9911796707
Advanced Search 
TMI Blog2011 (12) TMI 334X X X X Extracts X X X X X X X X Extracts X X X X ..... e capital of the factory to the extent of 32.5% of the total project cost and 7.5% of the project cost was to be contributed by the sugarcane grower members and co-operative institutions in the area. The balance 60% of the project cost was to be raised by way of term loan. He submitted that the total project initially was estimated at Rs. 15 crores and the Government contributed its share of share capital of Rs. 4.45 crores under letter dated 27.03.1991 and 26.03.1992. Due to some compelling circumstances, the project could not be started and the cost of the project increased to Rs. 24.75 crores due to delay and the contribution of the government towards share capital was increased to approx. Rs. 7.25 crores. He submitted that one of the conditions for the government contribution was that the share capital contribution till it was required, had to remain deposited with the nationalised bank and was not to be withdrawn without the prior approval of the Administrator, Union Territory. Accordingly, the interest received on fixed deposits of the government capital contribution was directly taken to "reserve account". The learned counsel for the assessee submitted that the project cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the letter dated 6-11-1998 from the Administrator, Dadra and Nagar Haveli, Union Territory wherein the assessee was directed that the interest accrued on government share capital contribution be adjusted against the additional share capital contribution by the Administration. The learned counsel for the assessee referred to the letter of the Administrator of Dadra and Nagar Haveli, Union Territory dated 24.09.1999 wherein the assessee was informed to adjust the interest earned on central government share capital contribution as an additional share capital contribution by the Administration and it was specifically made clear that to issue share certificate for interest accrued on the government share amount upto 31-3-1999 in the name of "President of India" as the interest was termed as additional share from the Administration. He submitted that contents of various letters from Administration of Dadra and Nagar Haveli clearly showed that the interest belonged to the central government and therefore the amount was not includible in the hands of the assessee. He relied on a series of decisions, citations of which were given from page nos. 16 to 21 of the compilation filed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. He relied on the orders of the AO and the CIT(A). 5. The learned counsel for the assessee in his rejoinder submitted that the case laws cited by the learned DR are distinguishable since they pertain to the cases where unsustainable claim has been made by the assessee. He submitted that the assessee has made bona fide claim and the issue is pending before the Hon'ble Bombay High Court in the quantum appeal of the assessee. He submitted that from day one, the Central Government was entitled to the interest accrued on the amount given by it and the interest amount was converted into share capital of the central government in the name of the "President of India" and was never in the domain of the assessee and the claim of the assessee was bona fide and was a sustainable claim. 6. We have considered rival submissions carefully and have perused the copies of various documents filed in the compilation by the assessee. We find that the assessee, a cooperative society, was engaged in the business of manufacturing of sugar and marketing of agriculture produce of its members. The assessee society was incorporated with main basic object of establishing sugar factory in the notified area ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount of interest accrued on capital contribution made by the central government which was kept in designated special account with the State Bank of India and the interest thereon was directed to be considered as part of the share capital contribution which the central government was required to make. The claim of the assessee was that the principle of diversion by over-riding title applies to the facts of the assessee, as the assessee was never having any domain of the interest accrued on the FDRs with the SBI of the government contribution amount, which was considered as part of the share capital contribution of the government. This claim of the assessee was rejected by the AO and appeal to the CIT(A) and to the Tribunal preferred by the assessee was also dismissed. We find that the penalty proceedings and the assessment proceedings are independent to each other. The issue of taxability of interest accrued on designated special account with the SBI of the government contribution considered as part of share capital contribution by the central government was decided against the assessee by the Tribunal and the assessee preferred appeal to the Hon'ble Bombay High Court vide Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to the assessee by the central government for non-utilisation of interest amount for its business purpose. The decisions of the Hon'ble Courts relied upon by the learned DR pertains to the cases where unsustainable claim has been made by the assessee and it was found that the assessee has not made a bona fide claim of exemption/deduction. The facts of the case of the assessee were that the assessee has made claim which could not be termed as frivolous claim and the Hon'ble Bombay High Court has already admitted quantum appeal of the appeal of the assessee. The arguments of learned DR that the assessee should have shown the interest income first and then it could have claimed the exemption thereto and since the assessee has not done so, the conduct of the assessee could not be said to be bona fide, devoid of any merit for the reasons that since as per the scheme of the government coupled with various directives issued by the authorities from time to time, the assessee was obliged to consider the amount of interest earned in designated special account of the SBI as part of the share capital contribution of the Central Government and therefore the assessee has validly had a bona f ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
