATURE OF CA PITAL RECEIPT AND THE SAME SHALL NOT BE TAXED UNDER THE HEAD 'INCOME FROM OTHE R SOURCES'. 3. ON THE FACTS & CIRCUMSTANCES OF THE CASE, THE AP PELLANT PRAYS THAT THE ADDITION MADE BY THE LEARNED AO AS DIRECTED BY THE LEARNED DRP AMOUNTING TO INR 7,48,970/- UNDER THE HEAD 'INCOME FROM OTHER SOURCES' SHALL BE DELETED. 4. WITHOUT PREJUDICE TO GROUND NO. 1 TO 3, THE APPE LLANT PRAYS THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IF INTEREST IN COME IS TAXED AS INCOME FROM OTHER SOURCES THEN THE CLAIM OF INTEREST EXPEN DITURE AMOUNTING TO INR 13,03,767/- SHOULD BE ALLOWED AGAINST THE INTEREST INCOME AND ONLY THE NET INTEREST INCOME SHOULD BE CHARGED AS PER THE PROVIS IONS OF SECTION 56 OF INCOME TAX ACT, 1961. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE APPELLANT DENIES THE LIABILITY FOR PAYMENT OF INTEREST U/S. 234B AND PRA YS THAT THE INTEREST LEVIED BY THE LEARNED AO AS DIRECTED BY LEARNED DRP SHALL BE DELETED. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF INFRASTRUCTURE DEVELOPMENT. THE ASSESSE E WAS AWARDED A CONTRACT FOR DEVELOPMENT OF HIGHWAY ON BUILT OPERAT E AND MAINTENANCE BASIS BY GOVERNMENT OF RAJASTHAN, PART OF NH-11, ST ARTING FROM SIKAR TO BIKANER IN THE STATE OF RAJASTHAN. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE EARNED INTEREST INCOME OF RS. 7,48,948 /- ON FIXED DEPOSITS IN BANKS. THE ASSESSEE TREATED THE SAID INTEREST INCOM E AS BUSINESS INCOME AND REDUCED FROM THE COST OF WORK-IN-PROGRESS. DURI NG THE ASSESSMENT THE ASSESSEE WAS ASKED TO EXPLAIN WHY THE INTEREST INCO ME SHOULD NOT BE TREATED AS INCOME FROM OTHER SOURCES. THE ASSESSE E FILED ITS REPLY DATED 15.12.2017 AND CONTENDED THAT THE ASSESSEE OB TAINED CREDIT ITA NO. 69 36 MUM 2018-SHRI BIKANER HIGHWAY LTD. 3 FACILITIES FROM VARIOUS BANKS AND INSTITUTIONS FOR SETTING UP OF INFRASTRUCTURE FACILITY. THE FUNDS ARE EXCLUSIVELY MEANT FOR USE OF SETTING UP OF INFRASTRUCTURE FACILITY. THE LENDERS DISBURSE D THE FUNDS AT SPECIFIED INTERVALS AND ARE REQUIRED FOR THE PURPOSE OF SETTI NG UP OF THE PROJECT. HOWEVER, DUE TO TIME DIFFERENCE AND SOURCE AND APPL ICATION OF FUNDS, THE ASSESSEE INVESTED IN SHORT TERM DEPOSIT AND EARNED INTEREST. ON MATURITY, THE FUNDS WERE ULTIMATELY USED FOR THE PURPOSE OF P ROJECT. THE INTENTION OF ASSESSEE OF PARKING THE FUNDS BY WAY OF FIXED DEPOS IT FOR SHORT PERIOD IS TO UTILIZE THE FUNDS FOR MAXIMIZING THE RETURN. THE ASSESSEE HAS CAPITALIZED THE CAPITAL EXPENDITURE AS WELL AS REVE NUE EXPENDITURE TILL TIME THE PROJECT IS SET UP AND HAS TREATED THE SAME AS C APITAL EXPENDITURE. THE CONTENTION OF ASSESSEE WAS NOT ACCEPTED BY ASSESSIN G OFFICER. THE ASSESSING OFFICER IN PARA-5.9 OF THE DRAFT ASSESSME NT ORDER HELD THAT INTEREST INCOME EARNED BY ASSESSEE IS ASSESSABLE AS INCOME FROM OTHER SOURCES. THE ASSESSEE FILED THE OBJECTION BEFORE TH E LD. DRP. HOWEVER, THE OBJECTION OF ASSESSEE WAS DISMISSED VIDE DIRECT ION DATED 10.09.2018. ON RECEIPT OF DIRECTION FROM LD. DRP, THE ASSESSING OFFICER PASSED THE FINAL ASSESSMENT ORDER ACCORDINGLY. AGGRIEVED BY TH E ADDITION IN THE FINAL ASSESSMENT, THE ASSESSEE HAS FILED THE PRESENT APPE AL BEFORE THIS TRIBUNAL. 3. WE HAVE HEARD THE SUBMISSION OF LD. AUTHORIZED REPR ESENTATIVE (AR) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (D R) FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ITA NO. 69 36 MUM 2018-SHRI BIKANER HIGHWAY LTD. 4 4. AT THE OUTSET OF HEARING, THE LD. AR OF THE ASSESSE E SUBMITS THAT THE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE COVERED BY VARIOUS DECISION OF TRIBUNAL IN FAVOUR OF ASSESSEE, WHICH WERE PASSED O N SIMILAR GROUNDS OF APPEAL IN CASES OF ASSESSES WHICH ARE ENGAGED IN SI MILAR INFRASTRUCTURE DEVELOPMENT ACTIVITIES FOR BUILT, OPERATE AND MAINT AINING THE HIGHWAYS IN DIFFERENT STATES. THE LD. AR OF THE ASSESSEE FIL ED THE COPY OF DECISION OF TRIBUNAL IN JORABAT SHILLONG EXPRESSWAY LTD. VS. IT O IN ITA NO. 3667/MUM/2016 FOR ASSESSMENT YEAR 2011-12 DATED 12. 09.2018 AND IN JORABAT SHILLONG EXPRESSWAY LTD. VS. ITO IN ITA NO. 6695/MUM/2017 FOR ASSESSMENT YEAR 2012-13 DATED 24.07.2019. 5. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF LOWER AUTHORITIES. THE LD. DR FURTHER SUBMITS THAT THE ASSESSEE BEFORE THE LD. DRP HAS TAKEN STAND THAT THE ASSESSEE HAS A LIA BILITY OF INTEREST AND THE AMOUNT WAS PARKED IN A FIXED DEPOSIT TO MEET OUT TH E INTEREST LIABILITY. IN SUPPORT OF HIS SUBMISSION, THE LD. AR OF THE ASSESS EE RELIED UPON THE DECISION OF TUTICORIN ALKALI CHEMICALS & FERTILIZER S LTD. VS. CIT (227 ITR 172) (SC). 6. IN REJOINDER SUBMISSION, THE LD. AR OF THE ASSESSEE SUBMITS THAT THE ASSESSEE AVAILED THE CREDIT FACILITY FROM THE BANKS AND VARIOUS INSTITUTIONS. THERE WAS COMPULSION ON THE ASSESSEE TO PARK THE AMOUNT OF LOAN IN AN ESCROW ACCOUNT. THE ASSESSEE CANNOT USE THE LOAN/CREDIT AMOUNT FOR ANY OTHER PURPOSE , EXCEPT FOR THE SPECI FIED PURPOSE AND THUS, ITA NO. 69 36 MUM 2018-SHRI BIKANER HIGHWAY LTD. 5 THE FACTS OF THE CASE OF ASSESSEE ARE ENTIRELY DIFF ERENT FROM TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD (SUPRA) AND COVE RED BY THE DECISION OF TRIBUNAL. 7. WE HAVE HEARD THE SUBMISSION OF BOTH THE PARTIES AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE T HAT ASSESSEE EARNED INTEREST ON DEPOSIT IN BANK. FURTHER, THERE IS NO D ISPUTE THAT THE ASSESSEE IS UNDER THE PROCESS OF SETTING UP OF INFRASTRUCTUR E FACILITY OF EXPRESSWAY FROM SIKAR TO BIKANER. THE ASSESSEE REDUCED THE IN TEREST FROM ITS WORK- IN-PROGRESS. WE HAVE NOTED THAT ON IDENTICAL GROUND S OF APPEAL, THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN JORABAT SHILLONG EXPRESSWAY LTD. (SUPRA) ON SIMILAR GROUNDS OF APPEAL PASSED THE FOL LOWING ORDER: 5. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PA RTIES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE NO TED THAT SIMILAR GROUND INTEREST INCOME WAS TREATED AS INCOME FROM OTHER S OURCES IN ASSESSMENT YEAR 2011-12. HOWEVER, ON APPEAL BEFORE THE TRIBUNA L, THE SAME WAS ALLOWED IN FAVOUR OF ASSESSEE AS BUSINESS INCOME. THE TRIBUNAL WHILE ALLOWING THE INTEREST INCOME AS BUSINESS INCOME FOL LOWED THE DECISION OF JAIPUR BENCH IN INFRASTRUCTURE DEVELOPMENT COMPANY OF RAJASTHAN LTD. VS. DCIT IN ITA NO. 628/JP/2014 DATED 11.08.2016, HONB LE DELHI HIGH COURT IN INDIAN OIL PANIPAT POWER CONSORTIUM VS. ITO (355 ITR 255(DEL.), CIT VS. FACOR POWER LTD. [2016] TAXMAN.COM 178 (DEL.). THEREFORE, CONSIDERING THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011- 12 AND RESPECTFULLY FOLLOWING THE SAME, GROUND NO. 1 TO 3 OF APPEAL ARE ALLOWED. 8. FURTHER, WE HAVE NOTED THAT IN CASE OF JORABAT SHIL LONG EXPRESSWAY LTD. FOR ASSESSMENT YEAR 2010-11, WHICH WAS FOLLOWED IN ASSESSMENT YEAR ITA NO. 69 36 MUM 2018-SHRI BIKANER HIGHWAY LTD. 6 2012-13 (SUPRA), THE CO-ORDINATE BENCH OF TRIBUNAL REFERRED AND RELIED UPON THE DECISION OF INDIAN OIL PANIPAT CONSORTIUM LTD. (315 ITR 255 (DELHI HIGH COURT) WHEREIN THE DECISION OF TUTICORI N ALKALI CHEMICALS & FERTILIZERS LTD. (SUPRA) WAS CONSIDERED AND DISTING UISHED. THE HONBLE DELHI HIGH COURT HELD THAT IN TUTICORIN ALKALI CHEM ICALS & FERTILIZERS LTD. (SUPRA) FUNDS HAVE BEEN BORROWED FOR SETTING U P OF PLANT AND THE SURPLUS WERE INVESTED IN FIXED DEPOSIT, THE INCOME EARNED IN THE FORM OF INTEREST WAS TAXED AS INCOME FROM OTHER SOURCES. THE HONBLE DELHI HIGH COURT ALSO REFERRED THE DECISION OF HONBLE SU PREME COURT IN BOKARO STEEL LTD. [236 ITR 315 (SC)] AND HELD THAT IF THE INCOME IS EARNED BY WAY OF INTEREST OR ANY OTHER MANNER ON FU NDS WHICH ARE EXTRICABLE LINKED TO SET UP OF THE PLANT, SUCH INCO ME IS REQUIRED TO BE CAPITALIZED TO BE SET UP OF AGAINST THE PRE-OPERATI VE EXPENSES. IT WAS HELD THAT TEST IS WHETHER ACTIVITIES ARE TAKEN UP FOR SE TTING UP OF BUSINESS AND THE FUNDS WHICH GENERATED ARE EXTRICABLE IS CONNECT ING THE SETTING UP OF THE PLANT. 9. THUS, CONSIDERING THE AFORESAID RATIO LAY DOWN BY H ONBLE DELHI HIGH COURT IN INDIAN OIL PANIPAT CONSORTIUM LTD. (SUPRA) , WE FIND THAT THE SUBMISSIONS OF LD DR FOR THE REVENUE HAS NO LEG TO STAND. THEREFORE, THE GROUND NO. 1 TO 3 OF THE APPEAL RAISED BY ASSESSEE ARE ALLOWED IN FAVOUR OF ASSESSEE. ITA NO. 69 36 MUM 2018-SHRI BIKANER HIGHWAY LTD. 7 10. GROUND NO.4 IS RAISED IN ALTERNATIVE TO THE GROUND NO. 1 TO 3. SINCE WE HAVE ALLOWED THE GROUND NO. 1 TO 3 OF THE APPEAL, H ENCE, THE DISCUSSION ON GROUND NO.4 HAVE BECOME ACADEMIC. 11. GROUND NO.5 RELATES TO INTEREST UNDER SECTION 234B WHICH IS CONSEQUENTIAL IN NATURE AND NEEDS NO SPECIFIC ADJUD ICATION. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20/01/2020. SD/- SD/- S. RIFAUR RAHMAN PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 20.01.2020 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR G BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI