9911796707
Advanced Search 
TMI Blog2019 (6) TMI 1370X X X X Extracts X X X X X X X X Extracts X X X X ..... ances of Rs, 1,42,29,269/- is taxable under the head "income from other sources" and that deduction under section 80IAB is not available on the said interest on contractor advances? 3. Whether on the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) was right in holding that interest expenditure of the Appellant is not allowable as deduction under section 36(1)(iii) of the Act? 4. Whether on the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) was right in holding that the processing fees of Rs. 9,066/- and lease premium of Rs. 39 Lakhs is chargeable to tax under the head "income from other sources" and that deduction under section 80IAB is not available on the said receipts? 5. Whether on the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) was right in enhancing the income of the Appellant? 6. Whether on the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) was right in enhancing the income and holding that the grant of Rs. 1 Crore towards repairs & maintenance of airports received by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nance of airports in Maharashtra is not the income of the appellant as there is diversion of income by way of overriding title. Ground 16: That without prejudice, the addition of one crore of grant received is illegal, had in law and highly excessive as the amount debited in the said account during the year is not reduced from the said account. The relevant facts are already on record and no new fact is required to be investigated. The above noted ground goes to the root of the matter. It is therefore humbly requested that the same may kindly be admitted and adjudicated. Reliance is placed on the decision of Hon‟ble Supreme Court in the case NTPC 229 ITR 383 (SC)." 4. The brief facts of the case are that the assessee filed its return of income on 30.09.2010 declaring total loss to the tune of Rs. 8,97,42,143/-. The return was processed u/s 143(1) of the Act. Thereafter, the case was selected for scrutiny under CASS. Notices u/s 143(2) & 142(1) of the Act were issued and served upon the assessee. On verification, it was found that the assessee earned the interest income in sum of Rs. 2,01,88,060/- and income from other sources of Rs. 40,14,804/- of SEZ Unit. 5. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ara no. 6 is hereby reproduced as under.: - "6. We have carefully perused the orders of the authorities below and also perused the relevant material brought on record before us. The only issue to be decided is whether the FDs was made out of surplus funds of the assessee or out of the borrowings/advances received by the assessee and whether the deposits were made for a short period. We find that this issue has not been considered by the lower authorities on the facts of the case. In our considered opinion, this issue needs to be re-adjudicated by the A.O. We accordingly restore this issue to the file of the A.O. The A.O. is directed to verify whether the FDs have been made out of surplus funds or out of loans and borrowing of the assessee and whether the FDs were for short period of time. The assessee is directed to file necessary details before the A.O. The A.O. is expected to give a fair and reasonable opportunity of being heard to the assessee." 10. On appraisal of the above mentioned finding, we noticed that the issue has been restored before the AO and the AO passed the order giving effect the order of Hon‟ble ITAT by virtue of order dated nil July, 2017 lies at pag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noted that the appellant had received interest on Fixed Deposit which was reduced from the working of WIP and included in profit of SEZ unit for the purpose of deduction u/s 80-AB. The appellant filed a response dated 27.01.2014 which has been extracted under Para 5.3.1. The assessing officer rejected the contention of the appellant that the interest income was derived from business holding that the same was derived from short term deposits made out of funds available for the business and from advances given. In other words, he held that there was no direct nexus with the business of the appellant but is a result of parking of surplus funds and earning interest which had to be treated as 'income from other sources and could not be considered as profit of the undertaking for the purpose of claiming deduction u/s 80-lAB of the Act. 5.2.2 It is noted that identical issue had come up before Hon'ble ITAT Mumbai in appellant‟s appeal for AY 2008-09 in ITA no. 1223/Mum/2013 decided by order dated 27/08/2014. On this issue, in Hon'ble [TAT made the following observation at Para 6 of the order: "We have carefully produced the orders of the authorities below and also pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for business or deposits in lieu of Bank Guarantee. The Company has raised funds in June 2010 to the tune of Rs. 150 Crore by issue of Non-convertible debentures to be utilized in infrastructure development of Project MIHAN. It is also to be appreciated that acquisition oi land fora large project is a long and complicated process which may result in several unpredictable reasons for delays. It is the contention of the appellant that amount not immediately required were temporarily parked with Banks with an intention to reduce the interest cost of the Project. Few deposits were placed with Bank towards security for Bank Guarantee. 5.2.5 Consideration of the dates of receipts of grants and nonconvertible debentures and the dates of deposits indicates that the same were made within one or 2 weeks of the receipts. In my opinion, this supports the claim of the appellant that the FDs were made out of funds received for the business of the appellant in the form of grants for land acquisition or non-convertible debentures and not out of any surplus funds generated from the business of the appellant. This was the precise finding Hon‟ble ITAT Mumbai wanted from lower authorities i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the issue has been decided by the Hon‟ble ITAT in the assessee‟s own case in favour of the assessee in the A.Y. 2008-09 in ITA. No.1223/M/2013 dated 27.08.2014. The copy of order is on the file and the relevant para is 7 which is hereby reproduced as under.: - "7. The second issue relates to the interest received by the assessee on advances made by it to its various contractors who are engaged in infrastructure work. We find that an identical issue has been considered by the Hon‟ble Gujarat High Court in the case of Nirma Industries, 283 ITR 402 where the Hon‟ble Gujarat High Court has held that the interest received on delayed payment by the debtor is to be included in the profit of the industrial undertaking. In the case in hand, there is no dispute that the assessee has received interest from advances made by it to its contractors engaged in infrastructure work, therefore, the interest received by the assessee has to be considered as interest derived from industrial undertaking eligible for deduction u/s 80-IAB of the Act. To sum up, interest amounting to Rs. 2,92,88,967/- being interest on advances to contractors is to be taxed under the head "b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the back ground of the above, we proceed to examine the activities under taken by the assessee during the Ay 2007-08 and they are as under: "Total land in possession has gone upto 2180.6 hectares... 1) Environmental clearance for the Airport part of MIHAN project excluding SEZ has been obtained by the assessee. 2) Notification for the SEZ is received from Ministry of commerce for 1511.51 hectares. 3) Telecom network is started. 4) The work of internal roads was done to the extent of Rs. 64.5 crores, boundary wall to Rs. 4.7 crores construction of storm water drainage channels in MIHAN area to Rs. 1.7 crores and construction of Flyover Interchange at the junction of NH-7 and COB across railway track is done to the extent of Rs. 15.65 crores. 5) Assessee leased out over 1517 acres of land both in processing and nonprocessing zone." 46. From the above, it is evident that the assessee not only obtained necessary and mandatory Environmental clearance from the Government and Ministry of Commerce has also issued Notification relating to the SEZ. Assessee also commenced the telecom network, constructed the internal roads, boundary walls, drainage channel systems, construction of flyw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d maintenance of airports as income of the assessee and also treated the rental income in sum of Rs. 1,05,000/- as income from business. it is to be seen whether the grant in sum of Rs. 1 crores released by Government of Maharashtra to the assessee on account of repairs and maintenance of airports is liable to be treated as income of the assessee or not. So far as the grant of Rs. 1 crores released by Government of Maharashtra on account of repairs and maintenance of airports is concerned, the CIT(A) has treated as income of the assessee. The Ld. Representative of the assessee has argued that the Government has given the grant to its 100% undertaking of Government of Maharashtra, therefore, the said grant is not liable to be treated as income of the assessee in view of the decision in the case of City and Industrial Development Corporation of Maharashtra Ltd. Vs. ACIT (2012) 138 ITD 381 (Mumbai) and in the case of CIT Vs. Karnataka Urban Infrastructure Development & Finance Corpn. (2006) 155 Taxman 228 (Kar.). However, on the other hand, the Ld. Representative of the Department has refuted the said contention. It is not in dispute that the assessee is 100% subsidiary of the Governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , "the facts that the trading activity carried on by the appellant may be covered by article 289(2) of the Constitution does not really assist the appellant's case. Even if a trading activity falls under clause (2) of article 289 of the Constitution, it can sustain a claim for exemption from Union taxation only if it is shown that the income derived from the said trading activity is the income of the State". Therefore, whenever, there is an activity in the nature of trade or business, clause (2) shall come to life, which according to clause, shall be applicable towards the State i.e. if an activity which is in the nature of trade or business, conducted by the State itself, the liability for tax shall emerge, a typical example is that of service tax collected by the State on events being conducted by the vendors, have to be deposited by the State, in the Government exchequer, making the State an assessee under service tax as held by the Hon'ble Supreme Court in the case of Rashtriya Ispat Nigam Ltd. vs Dewan Chand Ram Saran (CA No. 3905 of 2012). This is only possible where there is an activity of "trade or business", but, if, confined towards development, either of a new to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view to secure the above objective", and in para no. 3 of this Resolution clearly say, "The subsidiary company will work under the control and supervision of the State Government in the General Administrative Department". In our opinion, the first Resolution itself makes it clear that the assessee is to be an agent, but functions as an arm of the State Government, because, if the assessee can only work under the control and supervision of the State Government, meaning thereby that the assessee cannot make / take any decisions suo moto, then, in such a case authority for performance of all activities lie somewhere else. In any case, as per this Resolution, it clearly makes the assessee an "agent" of the State. 41. When we look into the financial functions of the assessee, we find that all dealings have to be routed through authorizations by the Government and all funds receivable shall be in compliance and with intimations to : To The Managing Director, State Industrial and Investment Corporation of Maharashtra Ltd. Bombay. The Industries Commissioner, Bombay The Accountant General, Maharashtra, Bombay The Pay & Accounts Officer, Bombay The Resident Audit Officer, Pay and Accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed to take a distinctive approach in the current year." 19. On appraisal of the facts and circumstances, we find that the assessee has been treated as agent of Government and the income of the assessee if any was treated as income of the Government which stand deposited in the consolidated fund of the State. The assessee placed reliance upon the decision of Kolkata High Court in case of Prl. CIT Vs. The State Fisheries Development Corporation ITA No. 19 of 2017 with GA 413 of 2017 in which the grant has been treated has capital receipt. The similar view has been taken by the Delhi High Court in case titled as CIT Vs. Handicrafts and Handlooms Exports Corporation of India Limited cited as (2014)360 ITR 130 (Delhi). The instant case also Maharashtra Government release the grant in favour of assessee for the repairs and maintenance of airports . It is if any capital in nature and is not liable to be considered as revenue in nature. Taking into account all the facts and circumstances and by relying upon the above mentioned law, we are of the view that the grant in sum of Rs. 1 crores released by Government of Maharashtra on account of repairs and maintenance of airports is not lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld constitute its business Therefore, this ground of appeal is allowed. The assessing officer is directed to treat lease/rent of Rs. 2,04,90,596/- as business income and eligible for purpose of deduction u/s 80-IAB." 20. On the basis of the above mentioned finding, the CIT(A) has also decided the issue in favour of assessee. At the time of arguments the Ld. Representative of the assessee has also placed reliance of the case titled as Shreeji Exhibitors Vs. ACIT (2015) 42 ITR (T) 596 and Chennai Properties & Investment Vs. CIT (2015) 373 ITR 673. In the said cases it is specifically held that the main business of assessee is commercial exploitation of the properties then the rental income of the assessee is not liable to be treated as income from house property. Taking into account all the facts and circumstances, we are of the view that the rental income to the tune of Rs. 1,05,000/- is liable to be treated as income business. Accordingly, we decide this issue in favour of the assessee against the revenue. ISSUE NO. 8 to 10 21. Issue nos. 8, 9 & 10 are linked to this issue nos. 5,6 & 7, therefore, there is no need to decide the separately being consequential to the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
