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Income Tax Appellate Tribunal, DELHI BENCH “G”, NEW DELHI
Before: SHRI H.S. SIDHU & SHRI O.P. KANT
Date of Hearing : 29-09-2016 Date of Order : 05-10-2016
ORDER PER H.S. SIDHU : JM
This Appeal filed by the Assessee is directed against the Order dated 4.3.2013 passed by the Ld. Commissioner of Income Tax(Appeal-III), New Delhi relevant for the assessment year 2009-10.
The grounds raised in the Appeal read as under:-
On the facts and circumstances of the case, the order passed by the learned Commissioner of Income
Tax (Appeals) [CIT(A)] is bad both in the eye of law and on facts.
2. (i) On the facts and circumstances of the case, the learned C1T(A) has erred both on facts and in law in confirming the action of AO in treating an amount of Rs. 12,15,015/- on account of interest on FDRs to be 'income from other sources'.
ii) That the above said addition has been confirmed rejecting the contention of the assessee that the FDRs being made out of business expediency, the interest earned on jem, as such, goes to reduce the cost of work in progress.
Without prejudice to the above and in the alternative, the learned CIT(A) has erred in not at owing benefit of expenses incurred in relation to earning of said interest on FDRs.
On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the appellant that the interest earned during construction period will go to reduce the cost of construction and as such will not be assessable as 'income from other sources'.
In the alternative and without prejudice to the above, the learned CIT(A) has erred, both on facts and in law, in ignoring the fact that the business having been set up all the expenditure incurred thereafter shall be allowable and to be set off against any other income during the year.
The Appellant craves leave to add, amend or alter any of the grounds of appeal.
3. The brief facts of the case are that assessee filed its return declaring net loss of Rs. (-) 32,167/- was filed on 29.9.2009. A search u/s. 132 was conducted in this case on 25.9.2008. Accordingly, the case was taken up for scrutiny. Statutory notices were issued and duly complied with. In response to the notices assessee’s AR filed the various details. Thereafter, the AO made the addition of Rs. 12,15,015/-. The reasons for making addition arose from the fact that during the assessment proceeding the AO found that the assessee had a deposit in the shape of FDR with the Indusind Bank on which during the year the assessee has earned interest of Rs. 12,15,015/-. AO observed that since the said interest was not shown as income under the head “income from other sources” instead the same was adjusted from the cost of work-in- progress. The AO accordingly, assessed the interest income under the head “income from other sources” vide his order dated 19.11.2010 passed u/s. 153A read with section 143(3) of the I.T. Act, 1961.
4. Aggrieved with the aforesaid assessment order, assessee preferred appeal before the Ld. CIT(A), who vide impugned order dated 4.3.2013 has dismissed the appeal of the Assessee by upholding the action of the AO in assessing the interest income of Rs. 12,15,015/- under the head “Income from other sources.”
5. Against the aforesaid order of the Ld. CIT(A), assessee is in appeal before the Tribunal.
6. At the time of hearing, ld. Counsel of the assessee has stated that the issue in dispute is squarely covered by the decision of the Hon’ble Jurisdictional High Court in the case of CIT vs. Jaypee DSC Ventures Ltd. reported in (2012) 17 taxmann.com 257 (Delhi). He further stated that Ld. CIT(A)-29, New Delhi has also decided the issue in dispute in favour of the assessee in assessee’s own case for the assessment year 2010-11 and 2011- 12 and held that this case is not one where the assessee had made the deposit of surplus money lying idle with it in order to earn interest; on the contrary, the amount of interest was earned from fixed deposits which were kept in the bank for furnishing the bank guarantee. He further stated that CIT(A) observed that the deposit in the cited case was directly linked with the purchase of plant and machinery and hence held that income earned on such deposits is incidental to the acquisition of assets and accordingly, capitalized. In the present case also it was obligatory to provide the bank guarantee for which fixed deposit has been made by the assessee to commence its business. Therefore, the interest income earned is nothing but the business income of the assessee and the act of assessee to reduce work in progress to the extent of interest received and Ld. CIT(A) for the assessment years mentioned above deleted the similar additions made by the AO in assessee’s own case. Ld. Counsel for the assessee also filed the copies of the order dated 23.9.2015 passed by the Ld. CIT(A) in assessee’s own case for the assessment years 2010-11 and 2011- 12 as well as the copy of the Hon’ble High Court of Delhi in the
7. On the other hand, Ld. DR did not controvert the arguments advanced by the Ld. Counsel for the assesse and relied upon the orders passed by the Ld. CIT(A) as well as the decision mentioned by the Ld. CIT(A) in the impugned order.
We have heard both the parties and perused the records.
We have also gone through the orders of the Ld. CIT(A) for the subsequent assessment years i.e. 2010-11 & 2011-12 wherein the assessee’s contention was accepted by the Ld. CIT(A) and similar additions was deleted by the Ld. CIT(A). We find that Ld. DR could not produce any order of the higher authorities contrary to the finding of the Ld. CIT(A) given on the issue in dispute for the AY 2010-11 & 2011-12, as aforesaid. We have also gone through the Hon’ble Jurisdictional High Court decision in the case of CIT vs. Japyee DSC Ventures Ltd. (Supra) and find that the issue in dispute is squarely covered by the said judgment of the Hon’ble Jurisdictional High Court decision of Jaypee DSC Ventures (Supra) wherein the Hon’ble High Court has held as under:-
“As is noticeable from the stipulations in the agreement, the performance guarantee by way of bank guarantee was required for faithful performance of its obligations. The non- submission of the guarantee would have entailed termination of the agreement and NHAI would have been at liberty to appropriate the bid security. That apart, the release of such performance security depended upon certain conditions. Thus, it is clearly evincible that the bank guarantee was furnished as a condition precedent to entering into the contract and further it was to be kept alive to fulfill the obligations. Quite apart from the above, the release of the same was dependent on the satisfaction of certain conditions. Thus, the instant case is not one where the assessee had made the deposit of surplus money lying idle with it in order to earn interest; on the contrary, the amount of interest was earned from fixed deposits which were kept in the bank for furnishing the bank guarantee. It had an inextricable nexus with securing the contract. Accordingly, the view expressed by the Tribunal cannot be found fault with.” [Para 21] 9. In the background of the aforesaid discussions and respectfully following the precedents, as referred above, we allow the appeal of the Assessee.
In the result, the Appeal filed by the Assessee stands allowed.
Order pronounced in the Open Court on 05/10/2016.