LOKHANDWALA KATARIA CONSTRUCTION P.LTD, MUMBAI V. ACIT CEN CIR 46, MUMBAI

ITA 798/MUM/2012

• Counselvise Citation: 79819914 RSA 2012
• Duration Of Justice: 1 year(s) 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 01-01-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 06-02-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRITAM SINGH
• Assessee Lawyers: BHUMIKA VORA
• Section: 12

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE S/SHRI B.R.MITTAL,(JM) AND N.K.BILLAIYA (AM ) . . , . . , ./I.T.A.NO.798/MUM/2012 ( / ASSESSMENT YEAR: 2004-05) M/S LOKHANDWALA KATARIA CONSTRUCTION PVT.LTD., 72, GANDHI NAGAR, DAINIK SHIVNER ROAD, WORLI, MUMBAI-400018. / VS. ASSTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 46, MUMBAI. ./ ./PAN/GIR NO. : AAACL5150A ( ' / APPELLANT) .. ( ( ' / RESPONDENT) ' / APPELLANT BY : MS.BHUMIKA VORA ( ' * /RESPONDENT BY : SHR I PRITAM SINGH * - / DATE OF HEARING : 1.1.2014 * - /DATE OF PRONOUNCEMENT : 1.1.2014 / O R D E R PER B.R.MITTAL, JM THE ASSESSEE HAS FILED THIS APPEAL FOR ASSESSMEN T YEAR 2004-05 AGAINST ORDER OF LD. CIT(A) DATED 30.11.2011 DISPUTING THE CONFI RMATION OF ADDITION OF RAS.9,30,511/- ON ACCOUNT OF INTEREST INCOME. 2. WE HAVE HEARD LD. REPRESENTATIVE OF THE PARTIES AND PERUSED THE ORDERS OF AUTHORITIES BELOW. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEV ELOPMENT OF PROPERTIES AND BUILDING RESIDENTIAL PROJECTS. THE AO MADE AN ADD ITION OF RS.9.30,511/- ON ACCOUNT OF INTEREST INCOME ON THE GROUND THAT THE ASSESSEE HAS NOT SHOWN THE SAID INTEREST INCOME, WHICH WAS RECEIVED FROM M/S LOKHANDWALA BUI LDERS. THE ASSESSEE CONTENDED THAT IT IS FOLLOWING COMPLETION METHOD OF ACCOUNTI NG IN RESPECT OF CONSTRUCTION CONTRACT AND THE INCOME WAS OFFERED TO TAX ONLY WHEN THE PRO JECT IS COMPLETED. THE INTEREST INCOME RECEIVED BY ASSESSEE OF RS. 9.30,511/- WAS DEDUCTED FROM WORK-IN-PROGRESS I.T.A.NO.798/MUM/2012 2 (WIP) OF ZAHARA PROJECT AS PER REGULAR PRACTICE OF ACCOUNTING. HOWEVER, THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE ON THE G ROUND THAT THE AMOUNT ADVANCED WAS NOT A TRADE ADVANCE OF WHICH THE ASSESSEE RECEIVED THE INTEREST OF RS.9,30,511/-. THAT THE ASSESSEE LENT THE SURPLUS FUND AVAILABLE WITH I T, TO ONE OF ITS GROUP CONCERN ON WHICH THE ASSESSEE HAS EARNED INTEREST INCOME. TH EREFORE, THE AO MADE THE ADDITION OF INTEREST OF RS.9,30,511/- TO THE INCOME OF THE ASSESSEE AND ACCORDINGLY COMPLETED THE ASSESSMENT. 4. IN THE FIRST APPEAL, THE LD. CIT(A) BY FOLLOWING THE DECISION OF HONBLE APEX COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS AN D FERTILIZERS LTD V/S CIT (1997) 227 ITR 172 (SC) CONFIRMED THE ACTION OF AO AND STATED THA T THE INTEREST INCOME ACCRUED TO THE ASSESSEE IS TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. DURING THE COURSE OF HEARING, LD. AR FIRSTLY JUSTIFIED ITS ST AND BY STATING THAT THE ASSESSEE HAS REDUCED THE WIP AGAINST THE INTEREST INCOME AND TH EREFORE NO SEPARATE ADDITION OF THE INTEREST IS TO BE ADDED. HOWEVER, IN REPLY TO THE QUERY AS TO HOW THE INTEREST INCOME CAN BE CONSIDERED AS PART OF BUSINESS ACTIVITY OF THE ASSESSEE BECAUSE THE ADVANCE WAS GIVEN BY ASSESSEE OF ITS SURPLUS FUND AND ADVAN CE WAS NOT GIVEN IN THE COURSE OF ITS BUSINESS ACTIVITY. THEREFORE, THE INTEREST INC OME HAS TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES AND THE SAME CANNOT B E REDUCED FROM WIP. LD. AR SUBMITTED THAT SHE HAS NO OBJECTION, IF THE WIP IS CORRESPONDINGLY INCREASED AND IF THE INTEREST INCOME IS TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES IN THE ASSESSMENT YEAR UNDER CONSIDERATION. ON THE OTHER H AND, LD. DR SUBMITTED THAT, HE HAS NO OBJECTION TO THE ABOVE CONTENTION OF THE LD. AR . 5. WE AGREE WITH THE LD. REPRESENTATIVES OF THE PAR TIES THAT THE SAID INTEREST INCOME IF IT IS TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES, THE WIP HAS TO BE INCREASED BY CORRESPONDING AMOUNT, AS THE ASSESSEE HAS REDUCED THE WIP AS PER ITS INVENTORIES FOR THE ASSESSMENT YEAR UNDER CONSIDER ATION AS ON 31.3.2004, COPIES PLACED ON RECORD. ACCORDINGLY, WE CONFIRM THE ORDER OF LD . CIT(A) THAT THE SAID INCOME OF RS.9,30,511/- HAS TO BE ASSESSED UNDER THE HEAD IN COME FROM OTHER SOURCES BUT AGREED WITH LD. AR THAT THE WIP WHICH THE ASSESSEE HAS RE DUCED EQUIVALENT TO THE INTEREST EARNED IN THE ASSESSMENT YEAR UNDER CONSIDERATION H AS TO BE INCREASED BY THE SAID AMOUNT. SUBJECT TO ABOVE, WE CONFIRM THE ORDER OF LD. CIT(A) BY REJECTING THE GROUNDS OF APPEAL TAKEN BY ASSESSEE. I.T.A.NO.798/MUM/2012 3 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED SUBJECT TO ABOVE OBSERVATION. ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST DAY OF JANUARY, 2014 * 1 2 1 ST DAY OF JANUARY, 2014 * SD SD ( . . /N.K.BILLAIYA ) ( . . /B.R.MITTAL) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. ' / THE APPELLANT 2. ( ' / THE RESPONDENT. 3. > ( ) / THE CIT(A)- 4. > / CIT 5. ? (A , - A , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) - A , /ITAT, MUMBAI