M/s Enbee Infrastructure Ltd., V. The ACIT, 1(1),

ITA 88/IND/2007

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1484 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 29-10-2009
• Assessment Year: misc
• Appeal Filed On: 19-01-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: S S DESHPANDE
• Keywords: Principle of natural justice; Capital receipt; TDS
• Section: 142(1); 234B; 148; 56

Judgement Text

PAGE 1 OF 7 IN THE INCOME TAX APPELATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JM AND SHRI M.L. GUSIA, AM ITA NOS.87 & 88/IND/2007 AYS: 2001-02 & 2002-03 M/S. ENBEE INFRASTRUCTURE LIMITED, 3, INDIRA PRESS COMPLEX, M.P. NAGAR, BHOPAL (PAN AAACE 8657 N) ..APPELLANT V/S. ACIT-1(1), BHOPAL ..RESPONDENT ASSESSEE BY : SHRI S.S. DESHPANDE, CA DEPARTMENT BY : SMT. APARNA KARAN, SR. DR ORDER PER JOGINDER SINGH, JM BOTH THE APPEALS FILED BY ASSESSEE FOR AYS 2001-02 & 2002-03 ARE AGAINST THE DIFFERENT ORDERS OF THE LD. CIT(A)-I, BHOPAL, DATED 30.11.2006 ON THE FOLLOWING GROUNDS: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. FIRST APPELLATE AUTHORITY ERRED IN CONFIRMING THE ADDITIO N OF RS.21,36,444/- AND RS.23,06,854/- RESPECTIVELY BY TREATING THE SAM E AS INCOME FROM OTHER SOURCES AND NOT TREATING AS ELIGIBLE FOR DEDU CTION FROM PREOPERATIVE EXPENSES. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. FIRST APPELLATE AUTHORITY ERRED IN NOT ENTERTAINING THE A DDL. GROUND REGARDING APPLICABILITY OF SEC. 234B & 234C BY HOLDING THAT T HE OMISSION WAS WILFUL AND UNREASONABLE. 2. DURING HEARING OF THESE APPEALS, WE HAVE HEARD S HRI S.S. DESHPANDE, LD. COUNSEL FOR ASSESSEE AND SMT. APARNA KARAN, LD. SR. DR. AT THE OUTSET, IT PAGE 2 OF 7 WAS POINTED OUT THAT THE FACTS AND THE ISSUES IN BO TH THE APPEALS ARE IDENTICAL, PERTAINS TO THE SAME ASSESSEE, THOUGH FOR DIFFERENT AYS, MAY BE HEARD TOGETHER. FIRST WE SHALL TAKE UP GROUND NO.1 I.E. C ONFIRMING THE ADDITION BY TREATING THE SAME AS INCOME FROM OTHER SOURCES. THE CONTENTION RAISED ON BEHALF OF THE ASSESSEE IS THAT THE IMPUGNED AMOUNTS ARE INTEREST RECEIVED FROM FDS OF BANK WHICH WERE IN THE SHAPE OF GUARANT EE MONEY, THEREFORE, IT IS AN CAPITAL RECEIPT AND NOT INCOME FROM OTHER SOU RCES. RELIANCE WAS PLACED UPON THE DECISIONS IN TUTIKORIN ALKALI CHEMICAL & F ERTILIZERS LTD. VS. CIT (227 ITR 172), CIT VS. KARNAL CO-OPERATIVE SUGAR MILLS L TD. (243 ITR 2), CIT VS. BOKARO STEEL LTD. (236 ITR 315). ON THE OTHER HAND, THE LD. SR. DR STRONGLY DEFENDED THE IMPUGNED ORDER BY CONTENDING THAT THE FDS WERE NOT MADE OUT OF COMPULSION, THEREFORE, IT IS AN INCOME FROM OTHE R SOURCES. IT WAS FURTHER PLEADED THAT SEC. 56 IS A CHARGING SECTION AND THE DECISION IN CIT VS. DR. V.P. GOPINATHAN (248 ITR 449) (SC) IS IN FAVOUR OF THE R EVENUE. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON THE FILE. SINCE THE GROUND RAISED AND THE FACTS ARE IDENTICAL IN BOTH THE APPEALS, THEREFORE, THESE CAN BE DISPOSED OF BY THIS COMMON AND CONSOLIDATED ORDER FOR THE SAKE OF BREVITY. BRIEF F ACTS ARE THAT THE ASSESSEE IS A LIMITED COMPANY, ENGAGED IN THE BUSINESS OF INVES TMENT, REAL ESTATE AND AGRICULTURE DECLARED NIL INCOME IN ITS RETURN FIL ED ON 29.10.2001. THE CASES WERE PROCESSED U/S 143(1)(A) ON 29.10.2002 (AY 2001 -02) AND 24.2.2003 (AY 2002-03). NOTICES U/S 148 DATED 14.1.2004 AND 17.12 .2003 RESPECTIVELY WERE PAGE 3 OF 7 ISSUED TO THE ASSESSEE TO WHICH THE ASSESSEE FILED REPLY BY CLAIMING THAT THE RETURN FILED ORIGINALLY MAY BE TREATED TO BE FILED IN COMPLIANCE TO NOTICE U/S 148. THEREAFTER, NOTICE U/S 142(1) WERE ISSUED ON 1 0.1.2005 ALONG WITH QUESTIONNAIRE THAT AS TO WHY THE INTEREST AMOUNT OF RS.21,36,444/- AND RS.23,06,854/- RESPECTIVELY RECEIVED ON DEPOSITS FR OM UTI BANK AND HUDCO SHOULD NOT BE ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSEE IN ITS REPLY CLAIMED THAT THE INTEREST EARNED ON FIXED DEPOSITS WAS RECEIVED FROM THE FDS PLACED WITH THE BANK AS PER LENDING TERMS FOR AVAIL ING BANK GUARANTEE FOR SETTING UP THE PROJECTS, CONSEQUENTLY, THE INTEREST SO EARNED IS INCIDENTAL TO THE BUSINESS OF THE ASSESSEE BY PLACING RELIANCE UP ON THE DECISION IN CIT VS. KARNAL CO-OPERATIVE SUGAR MILLS LTD. (243 ITR 2) (S C). NOW QUESTION ARISES THE INTEREST SO EARNED BY THE ASSESSEE IS INCOME FROM O THER SOURCE OR A CAPITAL RECEIPT. BEFORE COMING TO ANY CONCLUSION, THE NATUR E OF INTEREST, THE FACTS OR THE COMPELLING CIRCUMSTANCES, IF ANY, FOR MAKING SU CH FDS ARE SUPPOSED TO BE CONSIDERED. DURING HEARING OF THE APPEAL, THE LD. C OUNSEL FOR ASSESSEE INVITED OUR ATTENTION TO PAGES 7 TO 12 OF THE PAPER BOOK CO NTAINING SANCTION LETTER OF UTI BANK/BANK GUARANTEE, PAGES 13 TO 36, CONTAINING LOAN SANCTION LETTER FROM HUDCO ALONG WITH LOAN AGREEMENT AND TERMS & CO NDITIONS. OUR ATTENTION WAS ALSO INVITED TO COPY OF THE ORDER OF THE TRIBUNAL IN THE CASE OF ENBEE INDUSTRIES (PAGES 40 TO 46) (ITA NO.480/IND/2 008, DATED 5.12.2008). THE LD. DR IN REPLY PLEADED THAT THE BENCH IN THE C ASE OF ENBEE INDUSTRY HAS NOT CONSIDERED THE DECISION PRONOUNCED IN 248 ITR 4 49 (SC), THEREFORE, NOT PAGE 4 OF 7 APPLICABLE TO THE PRESENT FACTS BY FURTHER PLEADING THAT EACH YEAR IS OTHERWISE INDEPENDENT. THE ASSESSEE RECEIVED INTEREST AMOUNT OF RS.989327/- AND RS.62942/- ACCRUED FROM UTI (TOTAL RS.1052269/-). T DS OF RS.223588/- WAS ALSO DEDUCTED, LIKEWISE RS.793047/- WAS RECEIVED FR OM HUDCO ON WHICH THE TDS OF RS.179229/- WAS DEDUCTED. THE ASSESSEE ALSO RECEIVED AN AMOUNT OF RS.291127/- FROM SATYA OFFSET, BHARTI OFFSET AND BA NK OF MAHARASHTRA ON WHICH THE TDS OF RS.60109/- WAS DEDUCTED. THUS, THE GROSS TOTAL OF INTEREST WAS RECEIVED RS.21,36,443/- ON WHICH THE TOTAL TAX WAS DEDUCTED AT RS.462926/-. THE ASSESSEE WAS SANCTIONED A LOAN OF RS.485 LAKHS BY INDIAN RENEWAL ENERGY DEVELOPMENT AGENCY LTD. (IN SHORT IR DA). OUT OF THIS SANCTIONED AMOUNT, THE ASSESSEE AVAILED LOAN OF RS. 171 LAKHS DURING THE RELEVANT FY. THIS LOAN WAS SANCTIONED ON SPECIFIC C ONDITION THAT THE ASSESSEE SHALL SUBMIT A BANK GUARANTEE OF RS.84.50 LAKHS (EQ UIVALENT TO 10% OF THE SANCTIONED AMOUNT). WE HAVE PERUSED THE LETTER ISSU ED BY THE UTI BANK WHEREIN THE NON FUND BASE LIMIT (PERFORMANCE GUARAN TEE) WAS BASED UPON THE CONDITION THAT THE ASSESSEE SHALL DEPOSIT FIXED DEPOSIT AND THE MARGIN WILL BE KEPT BY THE BANK TILL THE BANK GUARANTEE IS RELE ASED BY MNES AND THE BANK WILL HAVE RIGHT TO ENCASH THE FIXED DEPOSIT IF THE GUARANTEE IS REVOKED. THIS HAS BEEN DULY AGREED/SIGNED BY THE BANK AND THE ASS ESSEE. THE BANK GUARANTEE WAS EXECUTED ON 24.7.2000. THE LOAN SANCT IONED (PAGES 13 TO 16 OF THE PAPER BOOK) IS SUBJECT TO CERTAIN TERMS & CO NDITIONS. IN VIEW OF THIS FACT, IT CAN BE SAID THAT FDS WERE GOT PREPARED OUT OF COMPULSION I.E. TO FULFIL PAGE 5 OF 7 THE REQUIREMENT OF CREDITORS, IN BUSINESS INTEREST AND NOT JUST TO EARN INTEREST OUT OF SURPLUS FUNDS, IF ANY. AT THE SAME TIME, THE ASSESSEE WAS NOT AT LIBERTY TO USE THE INTEREST THE WAY IT LIKED. IN SUCH A SIT UATION, THE DECISION FROM THE HONBLE APEX COURT IN CIT VS. KARNAL COOPERATIVE SU GAR MILLS (SUPRA) WHEREIN THE AMOUNTS WERE DEPOSITED TO OPEN LETTER OF CREDIT FOR PURCHASE OF MACHINERY REQUIRED FOR SETTING UP PLANT, SINCE THE INTEREST F ROM SUCH DEPOSIT WAS FOUND TO BE DIRECTLY CONNECTED AND INCIDENTAL TO CONSTRUC TION OF PLANT WAS OPINED TO BE A CAPITAL RECEIPT, SUPPORTS THE CASE OF THE ASSE SSEE. WHILE COMING TO THIS CONCLUSION, THE HONBLE COURT AFFIRMED THE DECISION OF THE HONBLE P & H HIGH COURT BY APPLYING ANOTHER DECISION IN BOKARO STEEL LTD. (SUPRA) AND ALSO CONSIDERED THE DECISION IN TUTIKORIN ALKALI CHEMICA LS & FERTILIZERS LTD. (SUPRA). IT IS SEEN THAT IN THE CASE OF TUTIKORIN, BORROWED FUNDS/SURPLUS FUNDS WERE INVESTED PRIOR TO COMMENCEMENT OF BUSINESS, THEREFO RE, THESE WERE HELD TO BE INCOME FROM OTHER SOURCES. HOWEVER, IT IS NOT SO IN THE PRESENT APPEAL. THE LD. DR RELIED UPON THE DECISION IN DR. V.P. GOPINAT HAN (SUPRA) WHEREIN THE ASSESSEE EARNED INTEREST FROM FIXED DEPOSITS, THERE FORE, IT WAS RIGHTLY HELD AS INCOME FROM OTHER SOURCES. THE FACTS OF THE PRESENT APPEAL ARE DIFFERENT AS THE FIXED DEPOSITS WERE MADE OUT OF COMPULSION TO F ULFIL THE REQUIREMENT OF CREDITORS AND NOT AT FREEWILL OF THE ASSESSEE WITH THE INTENTION TO EARN INTEREST, THEREFORE, IN OUR HUMBLE OPINION, THE CAS E OF THE DR. V.P. GOPINATHAN MAY NOT HELP THE REVENUE. THE DECISION IN BOKARO ST EEL LTD. FURTHER SUPPORT THE CASE OF THE ASSESSEE BECAUSE IN THE PRESENT CAS E, THE INTEREST AMOUNTS PAGE 6 OF 7 ARE DIRECTLY CONNECTED AND INCIDENTAL TO THE BUSINE SS REQUIREMENT OF THE ASSESSEE. IT IS WORTH MENTIONING THAT FOR AY 2001-0 2, THE INDORE BENCH OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE (ITA NO.480/IN D/2008) ON IDENTICAL ISSUE HELD THAT IT IS A CAPITAL RECEIPT. IT SEEMS THAT TH E DEPARTMENT HAS ACCEPTED THIS ORDER BY NOT CHALLENGING THE SAME BEFORE ANY HIGHER FORUM BECAUSE NO CONTRARY DECISION AGAINST THE AFORESAID ORDER WAS B ROUGHT TO OUR NOTICE. EVEN OTHERWISE, FOR THE SAKE OF CONSISTENCY, THE DEPARTM ENT IS NOT PERMITTED TO TAKE A CONTRARY STAND. OUR VIEW FINDS SUPPORT FROM THE DECISIONS IN CWT VS. ALLIED FINANCE P. LTD. (2007) (289 ITR 318) (DEL), BERGER PAINTS INDIA LTD. VS. CIT (266 ITR 99), UNION OF INDIA VS. SATISH PANNALA L SHAH (249 ITR 221) (SC), AND UNION OF INDIA & OTHERS VS. KAUMUDINI NARAYAN D ALAL & OTHERS (249 ITR 219) (SC). IN VIEW OF THIS FACT AND JUDICIAL PRONOU NCEMENTS, WE ARE NOT IN AGREEMENT WITH THE CONCLUSION DRAWN BY THE LD. CIT( A), CONSEQUENTLY, THIS GROUND OF THE ASSESSEE IS ALLOWED AND THE INTEREST AMOUNT IS DIRECTED TO BE TREATED AS CAPITAL RECEIPT AGAINST INCOME FROM OTHE R SOURCES. 4. THE NEXT GROUND RAISED PERTAINS TO CHARGING OF I NTEREST U/S 234B & 234C OF THE ACT. THE LD. DR CONTENDED THAT CHARGING OF INTEREST IS MANDATORY IN NATURE FOR WHICH RELIANCE WAS PLACED IN THE CASE OF ANJUM GHASWALA, 252 ITR 1 (SC). HOWEVER, WE HAVE FOUND THAT THE LD. CIT (A) HAS NOT DECIDED THE ISSUE ON MERIT AND MERELY DISMISSED THE ADDL. GROUN D RAISED BEFORE HIM ON THE PLEA THAT THE ASSESSEE HAS NOT EXPLAINED ANY RE ASON FOR NOT TAKING THIS GROUND WHILE FILING THE APPEAL. IT IS SEEN THAT THE HONBLE APEX COURT IN ANJUM PAGE 7 OF 7 M H GHASWALA CASE, INTEREST WAS CHARGED FOR DELAY I N FILING THE RETURN, HELD THAT SINCE INTEREST WAS FOR THE DEFICIENCY OR DEFER MENT OF ADVANCE TAX, THEREFORE, THE HONBLE SETTLEMENT COMMISSION HAS NO POWER TO REDUCE OR WAIVE. THE WAIVER OR REDUCTION WAS HELD TO BE PERMI SSIBLE ONLY UNDER CIRCULAR OF CBDT IN CASES AND UNDER CONDITIONS PRESCRIBED. H OWEVER, IN THE PRESENT APPEALS, THE INTEREST INCOME WAS HELD TO BE INCOME FROM OTHER SOURCES, CONSEQUENTLY, IT WAS ADDED TO THE INCOME OF THE ASS ESSEE. WE ARE OF THE VIEW THAT LEVY OF PENAL INTEREST IS AUTOMATIC ONCE THE D EFAULT TAKES PLACE WITHIN THE MEANING OF SEC. 234B & 234C AND THERE IS NO SCOPE F OR APPLYING THE PRINCIPLE FOR EQUITY OR RULE OF NATURAL JUSTICE. SINCE WE HAV E HELD THAT IT IS NOT A INCOME FROM OTHER SOURCES, THEREFORE, IT IS TO BE SEEN WHE THER THE ASSESSEE ACTUALLY COMMITTED ANY DEFAULT. HOWEVER, WITHOUT COMMENTING FURTHER AND DUE TO MANDATORY NATURE OF LEVY OF INTEREST, THIS GROUND O F ASSESSEE IS DISMISSED. IN THE RESULT, APPEALS OF THE ASSESSEE ARE PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.10.2009. SD/- SD/- (M.L. GUSIA) (JOGINDER SIN GH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30.10.2009 !VYAS! COPY TO: APPELLANT/RESPONDENT/CIT/CIT(A)/DR