Vraj Integrated Textile Park Ltd., Ahmedabad V. The Income tax Office,Ward-8(4), Ahmedabad

ITA 713/AHD/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6926 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 09-12-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 11-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B KULSHRESTHA
• Assessee Lawyers: VIJAY RANJAN
• Keywords: Capital asset; Principle of natural justice; Capital receipt
• Section: 234B

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD , , BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ ITA NO . 713 / AHD/ 201 3 [ [ / ASSESSMENT YEAR : 20 0 8 - 09 VRAJ INTEGRATED TEXTILE PARK LTD, CHIRIPAL HOUSE, NR. SHIVRANJANI CROSS ROAD, SATELLITE, AHMEDABAD PAN : A ACCV 1988 P VS ITO, WARD - 8(4), AHMEDABAD / (APPELLANT) / (RESPONDENT) ASSESSEE(S) BY : SHRI VIJAY RANJAN, AR REVENUE BY : SHRI B. KULSHRESTHA, SR. DR. / DATE OF HEARING : 09 / 12 /2014 / DATE OF PRONOUNCEMENT: 19 /1 2 /2014 / O R D E R PER SHRI N.S. SAINI, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - X I V , AHMEDABAD DATED 14 . 0 2 .201 3 FOR THE ASSESSMENT YEAR 20 0 8 - 0 9 . 2. GROUND NO.3 OF THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE CIT(A) CONFIRMING THE ADDITION OF RS.11,98,160/ - ON ACCOUNT OF FDR INTEREST, TREATING THE SAME AS TAXABLE RECEIPTS, WHEN THE SAME IS DIRECTLY CONNECTED AND INCIDENTAL TO CONSTRUCTION OF PLANT WHEN THE FDR HAS BEEN ESSENTIALLY UTILIZED LATER ON FOR PURCHASE OF CAPITAL ASSET. ITA NO. 713 /AHD/201 3 VRAJ INTEGRATED TEXTILE PARK LTD. FOR AY 200 8 - 0 9 2 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. THE UNDISPUTE D FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE IS IN THE PROCESS OF SETTING UP A TEXTILE PARK. THE BUSINESS OF THE ASSESSEE COULD NOT BE COMMENCED DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE RECEIVED RS.12 CRORES AS GOV ERNMENT GRANT FROM THE GOVERNMENT OF INDIA AND THE SAME WAS CAPITAL RECEIPT IN THE HANDS OF THE ASSESSEE. THE ASSESSEE EARNED INTEREST INCOME OF RS.11,98,160/ - DURING THE YEAR UNDER CONSIDERATION AND CLAIMED THE SAME AS CAPITAL RECEIPT AND SET OFF THE SAME AGAINST THE CAPITAL - WORK - IN - PROGRESS. THE ASSESSEE CLAIMED THAT INTEREST ON FIXED DEPOSIT WAS DUE TO MARGIN KEPT WITH THE BANK AGAINST EXPENDITURE INCURRED FOR PURCHASE OF VARIOUS CAPITAL ASSETS. HOWEVER, THE ASSESSING OFFICER HELD THAT THE INTEREST INC OME WAS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES AND THAT AS THE BUSINESS HAD NOT COMMENCED, THE SHORT TERM DEPOSITS WERE NOT INCIDENTAL TO CONSTRUCTION OF PLANT AND BUILDING, THE INTEREST ON DEPOSITS CONSTITUTES INCOME, AND COULD NOT BE SET O FF OR ADJUSTED AGAINST THE EXPENDITURE ON CAPITAL - WORK - IN - PROGRESS. 4. ON APPEAL, THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 5. BEFORE US, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND RELIED UPON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF INDIAN OIL PANIPAT POWER CONSORTIUM LIMITED V. ITO, [2009] 315 ITR 255 (DELHI). 6. IN THE AFORESAID DECISION, THE HONBLE DELHI HIGH COURT, AFTER GOING THROUGH THE DEC ISIONS OF THE HONBLE SUPREME COURT IN THE CASES OF CHALLAPALLI SUGARS LTD. V. CIT [ 1975] 98 ITR 167 (SC), CIT V. AUTOKAST LTD [2001] 248 ITR 110 (SC), CIT V. BOKARO STEEL LTD. [1999] ITA NO. 713 /AHD/201 3 VRAJ INTEGRATED TEXTILE PARK LTD. FOR AY 200 8 - 0 9 3 236 ITR 315 (SC), CIT V. GOVINDA CHOUDHURY AND SONS [1993] 203 ITR 881 (SC), MAZAGAON DOCK LTD V. CIT [1958] 34 ITR 368 (SC), NARAIN SWADESH WEAVING MILLS V. COMMISSIONER OF EXCESS PROFITS TAX [1954] 26 ITR 656 (SC), SG MERCANTILE CORPORATION P LTD V. CIT [1972] 83 ITR 700 (SC) AND TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD V. CIT [1997] 227 ITR 172 (SC) , HELD AS UNDER: - THE FUNDS IN THE FORM OF SHARE CAPITAL WERE INFUSED FOR THE SPECIFIC PURPOSE OF ACQUIRING LAND AND THE DEVELOPMENT OF INFRASTRUCTURE. THEREFORE THE INTEREST EARNED ON FUNDS PRIMARILY BROUGHT FOR INFUSION IN THE BUSINESS COULD NOT BE CLASSIFIED AS INCOME FROM OTHER SOURCES. SINCE THE INCOME WAS EARNED IN A PERIOD PRIOR TO COMMENCEMENT OF BUSINESS IT WAS IN THE NATURE OF A CAPITAL RECEIPT AND WAS REQUIRED TO BE SET OFF AGAINST PRE - OPERATIVE EXPENSES. 6. IN THE INSTANT CASE, THE GRANT OF RS.12 CRORES WAS RECEIVED BY THE ASSESSEE FOR SETTING UP OF THE TEXTILE PARK. THE INTEREST INCOME EARNED PENDING INFUSION OF GRANT IN AID IN THE CONSTRUCTION OF TEXTILE PARK . IT IS NOT IN DISPUTE THAT THE BUSINESS OF THE ASSESSEE HAD NOT COMMENCED DURING THE YEAR UNDER CONSIDERATION. THEREFORE, IN VIEW OF THE ABOVE DECISION OF THE HONBLE DELHI HIGH COURT, IT HAS TO BE HELD THAT THE INTEREST INCOME SO EARNED WAS CAPITAL R E C E I P T AND IS REQUIRED TO BE SET OFF AGAINST THE CAPITAL - WOR K - IN - PROGRESS. WE, THEREFORE, SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES ON THIS ISSUE AND ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE. 7. GROUND NOS.1 & 2 OF THE APPEAL READ AS UNDER: - 1. ON THE FACTS AS WELL AS IN THE CIRCUMSTANCES OF THE CASE OF THE APPELLANT, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS BAD IN LAW WHICH REQUIRES TO BE QUASHED. 2. WITHOUT PREJUDICE, ON THE FACTS AS WELL AS IN THE CIRCUMSTANCES OF THE CASE OF THE APPELLANT, THE LEARNED CIT(APPEALS) HAS ITA NO. 713 /AHD/201 3 VRAJ INTEGRATED TEXTILE PARK LTD. FOR AY 200 8 - 0 9 4 GROSSLY ERRED IN HOLDING THAT THE ASSESSING OFFICER DULY FOLLOWED THE PROCEDURE AND HAS ALSO DISPOSED OF THE OBJECTIONS RAISED BY THE APPELLANT BY PASSING A SPEAKING ORDER AND THEREUPON AGREEING WITH THE VIEWS OF ASSESSING OFFICER REJECTING THE PLEA OF THE ASSESSEE, THE CONCLUSION DRAWN BY THE LEARNED CIT(APPEALS) IS AGAINST THE PRINCIPLES OF NATURAL JUSTICE AND AGAINST THE BASIC CONCEPT OF FAIRNESS AND TRANSPARENCY. THE SAME MAY BE SET ASIDE. 8. IN VIEW OF OUR DECISION IN GROUND NO.3 OF THE APPEAL OF THE ASSESSEE, THE ABOVE GROUNDS OF APPEAL HAVE BECOME MERELY ACADEMIC IN NATURE AND HENCE, WE REFRAIN FROM ADJUDICATING THE SAME AND ACCORDINGLY, THEY ARE DISMISSED. 9. GROUND NO.4 OF THE APPEAL READS AS UNDER: - 4. ON THE FACTS AS WELL AS IN THE CIRCUMST ANCES OF THE CASE OF THE APPELLANT, THE CIT(APPEALS) HAS ERRED IN REJECTING THE GROUNDS OF APPEAL IN RESPECT OF INTEREST UNDER SECTION 234B AND 234C OF THE ACT, WHEN NO SUCH INTEREST IS CHARGEABLE. THE SAME MAY BE DELETED. 10. NO SUBMISSIONS WERE MADE ON THE ABOVE GROUND OF APPEAL BY THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE DURING THE COURSE OF HEARING. WE H O L D THAT CHARGING OF INTEREST IS CONSEQUENTIAL AND ACCORDINGLY DISPOSE OF THIS GROUND OF APPEAL OF THE ASSESSEE. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE CO URT ON F R I D A Y , THE 1 9 T H OF DECEMBER , 2014 AT AHMEDABAD. SD/ - SD/ - (KUL BHARAT) JUDICIAL MEMBER ( N.S. SAINI) ACCOUNTANT MEMBER AHMEDABAD; DATED 1 9 /1 2 /2014 BIJU T., PS ITA NO. 713 /AHD/201 3 VRAJ INTEGRATED TEXTILE PARK LTD. FOR AY 200 8 - 0 9 5 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) - XIV, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. [ / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD