M/s Sri Harsha Constructions, Hyderabad V. ACIT, Circle-6(1), Hyderabad, Hyderabad

MA 144/HYD/2014

• Counselvise Citation: [2014] 124 COUNSELVISE.COM (IT) 2510 (ITAT-HYDERABAD)
• Duration Of Justice: 2 month(s) 6 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 26-11-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 19-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Business income
• Section: 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE P.M. JAGTAP, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER MA NO. 144/HYD/2014 IN ITA NO. 929/HYD/2011 ASSESSMENT YEAR 2007-08 M/S. SRI HARSHA CONSTRUCTIONS, HYDERABAD PAN: AACFS8025M VS. THE ASST. CIT CIRCLE-6(1) HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SRI K.A. SAI PRASAD RESPONDENT BY: SRI RAJAT MITRA DATE OF HEARING: 14.11.2012 DATE OF PRONOUNCEMENT: 26.11.2012 O R D E R PER ASHA VIJAYARAGHAVAN, JM: BY THIS MA THE ASSESSEE SEEKS RECALL OF TRIBUNAL O RDER IN ITA NO. 929/HYD/2011 DATED 31.10.2012. 2. THE LEARNED COUNSEL SUBMITTED THAT IN THE APPEAL NO . 929/H/2011 THE ASSESSEE RAISED THE FOLLOWING GROUNDS AS GROUND NOS . 11 & 12. 11. THE COMMISSIONER OF INCOME TAX (A) ERRED IN HO LDING THAT THE ENTIRE ARBITRATION AMOUNT OF RS. 1,31,18,7 70 INCLUDED IN THE AMOUNT OF RS. 1,55,97,428/- IS LIABLE TO TAX. 12. THE COMMISSIONER OF INCOME TAX(A) OUGHT TO HAV E OBSERVED THAT THE ASSESSEE INCURRED CERTAIN EXPENSE S FOR HAVING THE ARBITRATION AMOUNT OF RS. 1,31,18,770/- AND THEREFORE ONLY PROFIT IN RESPECT OF THAT AMOUNT SHO ULD BE BROUGHT TO TAX. 3. HE FURTHER SUBMITTED THAT THE TRIBUNAL DISPOSED OF THESE GROUNDS IN PARA 20 PAGE 12 OF ITS ORDER DT. 31.10.2012. THE RE LEVANT OBSERVATIONS AND FINDINGS OF THE TRIBUNAL ARE EXTRACTED AS UNDER: 'FURTHER THE ASSESSEE CHALLENGED THE TREATING THE E NTIRE AMOUNT OF RS. 1,31,18,770 WHICH REPRESENTS THE ARBI TRATION AMOUNT RECEIVED AS INCOME OF THE ASSESSEE. ACCORDI NG TO THE ASSESSEE EXPENDITURE RELATING TO THIS INCOME HAS TO BE ALLOWED. MA NO. 144/HYD/2014 M/S. SRI HARSHA CONSTRUCTIONS ========================= 2 HOWEVER, THERE WAS A FINDING BY THE LOWER AUTHORITI ES THAT THE ASSESSEE ALREADY CLAIMED ALL THE EXPENSES RELAT ING TO THIS INCOME IN EARLIER YEARS. IF IT IS SO THERE CANNOT BE ANY FURTHER DEDUCTION. THE ASSESSEE COUNSEL PLEADED BEFORE US THAT THE FINDINGS OF THE CIT(A) ARE WRONG, HOWEVER, NOT PLAC ED ANY MATERIAL OR DOCUMENTS TO CONTROVERT THE ABOVE FINDI NGS. IN THESE CIRCUMSTANCES, WE ARE INCLINED TO CONFIRM THE FINDINGS OF THE CIT(A).' 4. THE LEARNED COUNSEL SUBMITTED THAT THE TRIBUNAL WAS OF THE OPINION THAT THE ASSESSEE HAD NOT PLACED ANY MATERIAL OR DO CUMENTS IN SUPPORT OF THE CLAIM OF EXPENDITURE INCURRED. HE DREW OUR ATT ENTION TO PARA 5.6 AT PAGE 4 OF THE WRITTEN SUBMISSIONS FILED BEFORE THE TRIBUNAL IN THE COURSE OF HEARING OF THE APPEAL WHICH ARE AS UNDER: '5.6 THOUGH THE ASSESSEE HAD RECEIVED THIS SUM AGAI NST THE CONTRACTS EXECUTED IN EARLIER YEAR, IT HAD TO INCUR SOME EXPENDITURE IN CONNECTION WITH AWARD PROCEEDINGS. MOST OF THE PAYMENTS ARE TO THE CONSULTANTS AND THE AMOUNT INCURRED IS RS. 15,98,500 AS PER THE DETAILS ENCLOSED. SINC E THE EXPENDITURE INCURRED THROUGH BANKING CHANNELS RELAT ED TO AWARD AMOUNT RECEIVED, IT IS PRAYED THAT THE HON'BL E INCOME TAX APPELLATE TRIBUNAL BE PLEASED TO DIRECT THE ASS ESSING OFFICER TO ASSESS ONLY NET ARBITRATION AMOUNT RECEI VED AS OTHER INCOME. THIS ISSUE IS COVERED BY GROUND NOS. 11 & 1 2.' 5. IT WAS SUBMITTED THAT THE AR OF THE ASSESSEE HAD AL SO FILED THE DETAILS OF EXPENDITURE INCURRED THROUGH BANKING CHANNELS, A S REFERRED TO IN THE WRITTEN SUBMISSIONS. IT WAS SUBMITTED THAT SINCE AL L THE DETAILS ARE ALREADY ON RECORD, THE OBSERVATION OF THE TRIBUNAL THAT SUCH D ETAILS ARE NOT FILED IS NOT CORRECT. FURTHER IT WAS POINTED OUT BY THIS MA THAT ANOTHER ISSUE RELATED TO GROUND NO. 8 READS AS UNDER: '8. THE COMMISSIONER OF INCOME TAX(A) OUGHT TO HAVE OBSERVED THAT THE INTEREST ON MARGIN MONEY OF RS. 3 ,81,972/- HAS TO BE CONSIDERED AS PROFITS FROM BUSINESS AND T HEREFORE NO SEPARATE ADDITION WAS REQUIRED TO BE MADE.' 6. THE LEARNED COUNSEL STATED THAT IN THE WRITTEN SUB MISSIONS FILED THE ASSESSEE AT PARAS 4 PAGE 3 SUBMITTED AS UNDER: '4. INTEREST ON MARGIN MONEY - GROUND NO. 8: SINCE THE FIXED DEPOSITS ARE TAKEN FOR GETTING BANK GUARANTEES IN THE COURSE OF BUSINESS FOR THE WORK C ONTRACTS MA NO. 144/HYD/2014 M/S. SRI HARSHA CONSTRUCTIONS ========================= 3 AWARDED, IT IS PRAYED THAT THE INTEREST OF RS. 3,81 ,972 ON MARGIN MONEY FIXED DEPOSITS CANNOT BE SEPARATELY AD DED AFTER ESTIMATING THE INCOME FROM THE BUSINESS AS A WHOLE. WE RELY ON THE DECISION OF KARNATAKA HIGH COURT IN THE CASE OF CIT VS PRODUCIN, 290 ITR 598 FOR THE PROPOSITION TH AT IF THE FIXED DEPOSITS HAVE LINK TO THE BUSINESS ACTIVITY T HE INTEREST THEREON IS BUSINESS INCOME. IN THE CASE OF CIT VS VIDYUT STEEL LTD 219 ITR 30, THE AP HIGH COURT HELD THAT THE INTEREST ON MARGIN MONEY DEPOSI TS CANNOT BE ASSESSED U/S 56 OF THE IT ACT.' 7. THE LEARNED COUNSEL SUBMITTED THAT THE TRIBUNAL DIS POSED OF THIS GROUND AT PARA 19 ON PAGE 11 WITH THE FOLLOWING OBS ERVATIONS / FINDINGS: '19. REGARDING THE INTEREST ON MARGIN MONEY THIS IS SUE CAME FOR CONSIDERATION BEFORE THIS TRIBUNAL IN THE CASE OF KNR CONSTRUCTIONS IN ITA NO 1141/HYD/2005. THE TRIBUNA L WHILE PASSING THE ORDER DATED 30.11.2009 CONSIDERED THE J UDGEMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF VID YUTH STEELS LTD. (CITED SUPRA), WHEREIN IT WAS HELD THAT INTERE ST EARNED ON MARGIN MONEY WAS INEXTRICABLY CONNECTED WITH THE CO NTRACT OF GUARANTEE ITSELF. THE INCOME DERIVED FROM THE M ARGIN MONEY FOR OBTAINING BANK GUARANTEE COULD NOT BE SEP ARATELY ASSESSED UNDER SECTION 56 OF THE ACT. FURTHER THE TRIBUNAL CONSIDERED THE JUDGEMENT OF JURISDICTIONAL HIGH COU RT IN THE CASE OF CIT VS. SPONGE IRON INDIA LTD. (201 ITR 770 ). FURTHER, WHILE DECIDING THE CASE OF VIDYUTH STEELS LTD., JU DGEMENT IN THE CASE OF SPONGE IRON INDIA LTD. WAS NOT BROUGHT TO THE NOTICE OF THE COURT. IT IS ALSO ON RECORD THAT THE SUPREME COURT JUDGEMENT IN THE CASE OF TUTICORIN ALKALI CHE MICALS AND FERTILISERS VS. CIT (227 ITR 172) IS ALSO AGAINST T HE ASSESSEE WHICH WAS FOLLOWED BY THE TRIBUNAL WHILE DISPOSING THE AP PEAL OF THE ASSESSEE ON THIS ISSUE. 20. FURTHER IN THAT CASE THE ASSESSEE FILED MA AND THE SAME WAS DISMISSED VIDE ORDER DATED 12TH OCTOBER, 2012 I N MA NOS. 113 & 114/HYD/2012.' 8. THE LEARNED COUNSEL SUBMITTED THAT THOUGH THE TRIBU NAL RECORDED THAT THE ISSUE IS COVERED IN ASSESSEE'S FAVOUR BY T HE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS VIDYUTH STEELS LTD (219 ITR 30) (AP), THE ISSUE WAS DECIDED AGAINST THE ASSESSEE PLACING RELI ANCE ON TWO OTHER DECISIONS WHICH ARE DISTINGUISHABLE ON FACTS. HENCE THE ORDER OF THE TRIBUNAL IN THIS REGARD NEEDS RECTIFICATION. THE LEARNED COUNSEL PRA YED THAT THE ORDER OF TRIBUNAL IN ITA NO. 929/H/11 MAY BE RECALLED IN THE INTEREST OF JUSTICE AND APPROPRIATE ORDERS MAY BE PASSED. MA NO. 144/HYD/2014 M/S. SRI HARSHA CONSTRUCTIONS ========================= 4 9. THE LEARNED DR DID NOT OPPOSE THE PROPOSITION OF TH E LEARNED COUNSEL. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE TRIB UNAL ORDER. WE ARE OF THE VIEW THAT A MISTAKE HAD CREPT IN WHILE P ASSING THE TRIBUNAL ORDER. HENCE, THE ORDER OF THE TRIBUNAL IN ITA NO. 929/HYD /2011 DATED 31.10.2012 IS HEREBY RECALLED AND THE APPEAL IS RESTORED ON THE F ILE OF THE TRIBUNAL. THE REGISTRY IS DIRECTED TO POST THE APPEAL FOR HEARING IN REGULAR COURSE UNDER INTIMATION TO THE PARTIES CONCERNED. 11. IN THE RESULT, MA BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 26 TH NOVEMBER, 2014. SD/ - (P.M. JAGTAP) ACCOUNTANT MEMBER SD/ - (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER HYDERABAD, DATED 26 TH NOVEMBER, 2014 TPRAO COPY FORWARDED TO: 1. M/S. SRI HARSHA CONSTRUCTIONS, C/O. M/S. B. NARSING RAO & CO., CHARTERED ACCOUNTANTS, PLOT NO. 554, ROAD NO. 92, J UBILEE HILLS, HYDERABAD-96. 2. THE ASST. CIT, CIRCLE - 6(1), 7 TH FLOOR, D BLOCK, IT TOWERS, MASAB TANK, HYDERABAD. 3. THE CIT - IV, HYDERABAD. 4. THE CIT - III, HYDERABAD. 5. THE DR B BENCH, ITAT, HYDERABAD