DCIT RG 8(2), MUMBAI V. KAMAT HOTELS (I) LTD, MUMBAI

ITA 846/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3481 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2004-2005
• Appeal Filed On: 31-01-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: R C JAIN
• Keywords: Business income
• Section: 80HHC

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, M UMBAI BEFORE S/SHRI B.R.MITTAL,(JM) AND RAJENDRA (AM) . . , , ./I.T.A. NO.846/MUM/2011 ( / ASSESSMENT YEARS:2004-05) DY.COMMISSUIONER OF INCOME TAX-8(2), ROOM NO.209, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 / VS. M/S KAMA T HOTELS (INDIA) LTD., 70C, NEHRU ROAD, VILE PARLE (EAST), MUMBAI-400072 ./ ./PAN/GIR NO. : AAACK2912L ( ( / APPELLANT) .. ( ) ( / RESPONDENT) ( / APPELLANT BY : MS.NEERAJA PRADHAN ) ( + /RESPONDENT BY : SHRI R.C.JAIN + - / DATE OF HEARING : 12.6.2013 + - /DATE OF PRONOUNCEMENT : 19.6.2013 / O R D E R PER B.R.MITTAL, JM: THE DEPARTMENT HAS FILED THIS APPEAL FOR ASSESSMEN T YEAR 2004-05 AGAINST ORDER OF LD. CIT(A)-XVII, MUMBAI DATED 29.10.2010. 2. ONLY ISSUE INVOLVED IN THIS APPEAL IS AS TO W HETHER THE LD. CIT(A) HAS ERRED IN DIRECTING THE AO TO TREAT THE INTEREST INCOME OF RS.21,46,920/- AS BUSINESS INCOME WITHOUT APPRECIATING THE FACT THAT INTEREST INCOME IS LIABLE TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES AS CONSIDERED BY THE A O. 3. THE RELEVANT FACTS ARE THAT THE ASSESSEE CARRIED ON HOTEL RELATED BUSINESS. THE ASSESSEE FILED THE RETURN OF INCOME DECLARING TOTA L INCOME AT RS.NIL AFTER SETTING OFF OF BROUGHT FORWARD LOSSES OF EARLIER YEARS. I.T.A. NO.846/MUM/2011 2 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E AO OBSERVED THAT THE ASSESSEE EARNED INTEREST INCOME AMOUNTING TO RS.2 5,43,090/- OUT OF WHICH THE ASSESSEE OFFERED RS.3,96,170/- BEING INTEREST ON I NCOME TAX REFUND AS INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. THE REMAIN ING INTEREST INCOME I.E. RS.21,46,920/- WAS CLAIMED AS BUSINESS INCOME AND A CCORDINGLY ASSESSED THE SAME AS INCOME FROM OTHER SOURCES. BEING AGGRIEVED, THE A SSESSEE FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 5. THE LD. CIT(A) VIDE PARAGRAPH 3.2 HAS DIRECTED T HE AO TO TREAT THE SAID INTEREST INCOME OF RS.21,46,920 AS BUSINESS INCOME. THE SAID PARAGRAPH READS AS UNDER : 3.2 THE AR SUBMITTED THAT THIS GROUND OF APPEAL WA S COVERED BY THE ORDER OF THE ITAT IN THE APPELLANTS OWN CASE. THE ITAT IN THE ORDER NOS. 4000/MUM/2006 AND 3245/MUM/2007 DATED 19.2.2009 FO R AYS 2002-03 AND 2003-04 IN PARA 6 OF DECIDED THE ISSUE IN FAVOUR OF THE APPELLANT AS HELD AS UNDER : IN OUR OPINION, THE CIT(A) HAD ADMITTED THAT THE F IXED DEPOSIT AS WELL AS THE NATIONAL SAVING CERTIFICATES WERE TAKEN FOR KE EPING THE COLLATERAL SECURITY IN THE BANK FOR OBTAINING THE LOAN AND HEN CE, THE SAME HAS NEXUS WITH THE BUSINESS OF THE ASSESSEE. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) THE SUBMISSION HAS BEEN CONSIDERED AND THE ORDER O F THE HONBLE ITAT PERUSED. AS THE FACTS ARE IDENTICAL AS IN EARLIER YEAR RELYI NG ON THE DECISION, THE AO IS DIRECTED TO TREAT INTEREST OF RS.21,46,920/- HENCE, THE DEPARTMENT IS IN APPEAL. 6. DURING THE COURSE OF HEARING, THE LD. DR SUBMITT ED THAT THE ASSESSEE EARNED THE INTEREST INCOME AGGREGATING TO RS.21,46,920/- AS U NDER : I) INCOME FROM INTEREST FROM BANKS ETC R S.20,65,805/- II) INTEREST EARNED ON NSC RS.11,941/- III) INTEREST EARNED ON STAFF LOAN RS.69,174/- SUB-TOTAL RS.21,46,920/- THE LD. DR SUBMITTED THAT THERE WAS NO DIRECT NEX US OF THE INTEREST INCOME EARNED BY THE ASSESSEE WITH THE BUSINESS OF THE ASSESSEE OF R UNNING AND MAINTAINING THE HOTELS AND RESTAURANTS AND HENCE, THE LD. CIT(A) WAS NOT JUSTIFIED TO CONSIDER THE SAID INTEREST INCOME AS BUSINESS INCOME OF THE ASSESSEE. THE LD. DR REFERRED THE DECISION OF THE I.T.A. NO.846/MUM/2011 3 HONBLE DELHI HIGH COURT IN THE CASE OF CIT V/S S HRI RAM HONDA POWER EQUIP & ORS (2007) 289 ITR 475 (DEL) AND SUBMITTED THAT WHEN TH E SURPLUS FUNDS ARE PARKED WITH THE BANK AND INTEREST IS EARNED THEREON, IT HAS BEE N HELD THAT THE SAID INTEREST INCOME IS INCOME FROM OTHER SOURCES. THE LD. DR ALSO REFE RRED TO THE DECISIONS OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V/S RAVI RA TAN EXPORTS (P) LTD (2000)246 ITR 443(BOM) AND THE DECISION IN THE CASE OF SHREE KR ISHNA POLYESTER LTD V/S DY.CIT (2005) 274 ITR 21(BOM) AND SUBMITTED THAT THEIR LOR DSHIPS HAVE HELD THAT INTEREST ON FIXED DEPOSITS WAS TAXABLE AS INCOME FROM OTHER SO URCES AND SUCH INCOME CANNOT FALL UNDER THE HEAD PROFIT AND GAINS OF PROFESSION AN D CANNOT BE INCLUDED IN BUSINESS PROFITS. THE LD. DR SUBMITTED THAT THE ASSESSEE IS NOT IN THE BUSINESS OF MONEY LENDING AND THE ABOVE DECISIONS OF THE JURISDICTIONAL HIG H COURT ARE SQUARELY APPLICABLE TO THE CASE OF THE ASSESSEE. THE LD. DR ALSO REFERRED T HE DECISION OF THE HONBLE KERALA HIGH COURT IN THE CASE OF CIT V/S JOSE THOMOS (20 02) 253 ITR 553(KER) AND SUBMITTED THAT THEIR LORDSHIPS HAVE HELD IN THE SAID CASE T HAT INTEREST IN THE FORM OF DIVIDEND FROM SBI MAGNUM AND INTEREST INCOME FROM BANK DEP OSITS WOULD NOT CONSTITUTES BUSINESS INCOME OF THE ASSESSEE. HE FURTHER SUBMIT TED THAT IT WAS HELD IN THE ABOVE CASE THAT SIMPLY BECAUSE BANK DEPOSITS AND SBI M AGNUM CERTIFICATES WERE OFFERED FOR COLLATERAL SECURITIES FOR BANK CREDIT FACILIT IES, IT COULD NOT BE SAID THAT THERE IS CONNECTION BETWEEN THE BANK DEPOSITS AND THE BUSINE SS ACTIVITIES OF THE ASSESSEE. THE LD. DR SUBMITTED THAT IMMEDIATE SOURCE OF INCOME IS FIXED DEPOSITS WHICH WERE PUT BY THE ASSESSEE WITH THE BANK AND HENCE AS PER THE D ECISION OF THE HONBLE APEX COURT IN THE CASE OF PANDIAN CHEMICALS LTD. V/S CIT (2003) 262 ITR 278 ( SC) THE INTEREST INCOME HAS RIGHTLY BEEN CONSIDERED BY THE AO UNDE R THE HEAD INCOME FROM OTHER SOURCES. 7. ON THE OTHER HAND, THE LD. AR SUBMITTED THAT TH E SIMILAR ISSUE HAS BEEN CONSIDERED BY THE MUMBAI BENCH F OF THE TRIBUNA L IN THE ASSESSEES OWN CASE IN DCIT V/S M/S KAMAT HOTELS P.LTD. IN ITA NO.4000/MUM /2006 (AY-2002-2003) AND IN ITA NO.3425/MUM/2007(AY-2003-04) BY A COMMON ORDER DATED 19.2.2009 AND THE TRIBUNAL HAS HELD THAT THE INTEREST ON FIXED DEPOSI TS AS WELL AS INTEREST ON NSC WERE TAKEN FOR KEEPING THE COLLATERAL SECURITIES IN T HE BANK FOR OBTAINING THE LOAN AND HENCE THE SAME HAS A DIRECT NEXUS WITH THE BUSINESS OF T HE ASSESSEE. THE LD. AR FURTHER I.T.A. NO.846/MUM/2011 4 SUBMITTED THAT THE DEPARTMENT HAS NOT PRODUCED ANY EVIDENCE TO CONTROVERT THE ABOVE FACTS THAT THE ASSESSEE HAS NOT PUT BANK DEPOSITS A ND MARGIN MONEY FOR HIS BUSINESS PURPOSE AND THEREFORE, THE INTEREST INCOME HAS TO B E ASSESSED UNDER THE HEAD INCOME FROM BUSINESS. IN REPLY TO A QUERY FROM THE BENCH ABOUT THE DETAILS OF LOAN TAKEN BY THE ASSESSEE FROM THE BANK, DETAILS OF FIXED DEPO SITS WITH THE BANK ETC, THE LD. AR SUBMITTED THAT IT IS FOR THE DEPARTMENT TO PROVE THAT THE SAID FIXED DEPOSITS WERE NOT TAKEN BY THE ASSESSEE FOR BUSINESS PURPOSE AND THE ASSESSEE COULD NOT BE ASKED AT THIS STAGE TO FURNISH THE ABOVE DETAILS. THE LD. AR ST ATED THAT THE CASE LAWS CITED BY THE LD. DR ARE NOT RELEVANT TO THE FACTS OF THE CASE AS IN THOSE CASES, THE QUESTION WAS WHETHER INTEREST INCOME ON FIXED DEPOSITS COULD BE CONSIDERED AS BUSINESS INCOME FOR THE PURPOSE OF COMPUTING THE DEDUCTION U/S 80HHC OF THE ACT OR NOT. HOWEVER, IN THE CASE OF THE ASSESSEE IT IS A SIMPLE CASE WHETHER T HE INTEREST INCOME ON BANK DEPOSITS, INTERESTS ON NSC AND INTEREST ON STAFF LOAN HAS TO BE CONSIDERED AS BUSINESS INCOME OR INCOME FROM OTHER SOURCES. HENCE, CASES REFERRED B Y THE LD. DR (SUPRA) ARE NOT APPLICABLE TO THE ISSUE BEFORE THE BENCH. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. RE PRESENTATIVES OF THE PARTIES AND THE ORDERS OF AUTHORITIES BELOW. WE HAVE ALSO CONSIDERED THE CASES CITED BEFORE US (SUPRA). 9. THERE IS NO DISPUTE TO THE FACTS THAT IN THE AS SESSEES OWN CASE FOR THE ASSESSMENT YEARS 2002-03 AND 2003-04, THE TRIBUN AL BY ITS COMMON ORDER DATED 19.2.2009 AFTER CONSIDERING THE DECISION OF THE TR IBUNAL IN THE CASE OF ACIT V/S EASTERN INTERNATIONAL HOTELS LTD IN ITA NOS.4245/MU M/2005 AND 4246/MUM/2005 ORDER DATED 16.5.2008 HAS HELD THAT INTEREST ON FIXED D EPOSITS AS WELL AS NATIONAL SAVING CERTIFICATES, WERE TAKEN FOR KEEPING COLLATERAL SECURITIES IN BANK FOR OBTAINING BANK LOAN, HENCE THE INTEREST INCOME HAS DIRECT NEXUS WITH THE BUSINESS OF THE ASSESSEE. HOWEVER, ON PERUSAL OF THE SAID ORDER OF THE TRI BUNAL, WE OBSERVE THAT NO DETAILS OF FACILITIES TAKEN BY THE ASSESSEE FROM THE BANK FOR WHICH THE ASSESSEE ALLEGEDLY GIVEN MARGIN MONEY IN THE FORM OF FIXED DEPOSITS AND NAT IONAL SAVINGS CERTIFICATES ARE SPELT OUT. NOR THE DETAILS OF FIXED DEPOSITS WITH BANK ETC. ARE DISCUSSED IN THE SAID ORDER. WE OBSERVE THAT THE LD. CIT(A) HAS ALSO NOT STATED ANY REASON WHILE DIRECTING THE AO TO TREAT THE INTEREST INCOME ON FIXED DEPOSITS, NAT IONAL SAVINGS CERTIFICATES AND STAFF LOAN I.T.A. NO.846/MUM/2011 5 AS BUSINESS INCOME BUT HAS MERELY RELIED ON THE SAI D ORDER OF THE TRIBUNAL DATED 19.2.2009, THE RELEVANT PORTION OF WHICH WE HAVE AL READY REPRODUCED HEREINABOVE. 10. ON PERUSAL OF THE MATERIAL PLACED ON RECORD AN D CONSIDERING THAT NO DETAILS OF THE BANK FIXED DEPOSITS, PURCHASE OF NATIONAL SAVIN GS CERTIFICATES HAVE BEEN PLACED ON RECORD, AND ALSO KEEPING IN VIEW THE DECISIONS CIT ED BY THE LD. DR (SUPRA) AND ALSO THE FACTS THAT THE ASSESSEE IS NOT IN BUSINESS OF MONEY LENDING BUT IS IN THE BUSINESS OF RUNNING AND MAINTENANCE OF HOTELS AND RESTAURANTS, WE ARE OF THE CONSIDERED VIEW THAT THE MATTER REQUIRES EXAMINATION AS TO WHETHER THE FIXED DEPOSITS HAVE BEEN TAKEN BY THE ASSESSEE AS A CONDITION FOR AVAILING THE LOAN FACILITIES FROM THE BANK FOR THE PURPOSE OF ITS BUSINESS OR THE SAID FIXED DEPOSITS WERE TA KEN TO PUT ITS SURPLUS FUND IN THE FORM OF FIXED DEPOSIT RECEIPTS WITH THE BANK. HOWEVER, AS FAR AS INTEREST ON NATIONAL SAVING CERTIFICATES AND STAFF LOAN(S) IS CONCERNED, THE SA ME CANNOT BE SAID TO HAVE BEEN RECEIVED BY THE ASSESSEE FOR AVAILING LOAN FACILIT IES FROM THE BANK. 11. BE THAT AS IT MAY, WE CONSIDER IT PRUDENT THAT THE MATTER MAY BE CONSIDERED TO CIT(A), TO DECIDE AFRESH BY THE LD. CIT(A) ON THE B ASIS OF EVIDENCE AS MAY BE FURNISHED BEFORE HIM. HENCE, WE SET ASIDE THE ORDER OF THE L D. CIT(A) BY RESTORING THE ISSUE TO HIM FOR HIS FRESH ADJUDICATION WITH A DIRECTION TO DECIDE THE SAME BY A REASONED ORDER AFTER GIVING DUE OPPORTUNITY OF HEARING TO THE PAR TIES AND AFTER CONSIDERING SUCH EVIDENCES AS MAY BE PLACED BEFORE HIM. HENCE, GROU ND OF APPEAL TAKEN BY THE DEPARTMENT IS ALLOWED FOR STATISTICAL PURPOSES. 12. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED AFTER HEARING LD. DR IN THE OPEN COURT ON 19TH JUNE, 2013 + 1 2 19TH JUNE, 2013 + SD/- SD/- ( /RAJENDRA ) ( . . /B.R.MITTAL) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; 2 DATED 19 / 06/2013 . . ./ SRL , SR. PS I.T.A. NO.846/MUM/2011 6 ! / COPY OF THE ORDER FORWARDED TO : 1. ( / THE APPELLANT 2. ) ( / THE RESPONDENT. 3. 6 ( ) / THE CIT(A)- 4. 6 / CIT 5. 7 )9 , - 9 , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, $ //TRUE COPY// (ASSTT. REGISTRAR) - 9 , /ITAT, MUMBAI