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Income Tax Appellate Tribunal, MUMBAI BENCH “F” MUMBAI
Before: SHRI SANJAY GARG & SHRI OM PRAKASH KANT
PER OM PRAKASH KANT, AM This appeal by the assessee is directed against order dated 29/09/2016 passed by the Ld. CIT(Appeals)-3, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2012-13, raising following grounds:
On the facts, and in circumstances of the case, and in law, learned Commissioner of Income-tax (Appeal) erred in
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upholding action of the Assessing Officer in making addition of upholding action of the Assessing Officer in making addition of upholding action of the Assessing Officer in making addition of ₹418,490/ ₹418,490/- raised by way of equity share capital issued to raised by way of equity share capital issued to the co-venturers invoking provisions of section 68 which in fact was venturers invoking provisions of section 68 which in fact was venturers invoking provisions of section 68 which in fact was duly supported by the documentary evidence and underwent duly supported by the documentary evidence and underwent duly supported by the documentary evidence and underwent the tests of Identity, Creditworthiness, and Genuineness the tests of Identity, Creditworthiness, and Genuineness the tests of Identity, Creditworthiness, and Genuineness successfully. successfully. 2. 2. On the facts, and in circumstances of the case, and in 2. On the facts, and in circumstances of the case, and in law, 2. On the facts, and in circumstances of the case, and in learned Commissioner of Income learned Commissioner of Income-tax (Appeal) erred in tax (Appeal) erred in upholding action of the Assessing Officer in making addition of upholding action of the Assessing Officer in making addition of upholding action of the Assessing Officer in making addition of ₹43,479,510/ ₹43,479,510/- received by way of premium on equity share received by way of premium on equity share capital issued to the co capital issued to the co-venturers invoking provisions of section venturers invoking provisions of section 68 which i 68 which in fact was duly supported by the documentary n fact was duly supported by the documentary evidence and underwent the tests of Identity, Creditworthiness, evidence and underwent the tests of Identity, Creditworthiness, evidence and underwent the tests of Identity, Creditworthiness, and Genuineness successfully. and Genuineness successfully. 3. Without prejudice to Ground No. 2, On the facts, and in Without prejudice to Ground No. 2, On the facts, and in Without prejudice to Ground No. 2, On the facts, and in circumstances of the case, and in law, learned Commissioner of circumstances of the case, and in law, learned Commissioner o circumstances of the case, and in law, learned Commissioner o Income Income-tax (Appeal) erred in not appreciating that legislature tax (Appeal) erred in not appreciating that legislature brought amendment to section 56 by inserting clause (viib) brought amendment to section 56 by inserting clause (viib) brought amendment to section 56 by inserting clause (viib) effective Assessment Year 2013 effective Assessment Year 2013-14 to tax excess premium 14 to tax excess premium charged by a closely held company; and case of the Appellant charged by a closely held company; and case of the Appellant charged by a closely held company; and case of the Appellant was pertaining was pertaining to Assessment Year 2012-13; and thus, there 13; and thus, there was no effective provision under the Income was no effective provision under the Income-tax Act 1961 to tax tax Act 1961 to tax share premium received by the Company. share premium received by the Company. 4. 4. On the facts, and in circumstances of the case, and in law, 4. On the facts, and in circumstances of the case, and in law, 4. On the facts, and in circumstances of the case, and in law, learned Commissioner of Income learned Commissioner of Income-tax (Appeal) er tax (Appeal) erred in upholding action of the Assessing Officer in disallowing capital upholding action of the Assessing Officer in disallowing capital upholding action of the Assessing Officer in disallowing capital work in progress of work in progress of ₹17,279,051/- to be claimed against future to be claimed against future economic benefits alleging that no details were submitted economic benefits alleging that no details were submitted economic benefits alleging that no details were submitted
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ignoring the fact that your Appellant submitted all the relevant ignoring the fact that your Appellant submitted all the relevan ignoring the fact that your Appellant submitted all the relevan details called for. details called for. 5. On the facts, and in circumstances of the case, and in law, On the facts, and in circumstances of the case, and in law, On the facts, and in circumstances of the case, and in law, learned Commissioner of Income learned Commissioner of Income-tax (Appeal) erred in tax (Appeal) erred in upholding action of the Assessing Officer in disallowing legal upholding action of the Assessing Officer in disallowing legal upholding action of the Assessing Officer in disallowing legal and consultation charges of and consultation charges of ₹3,158,584/- and traveling and traveling expenses of RS. 1,638,822 to be claimed against future enses of RS. 1,638,822 to be claimed against future enses of RS. 1,638,822 to be claimed against future economic benefits alleging that no details were submitted economic benefits alleging that no details were submitted economic benefits alleging that no details were submitted ignoring the fact that your Appellant submitted all the relevant ignoring the fact that your Appellant submitted all the relevant ignoring the fact that your Appellant submitted all the relevant details called for. details called for. 6. On the facts, and in circumstances of the case, and in law, On the facts, and in circumstances of the case, and in law, On the facts, and in circumstances of the case, and in law, learned Commissioner of Income earned Commissioner of Income-tax (Appeal) erred in tax (Appeal) erred in upholding action of the Assessing Officer in taxing interest upholding action of the Assessing Officer in taxing interest upholding action of the Assessing Officer in taxing interest income of income of ₹510,963/- separately instead of reducing it from the separately instead of reducing it from the cost of project ignoring the fact that interest receipt arose on cost of project ignoring the fact that interest receipt arose on cost of project ignoring the fact that interest receipt arose on temporary depo temporary deposits with banks pending application to capital sits with banks pending application to capital work in progress. work in progress. 7. Alternatively and without prejudice to Ground No. 6, on the Alternatively and without prejudice to Ground No. 6, on the Alternatively and without prejudice to Ground No. 6, on the facts, and in circumstances of the case, and in law, learned facts, and in circumstances of the case, and in law, learned facts, and in circumstances of the case, and in law, learned Commissioner of Income Commissioner of Income-tax (Appeal) erred in not appreciating tax (Appeal) erred in not appreciating that int that interest income of ₹510,963/- was to be offset against the was to be offset against the unallocated expenses carried to balance sheet. unallocated expenses carried to balance sheet.
Briefly stated, facts of the case are that the assessee company facts of the case are that the assessee company facts of the case are that the assessee company has been set up as a joint as a joint-venture between the ‘Ostan Ostan’ group of Singapore (OSMAP Asia OSMAP Asia Pacific P. Ltd.) and ‘UB’ group of India group of India to undertake activities of designing and manufacturing of injection undertake activities of designing and manufacturing of injection undertake activities of designing and manufacturing of injection
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moulding components, subsystems, ODM and OEM products. F moulding components, subsystems, ODM and OEM products. F moulding components, subsystems, ODM and OEM products. For the year under consideration year under consideration, the assessee filed return of income on , the assessee filed return of income on 29/09/2012 declarin 29/09/2012 declaring Nil income. The return of income filed by the income. The return of income filed by the assessee was selected for scrutiny an assessee was selected for scrutiny and statutory notices under the statutory notices under the Income-tax Act, 1961 (in short Act, 1961 (in short ‘the Act’) were issued and complied ) were issued and complied with. In the assessment completed under section 143(3) of the with. In the assessment completed under section 143(3) of the with. In the assessment completed under section 143(3) of the Act on 30/03/2015, the on 30/03/2015, the Assessing Officer made addition for the share made addition for the share capital and share premium received during the year under capital and share premium received during the year under capital and share premium received during the year under consideration. The Assessing Officer Assessing Officer also disallowed the expen also disallowed the expenses transferred to capital work transferred to capital work-in-progress though not claimed in the progress though not claimed in the year under consideration, but for further adjustment towards block ar under consideration, but for further adjustment towards block ar under consideration, but for further adjustment towards block of assets and claim of depreciation. The of assets and claim of depreciation. The Ld. Assessing Officer Ld. Assessing Officer also treated the interest income of interest income of ₹5,10,963/-received during the year received during the year under consideration under consideration as taxable under the head “income fr income from other sources” instead of sources” instead of claim of the assessee of adjusting the same adjusting the same against capital work- -in-progress. On further appeal, the Ld. CIT(A) progress. On further appeal, the Ld. CIT(A)
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upheld the order of the upheld the order of the Ld. Assessing Officer. On further appeal, the . On further appeal, the Tribunal vide order dated 05.09.2018 vide order dated 05.09.2018 dismissed the appeal of the ed the appeal of the assessee holding it to be non assessee holding it to be non-maintainable as the prescribed maintainable as the prescribed Form No. 36 for filing appeal was signed by the ex No. 36 for filing appeal was signed by the ex-director instead of director instead of managing director or director of the company. managing director or director of the company. On the miscellaneous On the miscellaneous application filed by the assessee r application filed by the assessee removing the defect of not signing emoving the defect of not signing the Form No. 36 by the No. 36 by the Managing Director or Director Director of the company, the Tribunal Tribunal vide order dated 30/07/2021 recalled the order dated 30/07/2021 recalled the appeal for deciding in in regular course. Accordingly, the appeal has been fixed before the bench for hearing the parties. been fixed before the bench for hearing the parties.
Before us the Ld. Ld. counsel of the assessee has filed a paperbook of the assessee has filed a paperbook in two volumes containing pages 1 to 528. in two volumes containing pages 1 to 528.
The ground No. 1 to 3 of the appeal relate The ground No. 1 to 3 of the appeal relate to addition of share addition of share capital amounting amounting to to ₹4,18,490/-and and share share premium premium of of ₹4,34,79,510/-.
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The facts in brief brief for adjudicating the issue in dispute the issue in dispute are that
for its manufacturing activities, the assessee proposed to acquire for its manufacturing activities, the assessee proposed to acquire for its manufacturing activities, the assessee proposed to acquire
land at “Shriwal” from M/s UB engineering Ltd, who is one from M/s UB engineering Ltd, who is one of the from M/s UB engineering Ltd, who is one
shareholder. It has been contended by the assessee that pending the shareholder. It has been contended by the assessee that pending the shareholder. It has been contended by the assessee that pending the
transfer of land, construction of factory building was carried out by transfer of land, construction of factory building was carried out by transfer of land, construction of factory building was carried out by
UB infrastructure Ltd. To fund the project, the assessee company UB infrastructure Ltd. To fund the project, the assessee company UB infrastructure Ltd. To fund the project, the assessee company
issued equity shares to following co issued equity shares to following co-ventures i.e. shareholders i.e. shareholders
having details as under: having details as under:
Name of the Allottee Number of equity Number of equity Amount of shares Share Share premium premium Total shares allotted shares allotted (₹10 per share) (₹1,990 per share) ₹1,990 per share) UB Engineering 7,000 70,000 0 70,000 VJM Media Private 3,000 30,000 0 30,000 Limited Osmap Asia Pacific 10,000 100,000 0 100,000 Private Limited UB Engineering 7,648 76,480 15,219,520 15,296,000 Limited VJM Media Private 3,277 32,770 6,521,230 6,554,000 Limited Osmap Asia Pacific 10,924 109,240 21,738760 21,848,000 Private Limited Total 41,849 418,490 43,479,510 43,898,000 5.1 On the basis of the information gathered from the ex the basis of the information gathered from the ex the basis of the information gathered from the ex-director
as well as the shareholders of the company, the as well as the shareholders of the company, the as well as the shareholders of the company, the Ld. Assessing
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Officer was not convinced about the identity & creditworthiness of was not convinced about the identity & creditworthiness of was not convinced about the identity & creditworthiness of the parties and genuineness of the transaction. genuineness of the transaction.
Before the Ld. CIT(A), the assessee filed additional evidence in Before the Ld. CIT(A), the assessee filed additional evidence in Before the Ld. CIT(A), the assessee filed additional evidence in support of identity, creditworthiness and genuineness of the support of identity, creditworthiness and genuineness of the support of identity, creditworthiness and genuineness of the transaction in respect of share cap transaction in respect of share capital and share premium received ital and share premium received, however the Ld. CIT(A) however the Ld. CIT(A) also upheld the both the addition of share upheld the both the addition of share capital and share premium as unexplained cash credit in terms of share premium as unexplained cash credit in terms of share premium as unexplained cash credit in terms of section 68 of the Act. .
Before us, the Ld. Ld. counsel of the assessee in support of ground in support of ground Nos. 1 to 3 of the appeal submitted that all documents re Nos. 1 to 3 of the appeal submitted that all documents re Nos. 1 to 3 of the appeal submitted that all documents related to shareholders were filed before the shareholders were filed before the Assessing Officer Assessing Officer which interalia contained details of joint contained details of joint-venture, Form No. 2 filed with ROC, annual filed with ROC, annual return filed with ROC, details of shareholders, Form No. FC return filed with ROC, details of shareholders, Form No. FC return filed with ROC, details of shareholders, Form No. FC-GPR filed with RBI, certificate of chartered account as to valuation of the with RBI, certificate of chartered account as to valuation of the with RBI, certificate of chartered account as to valuation of the Shares, details of shares allotted etc. The Shares, details of shares allotted etc. The Ld. counsel Ld. counsel submitted that Assessing Officer has not has not raised any doubt on the identity of the raised any doubt on the identity of the
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shareholders, who has contributed shareholders, who has contributed to the share capital as well as to to the share capital as well as to share premium. He submitted that assessee has already submitted share premium. He submitted that assessee has already submitted share premium. He submitted that assessee has already submitted valuation certificate from the chartered accountant as per valuation certificate from the chartered accountant as per valuation certificate from the chartered accountant as per requirement of law for requirement of law for justifying the share premium charged from justifying the share premium charged from the share applicants. the share applicants. The Ld. counsel submitted that finding of the submitted that finding of the Ld. CIT(A) of no explanation about business foundation by the Ld. CIT(A) of no explanation about business foundation by the Ld. CIT(A) of no explanation about business foundation by the assessee is contrary to the facts as all the documents with respect to assessee is contrary to the facts as all the documents with respect to assessee is contrary to the facts as all the documents with respect to increase in share capital and construction of the project were duly hare capital and construction of the project were duly hare capital and construction of the project were duly filed before the lower authorities. He submitted that the assessee filed before the lower authorities. He submitted that the assessee filed before the lower authorities. He submitted that the assessee expended expended expended significant significant significant amount amount amount on on on construction construction construction activity activity activity for for for construction of the factory. The construction of the factory. The Ld. counsel submitted that in view submitted that in view of the decision of Hon’ble Bombay High Court in the case of cision of Hon’ble Bombay High Court in the case of CIT Vs cision of Hon’ble Bombay High Court in the case of Gagandeep Infrastructure Infrastructure Private Limited in IT Private Limited in ITA No. 1613 of 2014, proviso to section 68 ( , proviso to section 68 (which creates obligation on the issuing which creates obligation on the issuing company to explain the sour company to explain the source of share capital and premium ce of share capital and premium) has been introduced by the Finance introduced by the Finance Act, 2012 with effect from 2012 with effect from
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01/04/2013 and does not have retrospective effect and therefore 01/04/2013 and does not have retrospective effect and therefore 01/04/2013 and does not have retrospective effect and therefore the assessee was not obliged to explain source of the source. The the assessee was not obliged to explain source of the source. The the assessee was not obliged to explain source of the source. The Ld. counsel further submitted that further submitted that lower authorities have have not examined the creditworthiness and genuineness of the transaction properly in e creditworthiness and genuineness of the transaction properly in e creditworthiness and genuineness of the transaction properly in the light of the documents submitted, and therefore finding of the the light of the documents submitted, and therefore finding of the the light of the documents submitted, and therefore finding of the Ld. CIT(A) might be set aside. Ld. CIT(A) might be set aside.
The Ld. DR on the other hand submitted that the documents DR on the other hand submitted that the documents DR on the other hand submitted that the documents filed by the assessee are not filed by the assessee are not sufficient to justify the creditworthiness sufficient to justify the creditworthiness and genuineness of the transaction and therefore the and genuineness of the transaction and therefore the and genuineness of the transaction and therefore the Ld. Assessing Officer and the Ld. CIT(A) are justified in making addition in terms and the Ld. CIT(A) are justified in making addition in terms and the Ld. CIT(A) are justified in making addition in terms of section 68 of the Act Act in respect of the amount of share capital and in respect of the amount of share capital and share premium credited by the assessee. e premium credited by the assessee.
We have heard rival submission of the parties on the issue in We have heard rival submission of the parties on the issue in We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. In the case dispute and perused the relevant material on record. In the case dispute and perused the relevant material on record. In the case, the Ld. counsel of the assessee has contested that of the assessee has contested that initially, 7000 equity initially, 7000 equity shares were issued to M/s UB engineering Ltd for a sum of shares were issued to M/s UB engineering Ltd for a sum of shares were issued to M/s UB engineering Ltd for a sum of
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₹70,000/-; 3000 shares were issued to VJM media Private Limited ; 3000 shares were issued to VJM media Private Limited ; 3000 shares were issued to VJM media Private Limited for a sum of ₹30,000/ 30,000/- and 10,000 shares were issued to Osmap and 10,000 shares were issued to Osmap Asia-Pacific Private Limited for a sum of Pacific Private Limited for a sum of ₹1,00,000/ 000/-. All these shares have been issued a shares have been issued at face value of ₹10/- without charging any without charging any premium. However, subsequently shares have been issued to the subsequently shares have been issued to the three entities at huge share premium. M/s UB engineering Ltd has three entities at huge share premium. M/s UB engineering Ltd has three entities at huge share premium. M/s UB engineering Ltd has been issued 7648 shares for a sum of been issued 7648 shares for a sum of ₹1,52,96,000/ 6,000/-which include some of ₹1,52,19,520/ 520/- as share premium. M/s VJM media Private as share premium. M/s VJM media Private Limited has been issued 3277 shares for a sum of Limited has been issued 3277 shares for a sum of Limited has been issued 3277 shares for a sum of ₹65,54,000/- which include ₹65,21, 65,21,230/- as share premium. Similarly as share premium. Similarly, M/s Osmap Asia-Pacific Private Limited Pacific Private Limited has been issued has been issued 10,924 shares for a sum of ₹2,18,48,000/ 18,48,000/-which include share premium of which include share premium of ₹2,17,38,760/-. In view of the huge share premium charged from the . In view of the huge share premium charged from the . In view of the huge share premium charged from the shareholders immediately after issuing shares at face value of shareholders immediately after issuing shares at face value of shareholders immediately after issuing shares at face value of ₹10, the Assessing Officer Assessing Officer after examining the documen after examining the documents filed by the assessee, was of the opinion that affairs of the assessee company of the opinion that affairs of the assessee company of the opinion that affairs of the assessee company
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and the transactions carried out are not genuine as the amount of and the transactions carried out are not genuine as the amount of and the transactions carried out are not genuine as the amount of share premium has been claimed to have been incurred for the share premium has been claimed to have been incurred for the share premium has been claimed to have been incurred for the construction of the factory, the land for which construction of the factory, the land for which was not even acquired by the assessee company. The Ld. CIT(A) has also doubted acquired by the assessee company. The Ld. CIT(A) has also doubted acquired by the assessee company. The Ld. CIT(A) has also doubted the business foundation of the assessee company. Before us the business foundation of the assessee company. Before us the business foundation of the assessee company. Before us, the Ld. counsel of the assessee has submitted that share premium has been of the assessee has submitted that share premium has been of the assessee has submitted that share premium has been charged as per the valuation report of the charged as per the valuation report of the Chartered Accountant Chartered Accountant and therefore no addition could have been made for the share premium. therefore no addition could have been made for the share premium. therefore no addition could have been made for the share premium. We find that Assessing Officer Assessing Officer has made addition under section 68 has made addition under section 68 of the Act holding the amount of share capital and share premium holding the amount of share capital and share premium holding the amount of share capital and share premium received by the assessee as unexp received by the assessee as unexplained cash credit and not made lained cash credit and not made the addition under section 56(2)(vii) of the under section 56(2)(vii) of the Act determining any determining any excess premium charged in case of closely held company, and excess premium charged in case of closely held company, and excess premium charged in case of closely held company, and therefore argument of the therefore argument of the Ld. counsel of the assessee in relation to of the assessee in relation to valuation of the share premiu valuation of the share premium are not relevant for adjudicating m are not relevant for adjudicating issue-in-dispute beforehand. dispute beforehand.
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9.1 In the case, the In the case, the Assessing Officer has noted that no compliance has noted that no compliance was made by the assessee company as made by the assessee company. It was submitted on behalf of . It was submitted on behalf of the assessee that regular directors nominated by the UB gr the assessee that regular directors nominated by the UB gr the assessee that regular directors nominated by the UB group had resigned and there was no staff working resigned and there was no staff working and therefore and therefore he issued notices to the directors of the company, which were shown as notices to the directors of the company, which were shown as notices to the directors of the company, which were shown as directors on record. The directors on record. The Assessing Officer also issued notices u/s also issued notices u/s 133(6) to the shareholders. The 133(6) to the shareholders. The Assessing Officer also i also issued notices to the bankers of the assessee company for gathering bank to the bankers of the assessee company for gathering bank to the bankers of the assessee company for gathering bank statements. After considering the information collected and After considering the information collected and After considering the information collected and submissions filed on behalf of the assessee, the submissions filed on behalf of the assessee, the Ld. Assessing Officer Assessing Officer was of the view that receipt of money through banking channel in was of the view that receipt of money through banking channel in was of the view that receipt of money through banking channel in itself was not sufficient to discharge the itself was not sufficient to discharge the onus under section 68 of the under section 68 of the Act. The relevant finding of the . The relevant finding of the Ld. Assessing Officer Assessing Officer is reproduced as under:
“12.7 The money may have been received 12.7 The money may have been received through banking channels, through banking channels, but neither does it reflect the business foundation on which the stated neither does it reflect the business foundation on which the stated neither does it reflect the business foundation on which the stated venture with foreign partner, should have been prepared nor does it with foreign partner, should have been prepared nor does it with foreign partner, should have been prepared nor does it
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reflect any actual genuine business activity. The share monies had actual genuine business activity. The share monies had actual genuine business activity. The share monies had come through come through banking channel is, at best, neutral. The companies hannel is, at best, neutral. The companies which subscribed to which subscribed to the shares were borne on the file of the Registrar the shares were borne on the file of the Registrar of Companies or are of Companies or are identifiable, was again a neutral fact and that identifiable, was again a neutral fact and that these companies were these companies were complying with such formalitics did not add complying with such formalitics did not add any credibility or evidentiary bility or evidentiary value. It did not ipso facto prove that value. It did not ipso facto prove that the transactions were genuine. the transactions were genuine. Introduction of money under the Introduction of money under the guise of loans, advances, share capital and guise of loans, advances, share capital and share premium has been share premium has been in vogue for so long and so widely prevalent that in vogue for so long and so widely prevalent that the tell- -tale signs of the instant case will invariably lead to the conclusion the instant case will invariably lead to the conclusion in the minds of in the minds of any ordinary man of normal prudence that the said any ordinary man of normal prudence that the said transaction is transaction is nothing but a device for any of the purpose best known to nothing but a device for any of the purpose best known to them.
12.8 It has been considered more by the 12.8 It has been considered more by the Hon'ble Supreme Court in the Hon'ble Supreme Court in the case of A Govindarajulu Mudaliar v.CIT (1958] 34 ITR 807 that it is case of A Govindarajulu Mudaliar v.CIT (1958] 34 ITR 807 that it is case of A Govindarajulu Mudaliar v.CIT (1958] 34 ITR 807 that it is not incumbent upon the Assessing Officer, on the facts and incumbent upon the Assessing Officer, on the facts and incumbent upon the Assessing Officer, on the facts and circumstances of circumstances of the case, to establish with the help of material on the case, to establish with the help of material on record that the share record that the share monies had come or emanated from the d come or emanated from the assessee's coffers. Section 68 of the assessee's coffers. Section 68 of the Act casts no such burden upon the Act casts no such burden upon the Assessing Officer. Assessing Officer.”
9.2 The Ld. Assessing Officer Assessing Officer held the share capital received by the held the share capital received by the
assessee as unexplained in terms o assessee as unexplained in terms of section 68, observing as under: observing as under:
“13.3 The 'Share Capital' is shown to have been received during the 13.3 The 'Share Capital' is shown to have been received during the 13.3 The 'Share Capital' is shown to have been received during the year under reference. The company has received "Share Capital' of under reference. The company has received "Share Capital' of under reference. The company has received "Share Capital' of Rs. 10/- per share amounting in all to Rs.4,18,490/ share amounting in all to Rs.4,18,490/-. The submissions . The submissions as received during the assessment proceedings, the during the assessment proceedings, the facts as brought facts as brought on record and the on record and the stated current position of the companies' affairs, as stated current position of the companies' affairs, as
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has been discussed has been discussed above in the order, points to the doubtful nature above in the order, points to the doubtful nature of the reflected transaction of the reflected transaction and shows the lack of genuineness of the and shows the lack of genuineness of the claimed nature of the transa claimed nature of the transaction. Considering the facts and Considering the facts and circumstances of the case and lack of circumstances of the case and lack of genuineness of the claimed genuineness of the claimed nature of the transaction, the nature of the transaction, the sum of Rs.4,18,490/-, introduced in the , introduced in the books of the assessee company as share books of the assessee company as share capital is hereby held as capital is hereby held as unexplained and unsubs unexplained and unsubstantiated as to the genuineness and nature genuineness and nature thereof and is brought to tax u/s.68 of the Act. thereof and is brought to tax u/s.68 of the Act.”
9.3 Similarly, the the Assessing Officer held the share premium held the share premium
received as unexplained in terms of the section 68 received as unexplained in terms of the section 68 received as unexplained in terms of the section 68, observing as
under:
“14.5 The shares were issued at 14.5 The shares were issued at a premium to the parties but a premium to the parties but justification and reason for premium is perspicuously missing and not and reason for premium is perspicuously missing and not and reason for premium is perspicuously missing and not forthcoming. Why forthcoming. Why and for what reasons, a share premium would be and for what reasons, a share premium would be payable in a case like this, payable in a case like this, is beyond comprehension. Any and every is beyond comprehension. Any and every reasonable man is normal reasonable man is normally expected to practice due diligence while expected to practice due diligence while investing his hard cared mon investing his hard cared money, let alone purchase shares i let alone purchase shares in a company. The stated sharehol company. The stated shareholders are having substantial percentage substantial percentage of shareholdings and have made substantial of shareholdings and have made substantial contribution of funds. contribution of funds. Their role does Their role does not end with the preparation of the business plan & business plan & contributing the funds and stop bothering afterwards. contributing the funds and stop bothering afterwards.
14.6 The submissions as received during the assessment proceedings, 14.6 The submissions as received during the assessment proceedings, 14.6 The submissions as received during the assessment proceedings, the facts as brought on record and the stated current position of the facts as brought on record and the stated current position of the facts as brought on record and the stated current position of the companies' affairs, as has been discussed above in the order, points to ffairs, as has been discussed above in the order, points to ffairs, as has been discussed above in the order, points to the doubtful nature of the reflected transaction and shows the lack of nature of the reflected transaction and shows the lack of nature of the reflected transaction and shows the lack of
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genuineness of the genuineness of the claimed nature of the transaction. Considering the claimed nature of the transaction. Considering the facts and circumstances facts and circumstances of the case and lack of genuine of the case and lack of genuineness of the claimed nature of the transaction, claimed nature of the transaction, it is held that the sum of it is held that the sum of Rs.4,34,79,510/ Rs.4,34,79,510/- introduced in the books of the assessee company as assessee company as share premium is hereby held as une re premium is hereby held as unexplained and unsubstantiated as unsubstantiated as to the genuineness and nature thereof and is br to the genuineness and nature thereof and is brought ought to tax accordingly u/s.68 of the Act. accordingly u/s.68 of the Act.
14.7 Accordingly, The amount of Rs.4,34,79,510/ 14.7 Accordingly, The amount of Rs.4,34,79,510/- is added as is added as assessee's income under the provisions of section 68 of the Income income under the provisions of section 68 of the Income income under the provisions of section 68 of the Income Tax Act. 1961.” ”
9.4 The Ld. CIT(A) upheld the addition observing as under: Ld. CIT(A) upheld the addition observing as under: Ld. CIT(A) upheld the addition observing as under:
“7.5 After raising the capital at a higher premium the appellant 7.5 After raising the capital at a higher premium the appellant 7.5 After raising the capital at a higher premium the appellant incurred some expenses and not carried any activities. The Directors incurred some expenses and not carried any activities. The Directors incurred some expenses and not carried any activities. The Directors in the appellant company were nominated by UB Group, who have all in the appellant company were nominated by UB Group, who have all in the appellant company were nominated by UB Group, who have all resigned and there is no staff working and the details we resigned and there is no staff working and the details we resigned and there is no staff working and the details were not submitted to the AO. During the course of assessment as well as submitted to the AO. During the course of assessment as well as submitted to the AO. During the course of assessment as well as during the course of appellate proceedings, the appellant has failed during the course of appellate proceedings, the appellant has failed during the course of appellate proceedings, the appellant has failed to establish any business which the appellant is proposing on the to establish any business which the appellant is proposing on the to establish any business which the appellant is proposing on the basis of which the higher premium was calculated. basis of which the higher premium was calculated. The appellant UB The appellant UB Ostan India Pvt. Ltd. is a subsidiary of UB Engineering Ltd, and a joint Ostan India Pvt. Ltd. is a subsidiary of UB Engineering Ltd, and a joint Ostan India Pvt. Ltd. is a subsidiary of UB Engineering Ltd, and a joint venture company between UB Group and Ostan Group. The overall venture company between UB Group and Ostan Group. The overall venture company between UB Group and Ostan Group. The overall control of the appellant company is with the UB Group. During the control of the appellant company is with the UB Group. During the control of the appellant company is with the UB Group. During the course of assessment proceedings the A course of assessment proceedings the AO has examined the nature of O has examined the nature of share capital and share premium and also the genuineness and share capital and share premium and also the genuineness and share capital and share premium and also the genuineness and nature of transaction. The appellant did not explain the business nature of transaction. The appellant did not explain the business nature of transaction. The appellant did not explain the business foundation on which the stated venture with foreign partner should foundation on which the stated venture with foreign partner should foundation on which the stated venture with foreign partner should
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have been prepared nor does it re have been prepared nor does it reflect any actual genuine business flect any actual genuine business activity. Though share monies has come through banking channel is, activity. Though share monies has come through banking channel is, activity. Though share monies has come through banking channel is, at best, neutral. The companies which subscribed to the shares were at best, neutral. The companies which subscribed to the shares were at best, neutral. The companies which subscribed to the shares were borne to the file of the Registrar of Companies on are identifiable, borne to the file of the Registrar of Companies on are identifiable, borne to the file of the Registrar of Companies on are identifiable, was again a neutra was again a neutral fact and that these companies were complying these companies were complying with such formalities did not add any with such formalities did not add any credibility or evidentiary value. credibility or evidentiary value. It did not apso facto prove that the It did not apso facto prove that the transactions were genuine. transactions were genuine. Introduction of money under the guise of loans, Introduction of money under the guise of loans, advances, share advances, share capital and share premium has been in voge for so long nd share premium has been in voge for so long and so widely and so widely prevalent that the tell prevalent that the tell-tale signs of the instant case will tale signs of the instant case will invariably lead to the conclusion in the minds of any ordinary man of lead to the conclusion in the minds of any ordinary man of lead to the conclusion in the minds of any ordinary man of normal prudence that the said transaction is nothing but a device prudence that the said transaction is nothing but a device prudence that the said transaction is nothing but a device for any of the purpose best known to them. The A0 has relied on the decision of the purpose best known to them. The A0 has relied on the decision of the purpose best known to them. The A0 has relied on the decision of the Apex Court in the case of A Govindarajulu Mudaliar vs. CIT [1958] Apex Court in the case of A Govindarajulu Mudaliar vs. CIT [1958] Apex Court in the case of A Govindarajulu Mudaliar vs. CIT [1958] 34 ITR 807, that it is not incumbent upon the AO on the facts and ITR 807, that it is not incumbent upon the AO on the facts and ITR 807, that it is not incumbent upon the AO on the facts and circumstances of the case, to establish circumstances of the case, to establish with the help of material on with the help of material on record that the share monies had come or emanated from the that the share monies had come or emanated from the that the share monies had come or emanated from the assessee's coffers. assessee's coffers. Section 68 of the Act casts no such burden upon the Section 68 of the Act casts no such burden upon the AO.
7.6 The facts as brought on record and the current position of the The facts as brought on record and the current position of the The facts as brought on record and the current position of the company's affairs establi company's affairs establish the doubtful nature and the reflected sh the doubtful nature and the reflected transaction which is a colorable device to bring the capital in the transaction which is a colorable device to bring the capital in the transaction which is a colorable device to bring the capital in the books of the company and further charged share premium at a the company and further charged share premium at a the company and further charged share premium at a higher rate to higher rate to increase the capital of the company. As regards the increase the capital of the company. As regards the premium is concerned premium is concerned, the appellant submitted that the premium the appellant submitted that the premium was computed on the basis of was computed on the basis of future business prospects and future business prospects and determined the higher rate of premium. determined the higher rate of premium. However, perusal of the However, perusal of the Balance Sheet indicate that the amount received as Balance Sheet indicate that the amount received as share premium share premium
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has been shown among the s has been shown among the share holders as bonus shares hare holders as bonus shares without creating corresponding liability. The appellant did not explain the creating corresponding liability. The appellant did not explain the creating corresponding liability. The appellant did not explain the basis of premium charged as the company is existing only on paper basis of premium charged as the company is existing only on paper basis of premium charged as the company is existing only on paper and no activity have been carried out during the financial year or activity have been carried out during the financial year or activity have been carried out during the financial year or subsequent years. years. In view of the above facts and circumstances of the In view of the above facts and circumstances of the case, I did not case, I did not find any reason to interfere in the f the A0 and hence f the A0 and hence Ground No. 2 and 3 are dismissed. 2 and 3 are dismissed.” 9.5 Before us the Ld. Ld. counsel of the assessee has submitted that of the assessee has submitted that lower authorities have not examined the documents of the assessee authorities have not examined the documents of the assessee authorities have not examined the documents of the assessee in support of creditworthiness as well as genuineness of the in support of creditworthiness as well as genuineness of the in support of creditworthiness as well as genuineness of the transaction. Before us transaction. Before us, the Ld. counsel of the assessee has referred of the assessee has referred to page No. 351 of the paperbook, which is investment schedule o to page No. 351 of the paperbook, which is investment schedule o to page No. 351 of the paperbook, which is investment schedule of balance sheet of M/s UB engineering Ltd. In the said schedule balance sheet of M/s UB engineering Ltd. In the said schedule balance sheet of M/s UB engineering Ltd. In the said schedule investment has been shown in the assessee company i.e investment has been shown in the assessee company i.e investment has been shown in the assessee company i.e. UB Ostan (India) Private Limited amounting to (India) Private Limited amounting to ₹1,54,00,000/ 54,00,000/- as on 31st March 2012. The source of same has been claimed as out of own The source of same has been claimed as out of own The source of same has been claimed as out of own sources in the form of share capital and reserves and surplus as well rces in the form of share capital and reserves and surplus as well rces in the form of share capital and reserves and surplus as well as borrowings. Bank statement of M/s UB engineering Ltd showing as borrowings. Bank statement of M/s UB engineering Ltd showing as borrowings. Bank statement of M/s UB engineering Ltd showing
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the said payment on 07/09/2011 to the assessee company is the said payment on 07/09/2011 to the assessee company is the said payment on 07/09/2011 to the assessee company is available on page 140 of the paperbook. available on page 140 of the paperbook.
9.6 Similarly, annual repo Similarly, annual report of VJM media Private Limited i.e. rt of VJM media Private Limited i.e. shareholder, is available on page 475 available on page 475 to 514 of the paperbook to 514 of the paperbook wherein investment in the assessee company is stment in the assessee company is recorded. recorded.
9.7 In respect of Ostan Asia In respect of Ostan Asia-Pacific Pte. Ltd, i.e. shareholder, the Ltd, i.e. shareholder, the Memorandum & Article Article of Association are available on page 262 to are available on page 262 to 285 of the paperbook. The Consolidated financial statement for the 285 of the paperbook. The Consolidated financial statement for the 285 of the paperbook. The Consolidated financial statement for the entity for the year ended 31/12/2012 has been filed on page 506 to entity for the year ended 31/12/2012 has been filed on page 506 to entity for the year ended 31/12/2012 has been filed on page 506 to page 513 of the paperbook. page 513 of the paperbook. A certificate of foreign inward A certificate of foreign inward remittance issued by t remittance issued by the Standard Chartered Bank showing transfer he Standard Chartered Bank showing transfer of foreign currency equivalent to of foreign currency equivalent to ₹2,19,99,300/-is available on page is available on page 186 of the paperbook. 186 of the paperbook.
9.8 The assessee has also filed bank ledgers of The assessee has also filed bank ledgers of ‘Yes Yes Bank’ showing receipt of money by way of share capital and share pr receipt of money by way of share capital and share pr receipt of money by way of share capital and share premium in its
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books of accounts which is available on page 226 to 232 of the books of accounts which is available on page 226 to 232 of the books of accounts which is available on page 226 to 232 of the paperbook. Bank statement of the relevant period of Corporation paperbook. Bank statement of the relevant period of Corporation paperbook. Bank statement of the relevant period of Corporation Bank has also been filed on page 123 of the paperbook. Bank has also been filed on page 123 of the paperbook. Bank has also been filed on page 123 of the paperbook.
9.9 In our opinion, due to non , due to non-cooperation on the part of th cooperation on the part of the assessee in assessment proceedings essee in assessment proceedings, part of the documents were , part of the documents were collected by the Assessing Officer Assessing Officer invoking section 133 (6) of the invoking section 133 (6) of the Act, but same are not explained to the , but same are not explained to the Assessing Officer Assessing Officer justifying nature and source of the credit nature and source of the credit by way of share capital by way of share capital and share premium. The additional evidence filed by the assessee before the The additional evidence filed by the assessee before the The additional evidence filed by the assessee before the Ld. CIT(A) have also also not been considered. We find that these We find that these documents in support of the creditworthiness and genuineness of documents in support of the creditworthiness and genuineness of documents in support of the creditworthiness and genuineness of the transactions have have not been referred by the lower lower authorities. The Ld. counsel before us has submitted that foreign shareholder of before us has submitted that foreign shareholder of before us has submitted that foreign shareholder of the assessee company is willing to appear before the the assessee company is willing to appear before the the assessee company is willing to appear before the Assessing Officer through authoriz through authorized signatory and file all the necessary and file all the necessary documents in support of its claim cuments in support of its claim, despite that there is no one on , despite that there is no one on
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behalf of the Indian shareholders behalf of the Indian shareholders to cooperate in pursuing the to cooperate in pursuing the proceedings. In view of the facts and circumstances In view of the facts and circumstances In view of the facts and circumstances and the interest of substantial justice, we feel it appropriate to restore this issue of substantial justice, we feel it appropriate to restore this issue of substantial justice, we feel it appropriate to restore this issue back to the file of the the Ld. Assessing Officer for examining all the for examining all the documents in support of claim of the assessee documents in support of claim of the assessee for for substantiating nature and source of the credit in its books of accounts nature and source of the credit in its books of accounts nature and source of the credit in its books of accounts, in relation to share capital and share share capital and share premium. The Ld. Assessing Officer Ld. Assessing Officer shall give is is is finding finding finding with with with reasons reasons reasons on on on the the the issue issue issue of of of identity, identity, identity, creditworthiness and genuineness of the transaction in respect of creditworthiness and genuineness of the transaction in respect of creditworthiness and genuineness of the transaction in respect of the amount of share capital and share premium received. It is the amount of share capital and share premium received. It is the amount of share capital and share premium received. It is needless to mention that the assessee shall be afforded adequate needless to mention that the assessee shall be afforded adequate needless to mention that the assessee shall be afforded adequate opportunity of being heard. of being heard. The grounds 1 to 3 of the appeal are 1 to 3 of the appeal are accordingly allowed for statistical purposes. accordingly allowed for statistical purposes.
9.10 The ground No. The ground No. 4 and 5 of the appeal relates to not considering of the appeal relates to not considering capital work in progress of capital work in progress of ₹1,72,79,051/-and expenses for legal and expenses for legal
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and consultancy charge and consultancy charges of ₹31,58,584/-and travelling expenses of and travelling expenses of ₹16,38,822/-for further carry for further carry forward.
9.11 The Assessing Officer Assessing Officer has mainly disallowed carry has mainly disallowed carry forward of the expenses in view of view of lack of information made available by the lack of information made available by the assessee during assessment proceedings. assessee during assessment proceedings. The relevant finding of the The relevant finding of the Assessing Officer in respect of work in progress of in respect of work in progress of ₹ 1.72 crores is in respect of work in progress of reproduced as under: reproduced as under:
“15.4 The “Capital Work in Progress’ is shown to have been added The “Capital Work in Progress’ is shown to have been added The “Capital Work in Progress’ is shown to have been added during the year under reference, but the assessce has not provided the year under reference, but the assessce has not provided the year under reference, but the assessce has not provided the facts regarding the block regarding the block-wise/item-wise details of Capital Work wise details of Capital Work- In-Progress, "where "where the the stated stated assets assets are are being being kept/installed/erected, ownership kept/installed/erected, ownership details/ agreements for the places details/ agreements for the places where such works works are being undertaken/ where the machinery is undertaken/ where the machinery is being installed/ kept and have failed to led/ kept and have failed to provide the details of person provide the details of person to whom payments are made or are due, for to whom payments are made or are due, for such capital work such capital work-in- progress. The submissions again point to the standing progress. The submissions again point to the standing facts that the facts that the assessee is claiming the works on other persons land as its assessee is claiming the works on other persons land as its assessee is claiming the works on other persons land as its own while the facts that the land never belonged to the assessee, the the facts that the land never belonged to the assessee, the the facts that the land never belonged to the assessee, the persons having possession of the land had no capability to sue having possession of the land had no capability to sue-motto let motto let the assessee use the land and it is without any hope, from the very assessee use the land and it is without any hope, from the very assessee use the land and it is without any hope, from the very beginning, that it belongs to the assessee. The as beginning, that it belongs to the assessee. The assessee appears to sessee appears to have full knowledge of the status in these regard, since the beginning. knowledge of the status in these regard, since the beginning. knowledge of the status in these regard, since the beginning.
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The authorized The authorized persons as per the KYC details received from the persons as per the KYC details received from the banks to operate the bank banks to operate the bank accounts of the assessee company shows accounts of the assessee company shows that these persons are not in that these persons are not in employment with the assessee company ent with the assessee company and at most some of them are the and at most some of them are the directors in the assessee company directors in the assessee company but having employment / contact with but having employment / contact with someone else having income someone else having income receipts from someone else other than the receipts from someone else other than the assessee company. Further, assessee company. Further, the explanation, as provi the explanation, as provided, shows the lack of ownership and fails to ownership and fails to provide the justification to establish the genuineness provide the justification to establish the genuineness of the claimed of the claimed expenditure towards addition of capital work expenditure towards addition of capital work-in-progress and progress and also failed to justify the purpose of the incurring such expenditure on failed to justify the purpose of the incurring such expenditure on failed to justify the purpose of the incurring such expenditure on other persons property. ersons property.” 9.12 Similarly travelling expenses and legal and consultancy fee was travelling expenses and legal and consultancy fee was travelling expenses and legal and consultancy fee was not allowed to carryforward in absence of evidences in support of not allowed to carryforward in absence of evidences in support of not allowed to carryforward in absence of evidences in support of the claim.
9.13 The Ld. CIT(A) also upheld the disallowance of capital The Ld. CIT(A) also upheld the disallowance of capital work-in- The Ld. CIT(A) also upheld the disallowance of capital progress in view of the fact that even the land was not transferred to in view of the fact that even the land was not transferred to in view of the fact that even the land was not transferred to the assessee. The disallowance of legal and consultation expenses the assessee. The disallowance of legal and consultation expenses the assessee. The disallowance of legal and consultation expenses and travelling expenses and travelling expenses was sustained in view of nonproduction of sustained in view of nonproduction of evidences.
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Before us, the Ld. Ld. counsel of the assessee has justified incurring justified incurring of expenses for capital wo of expenses for capital work-in-progress and travelling and legal progress and travelling and legal expenses. He submitted that all the details expenses. He submitted that all the details were duly provided to the duly provided to the lower authorities. He submitted that lower authorities. He submitted that the assessee could not proceed the assessee could not proceed with commercial operations due with commercial operations due to UB group coming into legal to UB group coming into legal crutches and therefore no benefit of the expenses is ever taken till crutches and therefore no benefit of the expenses is ever taken till crutches and therefore no benefit of the expenses is ever taken till date.
The Ld. DR on the other hand justified disallowance in view of on the other hand justified disallowance in view of on the other hand justified disallowance in view of no details of evidence in support of the same evidence in support of the same were were filed before the lower authorities.
We find that the We find that the Assessing Officer has made the disallowance has made the disallowance mainly in view of the fact that no supporting evidence mainly in view of the fact that no supporting evidence mainly in view of the fact that no supporting evidence were filed before him. The Ld. CIT(A) has also upheld mainly on this ground. before him. The Ld. CIT(A) has also upheld mainly on this ground. before him. The Ld. CIT(A) has also upheld mainly on this ground. We find that we have already restore the issue in dis We find that we have already restore the issue in dis We find that we have already restore the issue in dispute of examining of share capital and share premium received by the examining of share capital and share premium received by the examining of share capital and share premium received by the assessee in terms of section 68 of the assessee in terms of section 68 of the Act to the file of the to the file of the Ld.
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Assessing Officer and therefore in the interest of substantial justice and therefore in the interest of substantial justice, and therefore in the interest of substantial justice we feel it appropriate to restore this issue we feel it appropriate to restore this issue of allowability of capital ability of capital work-in-progress and legal and consultancy charges and travelling progress and legal and consultancy charges and travelling progress and legal and consultancy charges and travelling expenses back to the file of the expenses back to the file of the Ld. Assessing Officer Assessing Officer for deciding afresh. The assessee is directed to cooperate and file all the fresh. The assessee is directed to cooperate and file all the fresh. The assessee is directed to cooperate and file all the documentary evidences in support of its claim. The ground No. four documentary evidences in support of its claim. The ground No. four documentary evidences in support of its claim. The ground No. four and five of the appeal are accordingly allowed for statistical and five of the appeal are accordingly allowed for statistical and five of the appeal are accordingly allowed for statistical purposes.
In ground 6 and and 7, the assessee is aggrieved with , the assessee is aggrieved with taxing interest income of ₹ ₹5,10,963/-separately as ‘income from other income from other sources’.
The contention of the assessee that said interest income should The contention of the assessee that said interest income should The contention of the assessee that said interest income should be reduced from the cost of project a duced from the cost of project as the interest received arose s the interest received arose from temporary deposit with banks pendi from temporary deposit with banks pending application to capital ng application to capital work in progress. Alternatively work in progress. Alternatively, the assessee claimed that interest the assessee claimed that interest
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income of ₹5,10,963/ /- should have been set off against unallocated off against unallocated expenses carried to the balance sheet. expenses carried to the balance sheet.
Before us the Ld. Ld. counsel of the assessee submitted of the assessee submitted that issue in dispute is covered in favour of the assessee by the decision of the in dispute is covered in favour of the assessee by the decision of the in dispute is covered in favour of the assessee by the decision of the Hon’ble Supreme Court in the case of Hon’ble Supreme Court in the case of CIT Vs Bokaro steel Ltd 236 Vs Bokaro steel Ltd 236 ITR 315(SC). The Ld. Ld. counsel also referred to the decision of the to the decision of the Hon’ble Delhi High Court in the case of Hon’ble Delhi High Court in the case of NTPC Sail Power Company NTPC Sail Power Company Vs CIT in ITA No. 1238 of 2011 Vs CIT in ITA No. 1238 of 2011, wherein it is held that if the , wherein it is held that if the receipt is ‘inextricably linked’ to the setting receipt is ‘inextricably linked’ to the setting up of the project of the project, it would be capital receipt not liable to tax but ultimately to be used would be capital receipt not liable to tax but ultimately to be used would be capital receipt not liable to tax but ultimately to be used for reducing the cost of the p the cost of the project. The Ld. counsel counsel of the assessee before us submitted that in view of the same logic the funds invested submitted that in view of the same logic the funds invested submitted that in view of the same logic the funds invested by the assessee and the interest by the assessee and the interest earned was inextricably linked with inextricably linked with the setting up of the plant and therefore interest earned on fixed the setting up of the plant and therefore interest earned on fixed the setting up of the plant and therefore interest earned on fixed deposit must be adjusted with a capital work in progress. st be adjusted with a capital work in progress. st be adjusted with a capital work in progress.
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The Ld. DR on the other hand submitted that issu on the other hand submitted that issu on the other hand submitted that issue of treating interest receipt as capital receipt depends on the finding whether as capital receipt depends on the finding whether as capital receipt depends on the finding whether the business of the assessee was set up. He submitted that in the the business of the assessee was set up. He submitted that in the the business of the assessee was set up. He submitted that in the case of the assessee it was manufacturing unit and therefore said it the assessee it was manufacturing unit and therefore said it the assessee it was manufacturing unit and therefore said it can be called as set set up when raw material is purchase when raw material is purchased and processed for the first time by the said unit. processed for the first time by the said unit.
We have heard rival submission of the parties on the issue in We have heard rival submission of the parties on the issue in We have heard rival submission of the parties on the issue in dispute and perused t dispute and perused the relevant material on record. The issue in he relevant material on record. The issue in dispute in the ground raised is whether the interest income could be dispute in the ground raised is whether the interest income could be dispute in the ground raised is whether the interest income could be adjusted against the capital work in progress. In view of the decision adjusted against the capital work in progress. In view of the decision adjusted against the capital work in progress. In view of the decision of the Hon’ble Delhi High Court in the case of of the Hon’ble Delhi High Court in the case of NTPC sail Power Co NTPC sail Power Co Ltd (supra), which has been cited by the assessee , which has been cited by the assessee counsel, the , which has been cited by the assessee assessee is required to establish whether the business of the assessee is required to establish whether the business of the assessee is required to establish whether the business of the assessee was set up and if the and if the receipt is inextricably linked wit inextricably linked with the setting up of the project setting up of the project, then only the said receipt could be adjusted could be adjusted against capital work in progress o against capital work in progress or cost of the project r cost of the project. Since, this
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issue of setting of the business issue of setting of the business has not been decided in the case of has not been decided in the case of the assessee by the the assessee by the lower authorities, therefore we feel it authorities, therefore we feel it appropriate to restore the issue in dis appropriate to restore the issue in dispute also to the file of the pute also to the file of the Ld. Assessing Officer for deciding a for deciding afresh in accordance with law. The fresh in accordance with law. The ground No. 6 and 7 of the appeal of the assessee of the appeal of the assessee are accordingly allowed for statistical purposes. allowed for statistical purposes.
In the result, the appeal of the assessee is allowed In the result, the appeal of the assessee is allowed for statistical In the result, the appeal of the assessee is allowed purposes.
Order pronounced in the Court on ounced in the Court on 20/07/2022. Sd/- Sd/- - (SANJAY GARG SANJAY GARG) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 20/07/2022 Rahul Sharma, Sr. P.S.
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Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, BY ORDER, //True Copy// (Sr. Private Secretary) (Sr. Private Secretary) ITAT, Mumbai ITAT, Mumbai