Tamil Nadu Urban Finance and Infrastructure Development Corporation Ltd., CHENNAI V. ACIT, CHENNAI

ITA 742/CHNY/2008

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7146 (ITAT-CHENNAI)
• Duration Of Justice: 6 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2014
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 28-07-2014
• Assessment Year: 2000-2001
• Appeal Filed On: 10-04-2008
• Court: TRIBUNAL
• Department Lawyers: N RENGARAJ
• Assessee Lawyers: G BASKAR
• Keywords: Business income; Question of law

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNALD BENCH, CHEN NAI . , ! ' #' '!$, % ! & BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER I.T.A. NOS. 739, 740, 741, 742 & 743/MDS/2008 ASSESSMENT YEARS : 1996-97, 1998-99, 1999-2000, 20 00-01 & 2001-02 M/S.TAMIL NADU URBAN FINANCE AND INFRASTRUCTURE DEVELOPMENT CORPORATION LTD, 490/1-2, ANNA SALAI, NANDANAM, CHENNAI 600 035 [PAN: AAACT 1259 R] ( $' /APPELLANT) VS THE ASST. COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-III(I) CHENNAI 34 ( ()$' /RESPONDENT) / APPELLANT BY : MR. G. BASKAR, ADVOCATE / RESPONDENT BY : MR. N.RENGARAJ, CIT-DR / DATE OF HEARING : 28-07-2014 / DATE OF PRONOUNCEMENT : 22-08-2014 * / O R D E R PER BENCH: THE PRESENT SET OF APPEALS HAVE BEEN FILED BY THE ASSESSEE IMPUGNING THE ORDER OF COMMISSIONER OF INCOME TAX(A PPEALS)-III, CHENNAI, DATED 22-02-2008 COMMON FOR ASSESSMENT YEA RS (AYS) 1996-97, 1998-99, 1999-2000, 2000-01 & 2001-02. ITA NOS. 739, 740, 741 742 & 743/MDS/2008 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A COMPANY REGISTERED UNDER THE PROVISIONS OF THE COMP ANIES ACT, 1956. THE STATE GOVERNMENT IS HOLDING 100% SHARES OF THE ASSESSEE COMPANY. THE ASSESSEE COMPANY WAS INCORPO RATED TO ACT AS A NODAL AGENCY TO RECEIVE FUNDS FROM CENTRAL GOVERNMENT AS WELL AS STATE GOVERNMENT AND DISBURSE THE SAME F OR DEVELOPMENT PROJECTS INITIATED BY THE STATE GOVERNM ENT /LOCAL BODIES FROM TIME TO TIME. THE ASSESSEE EARNED INTER EST ON THE FUNDS SO ADVANCED FOR THE PROJECTS. APART FROM THI S, THE ASSESSEE PARKED EXCESS FUNDS IN BANKS AND EARN INTEREST ON THE SAID FUNDS. THE INTEREST SO EARNED BY THE ASSESSEE WAS AGAIN INVESTED IN VARIOUS DEVELOPMENT PROJECTS AS PER THE GOVERNME NT INSTRUCTIONS. FOR THE AYS UNDER CONSIDERATION, THE ONLY ISSUE IS: WHETHER THE INTEREST RECEIVED BY THE ASSESSEE ON TH E FUNDS IS INCOME OF THE ASSESSEE? 3. SHRI G.BASKAR, APPEARING ON BEHALF OF THE ASSESS EE SUBMITTED THAT SIMILAR ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE AYS. 2005-06, 2006-07 & 2007-08. THE CO-ORDINATE BENCH OF THE TRIBUNAL VIDE ORDER DT .11 TH SEPTEMBER, 2012 HELD THAT THE INTEREST RECEIVED BY THE ASSESSEE ON THE FUNDS IS NOT TO BE TREATED AS INCOME IN THE HANDS OF THE ITA NOS. 739, 740, 741 742 & 743/MDS/2008 3 ASSESSEE. THE LD.COUNSEL FOR THE ASSESSEE PLACED O N RECORD A COPY OF THE ORDER OF THE TRIBUNAL IN ITA NO.5/MDS/2 010, 6/MDS/2010 AND 603/MDS/2011. 4. WE FIND THAT IDENTICAL ISSUE HAD COME UP BEFORE THE CO- ORDINATE BENCH OF THE TRIBUNAL. WHILE DECIDING THE ISSUE, RELIANCE WAS PLACED ON THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. KARNATAKA URBAN INFRASTRUCTURE DEVELOPMENT & FINANCE CORPORATION REPORTED AS 284 ITR 582. THE RELEVANT EXTRACT OF THE ORDER OF THE TRIBUNAL IS RE-PRODUCED HEREIN BELOW: 8. WE HAVE HEARD THE SUBMISSIONS MADE BY BOTH THE PARTIES AND HAVE EXAMINED THE ORDERS PASSED BY THE LOWER AUTHOR ITIES. IT IS AN ADMITTED FACT THAT THE ASSESSEE IS A STATE GOVERNME NT UNDERTAKING AND IS ONLY ACTING AS NODAL AGENCY FOR RECEIVING FUNDS FROM CENTRAL AS WELL AS STATE GOVERNMENTS AND THE DISBURSEMENT OF THE FU NDS FOR THE DEVELOPMENT AND THE INFRASTRUCTURE PROJECTS IS AS P ER THE DIRECTIONS OF THE GOVERNMENT FROM TIME TO TIME. THE CONTROVERSY INVOLVED IN THE PRESENT APPEAL IS WITH REGARD TO ACCRUED INTEREST O N THE FUNDS ADVANCED TO THE LOCAL BODIES /IDSMT FUNDS PROGRAMME. THE HON BLE KARNATAKA HIGH COURT IN CIT VS. KARNATAKA URBAN INFRASTRUCTU RE DEVELOPMENT & FINANCE CORPORATION (SUPRA) HAS HELD AS UNDER:- 4. THE MATERIAL ON RECORD SHOWS THAT THE VERY PURP OSE OF CONSTITUTION OF THE ASSESSEE WAS TO ACT AS A NODAL AGENCY FOR IMPLEMENTATION OF MEGA-CITY SCHEME WORKED OUT BY TH E PLANNING COMMISSION. BOTH THE CENTRAL AND THE STATE GOVERNMENTS ARE EXPECTED TO PROVIDE REQUISITE FINAN CES FOR ITA NOS. 739, 740, 741 742 & 743/MDS/2008 4 IMPLEMENTATION OF THE SAID PROJECT. THE FUNDS FROM THE CENTRAL AND STATE GOVERNMENTS WILL FLOW DIRECTLY TO THE SPE CIALISED 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 VA RIOUS AGENCIES SUCH AS WATER, SEWERAGE BOARDS, MUNICIPAL CORPORATIONS, ETC. THE OBJECTIVE IS TO CREATE AND M AINTAIN A FUND FOR THE DEVELOPMENT OF INFRASTRUCTURAL ASSETS ON A CONTINUING BASIS AND, THEREFORE, THE ASSESSEE IS A NODAL AGENCY FORMED/CREATED BY THE GOVERNMENT OF KARNATAK A AS PER THE GUIDELINES; THERE IS NO PROFIT MOTIVE AS TH E ENTIRE FUND ENTRUSTED AND THE INTEREST ACCRUED THEREFROM ON DEP OSITS IN BANK THOUGH IN THE NAME OF THE ASSESSEE HAS TO BE A PPLIED ONLY FOR THE PURPOSE OF WELFARE OF THE NATION/STATE S AS PROVIDED IN THE GUIDELINES; THE WHOLE OF THE FUND B ELONGS TO THE STATE EXCHEQUER AND THE ASSESSEE HAS TO CHANNEL ISE THEM TO THE OBJECTS OF CENTRALLY SPONSORED SCHEME O F INFRASTRUCTURAL DEVELOPMENT FOR MEGA-CITY OF BANGAL ORE. FUNDS OF ONE WING OF THE GOVERNMENT IS DISTRIBUTED TO THE OTHER WING OF THE GOVERNMENT FOR PUBLIC PURPOSE AS PER THE GUI DELINES ISSUED. THE MONIES SO RECEIVED, TILL IT IS UTILISED , IS PARKED IN A BANK. THE FINDING RECORDED BY THE TRIBUNAL CLEARLY SHOWS THAT THE ENTIRE MONEY IN QUESTION IS RECEIVED FOR IMPLEM ENTATION OF THE SCHEME WHICH IS FOR A PUBLIC PURPOSE AND THE SA ID SCHEME IS IMPLEMENTED AS PER THE GUIDELINES OF THE CENTRAL GOVERNMENT AND, THEREFORE, THE ASSESSEE IS ONLY ACT ING AS A NODAL AGENCY OF CENTRAL GOVERNMENT FOR IMPLEMENTATI ON OF THESE PROJECTS. IT IS NOT THE CASE OF THE REVENUE T HAT THE ASSESSEE WAS CARRYING ON ANY BUSINESS OR ACTIVITIES OF ITS OWN WHILE IMPLEMENTING THE SCHEME IN QUESTION. THE UNUT ILISED MONEY, DURING WHICH THE PROJECT COULD NOT BE FULLY IMPLEMENTED, IS DEPOSITED IN A BANK TO EARN INTERES T. THAT INTEREST EARNED IS ALSO AGAIN UTILISED FOR THE IMPL EMENTATION OF THE MEGA-CITY SCHEME WHICH IS ALSO PERMITTED UNDER THE SCHEME. THEREFORE, 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 ASSE SSEE AS THE INTEREST IS EARNED OUT OF THE MONEY GIVEN BY TH E 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 EA RNED BY WAY OF INTEREST BY THE ASSESSEE AND SETTING ASIDE T HE ORDER OF ITA NOS. 739, 740, 741 742 & 743/MDS/2008 5 AO WHICH IS AFFIRMED BY THE FIRST APPELLATE AUTHORI TY. THE FINDING GIVEN BY THE TRIBUNAL IS PURELY A QUESTION OF FACT. WE DO NOT FIND ANY SUBSTANTIAL QUESTION OF LAW INVOLVE D IN THIS APPEAL AND THEREFORE, THIS APPEAL IS LIABLE TO BE D ISMISSED AT THE STAGE OF ADMISSION ITSELF. 9. ON THE OTHER HAND, THE D.R. HAS PLACED RELIANCE ON THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE RELEVANT TO THE ASSESSMENT YEAR 2004-05 IN ITA NO.352/MDS/2007 DECIDED ON 8.2.2008. IN THE AFOREMENTIONED CASE, THE ISSUE INVOLVED WAS WITH RE GARD TO CLAIM OF THE ASSESSEE TO TREAT ITS ENTIRE INCOME AS EXPENDITURE UNDER SECTION 10(23G) OF THE INCOME TAX ACT AND HAS ALSO CLAIMED DEDUCTION UNDER SECTION 36(1)(VIII) OF THE ACT TO THE EXTENT OF 40% OF THE BUSINESS INCOME WITHOUT APPROVAL FROM CBDT. WE ARE OF THE CONSIDERE D OPINION THAT THE CONTROVERSY INVOLVED IN THE PRESENT CASE IS DIFFERE NT FROM THE ONE WHICH HAS BEEN DECIDED BY THE TRIBUNAL IN ITA NO.352/MDS/ 2007 RELEVANT TO THE ASSESSMENT YEAR 2004-05. HOWEVER, THE PRESENT CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE DIVISION BENCH JUDGEMENT OF THE HONBLE KARNATAKA HIGH COURT, WHEREIN IT HAS BEEN HELD THAT SINCE INTEREST EARNED IS AGAIN UTILIZED FOR IMPLEMENTATI ON OF THE MEGA-CITY SCHEME, THE SAME CANNOT BE TREATED AS INCOME OF TH E ASSESSEE. THE INTEREST IS EARNED OUT OF THE MONEY GIVEN BY THE GO VERNMENT OF INDIA FOR THE PURPOSE OF IMPLEMENTATION OF MEGA-CITY SCHEME . 10. WE, THEREFORE, UPHOLD THE FINDINGS OF THE CIT(A ) AND DISMISS THE APPEAL OF THE REVENUE BEING DEVOID OF MERITS. SINCE THE ISSUE IN PRESENT APPEALS OF THE ASSESSEE IS IDENTICAL TO THE ONE ALREADY ADJUDICATED BY THE CO-ORDINATE BENC H, WE ITA NOS. 739, 740, 741 742 & 743/MDS/2008 6 RESPECTFULLY FOLLOW THE SAME AND SET ASIDE THE IMPU GNED ORDER. ACCORDINGLY, ALL THE APPEALS OF THE ASSESSEE ARE AL LOWED. ORDER PRONOUNCED ON FRIDAY, THE 22 ND AUGUST, 2014 AT CHENNAI. SD/- SD/- (. ) (#' '!$) (A. MOHAN ALANKAM ONY) ! / ACCOUNTANT MEMBER (VIKAS AWASTHY) % ! / JUDICIAL MEMBER /CHENNAI, ! /DATED: 22 ND AUGUST, 2014 TNMM ' #$%&'& /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ' ' ()* /CIT(A) 4. ' ' ( /CIT 5. &+,$$-. /DR 6. ,/01 /GF