THE COMMISSIONER OF INCOME-TAX vs. M/S.KERALA INFRASTRUCTURE INVESTMENT FUND BOARD,THIRUVANANTHAPURAM

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ITA/26/2014HC KeralaKLHC01026592201404 April 2014Bench: HONOURABLE MR.JUSTICE A.M.SHAFFIQUE,HONOURABLE THE CHIEF JUSTICE DR. MANJULA CHELLUR4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court of Kerala, in its judgment dated April 4, 2014, disposed of the appeal by referring to its earlier decision in I.T.A. Nos. 1779 & 1783/2009 and other connected matters concerning the same assessee for earlier assessment years. The Court stated that in light of the observations of the jurisdictional High Court in those earlier matters, the present appeal also deserved to be disposed of in terms of the order dated November 11, 2009, in I.T.A. No. 1779/2009. Consequently, the substantial questions of law were answered against the appellant Revenue. The specific reasoning of the Tribunal or the detailed findings on each issue are not elaborated in this High Court judgment, as it relies on a previous binding precedent. The operative direction is that the appeal is disposed of in terms of the earlier order.

What were the facts?

The Revenue, Commissioner of Income Tax, Thiruvananthapuram, is the appellant before the High Court of Kerala. The respondent is M/s. Kerala Infrastructure Investment Fund Board. The assessment year in question is 2008-2009. The appeal challenges an order of the Income Tax Appellate Tribunal, Cochin Bench, dated September 5, 2013. The Assessing Officer had passed an order on December 9, 2010, and the Commissioner of Income Tax (Appeals) had passed an order on February 14, 2013. The core dispute concerns whether interest income earned by the assessee from treasury and bank deposits should be assessed as business income or income from other sources.

What were the issues?

The Tribunal had to decide the following substantial questions of law: 1. Whether the Tribunal was right in law in holding that the interest income is assessable as business income. 2. Whether the Tribunal was right in holding that the assessee had commenced business, considering it had not fulfilled its primary objective of financing infrastructure projects and had not financed any such project, in light of the principle laid down in Tuticorin Alkali Chemicals and Fertilisers Ltd. v. CIT. 3. Whether the Tribunal was right in upholding the CIT (Appeals)'s decision that interest income is business income and all expenses, including interest on borrowed funds and administrative expenses, are allowable as business expenditure, contrary to the decision in Tuticorin Alkali Chemicals and Fertilisers Ltd. vs CIT, which held such interest income to be assessable under other sources. Assessee's Contentions: Not recorded in the judgment. Revenue's Contentions: The Revenue argued that interest income should be assessed under 'income from other sources' and not as 'business income'. They relied on the principle laid down in Tuticorin Alkali Chemicals and Fertilisers Ltd. v. CIT (227 ITR 172) to support their contention that interest income is assessable under other sources and only eligible deductions under that head should be allowed. They also questioned whether the assessee had commenced business.

Which sections of the Income-tax Act were involved?

Section 143(3)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HON'BLE THE CHIEF JUSTICE DR. MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE FRIDAY, THE 4TH DAY OF APRIL 2014/14TH CHAITHRA, 1936 ITA.No. 26 of 2014 () -------------------------- AGAINST THE ORDER/JUDGMENT IN ITA 279/2013 of INCOME TAX APPELLATE TRIBUNAL,COCHIN BENCH DATED 05-09-2013 APPELLANT(S)/APPELLANT: --------------------------------- THE COMMISSIONER OF INCOME TAX, THIRUVANANTHAPURAM

BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S)/RESPONDENT: ------------------------------------- M/S.KERALA INFRASTRUCTURE INVESTMENT FUND BOARD, GOVT. SECRETARIAT, THIRUVANANTHAPURAM.

THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 04-04-2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

ITA.No. 26 of 2014 () APPENDIX APPELLANT’S ANNEXURES : A COPY OF THE ORDER U/S 143(3) OF THE ASSESSING OFFICER DATED 09.12.2010. B COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 14.02.2013. C COPY OF THE ORDER OF THE APPELLATE TRIBUNAL DATED 05.09.2013. RESPONDENT’S ANNEXURES : NIL // True Copy // P.A. To Judge DSV/23/04

Manjula Chellur, C.J. & A.M. Shaffique, J. =-=-=-=-=-=-=-=--=-=-=-=-=-=-=-=-=-=-=-=-= I.T. Appeal No. 26 of 2014 =-=-=-=-=-=-=-=-=--=-=-=-=-=-=-=-=-=-=-=-= Dated this, the 4th day of April, 2014. J U D G M E N T Manjula Chellur, J. Assessment year in question is 2008-2009. 2. Revenue is the appellant before us, who has raised following substantial questions of law for consideration of this Court: “1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the interest is assessable as business income? 2. Whether, on the facts and in the circumstances of the case and in the light of the principle laid down in Tuticorin Alkali Chemicals and Fertilisers Ltd. v. CIT (227 ITR 172) the Tribunal was right in holding that the assessee had commenced business when in fact the assessee had not fulfilled the main intention for which it was formed, viz. that of financing infrastructure projects and had not financed any infrastructure project since it had been formed? 3. Whether, on the facts and in the circumstances of the case, the Tribunal is right in upholding that decision of the CIT (Appeals) that interest income earned by the assessee is business income and all expenses incurred including interest on borrowed funds and administrative expenses are to be allowed as business expenditure as it was incurred solely for the purpose of business in light of the decision of the Hon'ble Supreme Court in Tuticorin Alkali Chemicals and Fertilisers Ltd vs CIT (227 ITR 172) to the contrary that such interest income is to be assessed under other sources and only deductions eligible under this head are to be allowed.”

I.T. Appeal No. 26 of 2014 -: 2 :- 3. The controversy involved is whether income by received by the assessee by way of interest out of Treasury deposits and Bank deposits are assessable under the head 'income from business or other source'. As on today, similar controversy pertaining to the very same assessee came up for consideration before this Court in I.T.A. Nos. 1779 & 1783/2009 and other connected matters relating to earlier assessment years. In the light of observations of jurisdictional High Court, this matter also deserves to be disposed of in terms of order dated 11.12.2009 in I.T.A. No. 1779/2009 and other connected matters. Accordingly, substantial questions of law are answered against appellant Revenue. Sd/- Manjula Chellur, Chief Justice. Sd/- A.M. Shaffique, Judge. Tds/ [True copy] P.S. to Judge.

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