Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
Before: SHRI G.S. PANNU & SHRI RAM LAL NEGI
O R D E R PER G.S. PANNU, AM :
The captioned appeal by the assessee is directed against the order of CIT(A)-47, Mumbai dated 10.06.2015, pertaining to the Assessment Year 2009-10, which in turn has arisen from the order passed by the Assessing Officer, Mumbai dated 30.12.2011 under section 153C r.w.s. 143(3) of the Income Tax Act, 1961 (in short ‘the Act’).
In this appeal, the solitary grievance of the assessee is against the action of the CIT(A) in sustaining an addition of Rs.40,00,000/- made by the Assessing Officer with respect to amount received from one M/s. IL&FS Transportation Network Ltd.
In order to appreciate the background of the dispute raised by the assessee in this appeal, the following discussion is relevant. The assessee before us is a company incorporated under the provisions of the Companies Act, 1956 and it is part of the group of companies known by the name of M/s. Flemingo/Bermaco group. A search and seizure action u/s 132(1) of the Act was carried out in the Flemingo/Bermaco group on 30.10.2009 and, as a consequence, an assessment u/s 153C r.w.s. 143(3) of the Act was also made on the assessee for the instant assessment year. The Assessing Officer notes that the assessee was incorporated on 20.03.2008 and it is engaged in the business of organising, undertaking, developing, executing all kinds of infrastructure activities and to construct, build, develop, maintain, operate, own and transfer infrastructure facilities of all kinds. In the assessment order, the Assessing Officer has discussed in detail the monies received by the assessee and other group concerns by way of loans, share application monies, advances, etc. from other concerns. Particularly, the Assessing Officer has noted that assessee received a sum of Rs.20,00,00,000/- from M/s. IL&FS Transportation Network Ltd. in terms of an Agreement dated 18.04.2008. The assessee had explained that the amount was received as security deposit in terms of an Agreement (Memorandum of Understanding) between M/s. IL&FS Transportation Network Ltd. and the assessee, and it related to the work of development of Jharkhand Accelerated Road Development Programme obtained by M/s. IL&FS Transportation Network Ltd. and the said concern obtained the services of the assessee for providing heavy plant & machinery and equipment, identifying and blocking for stone/concrete required for the Jharkhand Accelerated Road Development Programme. M/s. IL&FS Transportation Network Ltd. had agreed to provide a security deposit not exceeding Rs.25,00,00,000/-, which is stated to be Rs.20,00,00,000/- in question, in order to secure its right to have the availability of heavy plant & machinery as well as stone quarries as and when it may require. Similarly, the Assessing Officer noted that the assessee had received during the year a sum of Rs.2,50,00,000/- from one, M/s. Utility Energy Tech and Engineers Pvt. Ltd., which was stated to be as interest-free inter-corporate deposit. The Assessing Officer was not satisfied with the explanations rendered by the assessee with regard to the nature of the aforesaid amounts received. The Assessing Officer noted that immediately after the receipt of monies, the amounts were either transferred to the account of other associate concerns or were used for funding its share trading business. As per the Assessing Officer, the purpose as per the Agreement/Memorandum of Understanding was not fulfilled. For the said reasons, the Assessing Officer concluded that assessee had received said funds without any liability to pay back. Be that as it may, the Assessing Officer concluded as under :-
“8.4 In view of the above detailed discussion on the nature of the funds received, its utilization and in the light of documentary evidences in the form of various seized documents as discussed above, it is clearly established that the various funds received in the form of Share Application Money, unsecured loans by the assessee and other concerns of Bermaco Group from Reliance ADAG group concerns & IL&FS Group concerns are in the nature of revenue receipts only liable to be taxed in the hands of the assessee group companies as income. Although these funds have been claimed as received in the form of share application money, unsecured loan, advances etc. yet in substance they are in the nature of revenue receipts towards professional services or consultancies rendered by assessee for various purposes as discussed above. Therefore, the receipts in the respective assessment year are required to be taxed in the hands of the group companies in which funds are received.”
Following his aforesaid approach, the Assessing Officer assessed the amounts of Rs.20,00,00,000/- received from M/s. IL&FS Transportation Network Ltd. and Rs.2,50,00,000/- from M/s. Utility Energy Tech and Engineers Pvt. Ltd. as revenue receipts in the hands of the assessee as received for professional services or consultancy rendered by the assessee. The aforesaid addition was challenged by the assessee in appeal before the CIT(A). The varied submissions made by the assessee have been considered by the CIT(A) who also called for a Remand report from the Assessing Officer. The Assessing Officer furnished a report and after considering the stand of the assessee thereof, the CIT(A) has proceeded to delete the addition of Rs.2,50,00,000/- representing amount received from M/s. Utility Energy Tech and Engineers Pvt. Ltd. in its entirety, and with respect to the amount of Rs.20,00,00,000 crores received from M/s. IL&FS Transportation Network Ltd., he has deleted the addition to the extent of Rs.19,60,00,000/- and sustained the balance of Rs.40,00,000/-. This sustenance of addition to the extent of Rs.40,00,000/- is the subject matter of appeal before us.
Notably, at the time of hearing, it was specifically put to the parties as to whether there is any cross appeal of the Revenue, but it has been submitted at Bar that there is no appeal by the Revenue against the impugned order of the CIT(A). In this background, we have heard the rival contentions.
A pertinent plea of the assessee is that once the CIT(A) has disagreed with the principal plea of the Assessing Officer about the nature of the amount received from M/s. IL&FS Transportation Network Ltd., there was no justification to sustain the addition in respect of part of the amount of Rs.40,00,000/- merely because the same was not repaid. The learned representative for the assessee pointed out that the liability of Rs.40,00,000/- was appearing in the Balance-sheet as a refundable security deposit and, therefore, the addition has been wrongly sustained. The learned representative pointed out that even with regard to the addition made by the Assessing Officer in the case of other group concerns, tabulated in para 8.4 of the assessment order, the additions have been either deleted by the CIT(A) or appeals were still pending at the level of CIT(A). In the case of one group concern, namely M/s. Bermaco Energy Systems Ltd., it was pointed out that the advance received from M/s. Utility Energy Tech and Engineers Pvt. Ltd. as well as M/s. IL&FS Transportation Network Ltd. in Assessment Year 2010-11, which were assessed by the Assessing Officer on reasons similar to the instant case, have since been deleted by the CIT(A) and no appeal has been preferred by the Revenue before the Tribunal. The learned representative pointed out that so far as the assessee is concerned, its obligation in terms of Sec. 68 of the Act was to satisfactorily demonstrate the identity and creditworthiness of the credits and the genuineness of the transactions. It was pointed out that a total of Rs.20,00,00,000/- was received from M/s. IL&FS Transportation Network Ltd. as security deposit and the fact that the CIT(A) has accepted the position with regard to Rs.19,60,00,000/- implies that the onus cast on the assessee u/s 68 of the Act has been discharged and, therefore, there was no reason for the CIT(A) to confirm the addition to the extent of Rs.40,00,000/- merely because the amount was yet to be repaid. At the time of hearing, the learned representative has also referred to the Paper Book filed, wherein is placed the material that was before the CIT(A) on the basis of which the addition of Rs.20,00,00,000/- has been restricted to Rs.40,00,000/-, and contended that the explanation about the nature of amount cannot be accepted in part.
On the other hand, the ld. DR appearing for the Revenue pointed out that the CIT(A) has based his decision on the fact that the amount has been repaid by the assessee to the extent of Rs.19,60,00,000/- and, therefore, the balance of Rs. 40,00,000/- which remained unpaid is of the nature as inferred by the Assessing Officer. Thus, he has defended the order of the Assessing Officer in this manner. The ld. DR also referred to the Agreement (Memorandum of Understanding) with M/s. IL&FS Transportation Network Ltd. to point out that none of the obligations set out in the said arrangement have been carried out by the assessee and, therefore, there was no justification for not repaying the impugned sum of Rs.40,00,000/-.
We have carefully considered the rival submissions. Factually speaking, the Assessing Officer has dealt with the veracity of the two transactions entered by the assessee, namely receipt of Rs.20,00,00,000/- from M/s. IL&FS Transportation Network Ltd. as a security deposit in terms of an Agreement (Memorandum of Understanding) dated 18.04.2008; and, secondly, interest-free inter- corporate deposit (ICD) of Rs.2,50,00,000/- from M/s. Utility Energy Tech and Engineers Pvt. Ltd. The Assessing Officer had discussed the issue in detail in the assessment order, including the manner in which assessee and other group concerns have received monies in the shape of loans and advances, share application monies, advances, etc. from other entities. It would suffice for our purpose to note here that the Assessing Officer was not satisfied with regard to the nature of the amounts received from the two parties in question. According to him, the amounts received were treated by the assessee as if they were its own funds and did not carry any liability to repay. Therefore, he treated the amounts as ‘revenue receipts’ and brought to tax the same. The CIT(A) has disagreed with the Assessing Officer with respect to the sum of Rs.2,50,00,000/- received from M/s. Utility Energy Tech and Engineers Pvt. Ltd. and with respect to Rs.19,60,00,000/- out of the total of Rs.20,00,00,000/- received from M/s. IL&FS Transportation Network Ltd. The findings of CIT(A) in this regard are as follows :-
“6.3 I have carefully perused the above and also the remand reports and the documents enclosed as annexures by the appellant. The appellant had proved the creditworthiness and genuineness of transactions since the relevant details such as bank statement of the creditors, confirmations, terms of transaction etc. have already been produced before the Assessing Officer during the course of the assessment proceedings itself. Even the parties who had given the advance had submitted the details confirming the transactions in response to notices issued to them by the Assessing Officer u/s. 133(6) of the Act. Further, the AO has, vide his remand report dated 17.11.2014 confirmed the transactions pertaining to the repayment of the advance of Rs.19,60,00,000/- to IL & FS Transportation Network Ltd. and of Rs.2,50,00,000/- to Utility Energy Tech Engineers Pvt Ltd by the appellant and that no infirmity has been pointed out by the Assessing Officer, except for the exceptions pointed and explained by the appellant. It is established that the advance received by the appellant has ultimately been repaid. It is seen that the amount of Rs.19,60,00,000/- to IL & FS Transportation Network Ltd. out of the advance of Rs.20,00,00,000/- and Rs.2,50,00,000/- to Utility Energy Tech Engineers Pvt Ltd has been repaid and so the very basis of the addition of the AO on the basis that it is without any liability to repay becomes infructuous and so the addition of Rs.22.10 crores (Rs.19.60 crores + Rs.2.50 crores) is deleted. Out of the total amount of Rs.20 crores, the appellant has given satisfactory documentary evidence relating to the amount of Rs.19.60 crores and so the same is deleted. The balance amount of Rs.40 lakhs is confirmed for non-repayment. Therefore, Ground of Appeal No.4 is partly allowed. The AO is directed to delete Rs.21.10 crores and confirm Rs.40 lakhs.”
8. Insofar as the findings of the CIT(A) in relation to the amounts deleted are concerned, they are not in dispute before us. The grievance of the assessee is against the action of the CIT(A) in non-suiting the assessee for the treatment of Rs.40,00,000/- in its hands, whereas the balance of Rs.19,60,00,000/- received from M/s. IL&FS Transportation Network Ltd. in terms of the same arrangement has been treated differently.
9. The decision of the CIT(A) shows that he has primarily gone by the fact that the amounts received have been repaid by the assessee subsequently and, therefore, he has disagreed with the Assessing Officer’s treatment of the amounts being ‘revenue receipts’ not carrying any liability to repay. It can be seen that the Assessing Officer held that the amount did not carry any liability to repay whereas according to the CIT(A), once the amount has been actually repaid, it could not be treated as assessee’s own money so as to merit the addition as made by the Assessing Officer. In the absence of any appeal by the Revenue against such finding of the CIT(A), we may also examine as to whether the said test can be applied in the context of the balance amount of Rs.40,00,000/- received from M/s. IL&FS Transportation Network Ltd. It is not in dispute that the impugned sum of Rs.40,00,000/- has also been received in pursuance to the Agreement (Memorandum of Understanding) with M/s. IL&FS Transportation Network Ltd. dated 18.04.2008. The learned representative for the assessee pointed out that the impugned sum was not repaid, but its liability was still outstanding in the Balance-sheet, and that there was enough justification to say that the amount was not in the nature of an amount assessable in the hands of the assessee. In our considered opinion, if one has to go by the test formulated by the CIT(A), and incidentally which is not disputed by the Revenue before us (as no appeal is said to have been filed against the order of the CIT(A) by the Revenue), the aforesaid sum becomes assessable. Notably, the Assessing Officer had disagreed with the assessee on the ‘nature’ of the credit appearing in account books of the assessee against the name of M/s. IL&FS Transportation Network Ltd. The assessee had claimed it as a security deposit in pursuance to an MOU, against which services were to be performed. The Assessing Officer had disagreed and concluded that it was in the nature of an amount owned by the assessee itself. Pertinently, the CIT(A) has allowed relief to the extent amount has been repaid, and he has not touched upon the ‘nature’ of the credit at the time of its receipt. So however, it has been the case of the assessee that apart from the test of repayment, there is enough justification to say that the amount has been received for which assessee has a liability to either repay or render the services as envisaged in the MOU. Whether or not the said plea is tenable is relevant to decide the fate of the impugned sum of Rs.40,00,000/-, but the same has not been addressed by the CIT(A). So far as the source of the credit is concerned, there is no dispute, and the only dispute is with regard to the nature of the amount and, in our considered opinion, the onus to prove the nature of impugned credit is entirely on the assessee. In our considered opinion, it would be in the fitness of things that the assessee is allowed an opportunity to demonstrate with positive evidence that with respect to the sum of Rs.40,00,000/-, the liability to repay M/s. IL&FS Transportation Network Ltd. continues inspite of the fact that the arrangement envisaged in the Agreement (Memorandum of Understanding) dated 18.04.2008 has not fructified, a fact which is not in dispute. Since the aforesaid aspect requires a factual appreciation of the state of affairs, we deem it proper to restore the matter back to the file of the CIT(A). It is directed that the CIT(A) shall examine the aforesaid aspect on the basis of the material and evidence that the assessee may submit before him. Accordingly, the issue relating to assessability of sum of Rs.40,00,000/- is restored back to the file of the CIT(A) to be decided after hearing the assessee and as per law.
In the result, appeal of the assessee is treated as allowed for statistical purposes.
Order pronounced in the open court on 12th September, 2017.