ASSISTANT COMMISSIONER OF INCOME TAX,CIRCLE - 4(1)(1), BANGALORE vs. M/S. KAPPEC LIMITED, BANGALORE

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ITA 1348/BANG/2019Status: DisposedITAT Bangalore06 March 2020AY 2014-1510 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal confirmed the CIT(Appeals)'s order, finding that the revenue failed to present new evidence or cogent material to controvert the CIT(Appeals)'s observations. Therefore, the Tribunal did not interfere with the CIT(Appeals)'s decision.

What were the facts?

The assessee, a public sector company trading agricultural products, earned interest on fixed deposits. The Assessing Officer treated this interest as income from other sources, considering it as grant-in-aid. The CIT(Appeals) allowed the assessee's appeal, holding the interest was not taxable as income from other sources.

What were the issues?

Whether interest earned on fixed deposits, funded by government grant-in-aid, is taxable as income from other sources. Whether the CIT(Appeals) erred in deleting the disallowance of interest.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 250,Section 143(2),Section 142(1)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, BANGALORE BENCHES “ A ” BENCH: BANGALORE

Before: SHRI A.K. GARODIA & SHRI PAVAN KUMAR GADALE

For Respondent: Shri A. Ramesh Kumar, JCIT(D.R)
Hearing: 02.03.2020Pronounced: 06.03.2020

O R D E R

PER SHRI PAVAN KUMAR GADALE, JM :

1.

The revenue has filed an appeal against the order of Commissioner of Income Tax (Appeals)-12, Bangalore passed under Section 143(3) and 250 of the Income Tax Act, 1961 ('the Act').

2.

The revenue has raised the following grounds of appeal:

3.

The Brief facts of the case are that, the assessee company is engaged in trading of agricultural products and filed the Return of Income for the Assessment Year 2014-15 on 17.09.2014 with total income of Rs.5,79,23,958/-.Subsequently the case was selected for scrutiny and notice under Section 143(2) and 142(1) of the Act were issued. In compliance, the learned Authorized Representative appeared from time to time and filed the details. The assessee company is a public sector company established by the Government of Karnataka to trade on agricultural products and through approved channelized agents of seeds, onions etc. The Assessing Officer based on the details filed by the assessee, found that the assessee has a Bank Balance as per Balance Sheet of Rs.34.71 Crores including deposits with Banks of Rs.33.11 Crores. The Assessing Officer issued show cause notice to treat the interest on Fixed Deposits (FDs) as income from other sources. Further, the Assessing Officer observed that the interest component cannot be treated as grant-in-aid and dealt at Para 4 to 4.3 of the order and taxed the entire interest earned by the assessee on FDs are out of the grant-in-aid as income from other sources and assessed the total income of Rs.9,03,66,445/- and passed the order under Section 143(3) of the Act dt.28.12.2016. Aggrieved by the order, the assessee has filed an appeal with the CIT(Appeals), whereas the CIT(Appeals) considering the grounds of appeal

, findings of Assessing Officer and submissions of the assessee on the disputed issue observed that the interest on FDs cannot be treated as ‘income from other sources’ reliying on the judicial decisions and allowed the assessee appeal. Aggrieved by the order of CIT(Appeals), the revenue has filed an appeal before the Tribunal.

4. At the time of hearing, the learned Departmental Representative submitted that the CIT(Appeals) has erred in deleting the disallowance of interest made by the Assessing Officer as the decision of Hon'ble High Court of Karnataka in the case of CIT & Anr. Vs. Karnataka Urban Infrastructure & Finance Corporation(Karnataka)(284 ITR 582) relied on by the CIT(Appeals) was challenged by the revenue and the Revenue has filed SLP before the Hon'ble Supreme Court. Contra, the LdAr supported the orders of CIT(Appeals).

5. We heard the rival contentions and perused the material on record. The sole disputed issue argued by the ld.DR that the CIT(Appeals) has granted relief without appreciating the fact that the interest on fixed deposits with bank are out of the grant-in-aid received from the Govt. of Karnataka and is taxable in the hands of the assessee. Further the decision relied by the CIT(Appeals) of Hon'ble High Court of Karnataka is challenged before the Hon'ble Supreme Court in SLP by the Revenue. We found that the revenue has relied only on the SLP filed before the Hon'ble Supreme Court and the the observations of the CIT(Appeals) at page 3 Para 9 to 15 of the order is read as under :

6.

The ld. DR could not controvert the observations of the CIT(Appeals) with any new evidence or cogent material. Accordingly, we are not inclined to interfere with the order of CIT(Appeals) and confirm the same and dismiss the grounds of appeal of revenue.

7.

In the result, the revenue’s appeal is dismissed.

Pronounced in the open court on the date mentioned on the caption page.

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