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Income Tax Appellate Tribunal, MUMBAI “B” BENCH, MUMBAI
Before: SHRI SHAILENDRA KUMAR YADAV, JUDICIAL & SHRI RAJESH KUMAR.
अपीलाथ� क� ओर से/By Appellant : Shri Anuj Kisnadwala, ��यथ� क� ओर से/By Respondent : Shri Chandra Vijay, DR सुनवाई क� तार�ख/Date of Hearing : 16.08.2016 घोषणा क� तार�ख/Date of Pronouncement : 23.08.2016 ORDER PER SHAILENDRA KUMAR YADAV, J.M:
This appeal has been filed by assessee against the order of Commissioner of Income-Tax (Appeals)-5, Mumbai, dated 17.03.2010 for A.Y. 2004-05 on following grounds:
A.Y. 2004-05 [Mumbai Integrated SEZ Ltd. vs. DCIT] Page 2 “GROUND I: On the facts and in the circumstances of the case and in law, the Commissioner of Income Tax (Appeals) - V, erred in upholding the observation of the Deputy Comm. of Income Tax, Circle —2(2), Mumbai ("The AO") that the Appellant had not set up its business and not commenced its operations.
He failed to appreciate and ought to have held that: a. the assessment cannot be made based on conjuncture, surmises and/or imagination; b. the Appellant company is formed for the purpose of carrying out the business of development and operation of infrastructure facilities in India, including developing Special Economic Zones; C. the business of the Appellant had already been set up and the project was in the development stage. d. For the purpose of the Income Tax Act, it is setting up on the business that has to be considered and not the commencement. e. On the facts and circumstances of the case, the decision of the Supreme Court in Tuticorin Alkalies Chemicals & Fertilizers Ltd. Vs. CIT (227 ITR 172) would not apply.
2. The Appellant, therefore, prays that it be held that the Appellants business was already set up and accordingly the ratio of the decision in Tuticorin Alkalies Chemicals & Fertilizers Ltd. (supra) would not be applicable.
GROUND II
WITHOUT PRJUDICE ABOVE,
1. On the facts and in the circumstances of the case and in law, the Commissioner of Income Tax (Appeals) - V, erred in upholding the order of AO, in assessing interest receipt from staff loans and deposits for Letter of Credit (LC)/ Bank Guarantee (BG) Margin amounting to Rs. 12,26,209/- as Income from Other Sources by relying on the decision of the Supreme Court in the case of Tuticorin Alkalies Chemicals & Fertilizers Ltd. (Supra).
2. He failed to appreciate and ought to have held that: a. the Appellant company is in the business of development and operation of infrastructure facilities in India, including developing Special Economic Zones; b. the margin money account had been opened towards LC for procurement of project material (steel) which was required for the development of the project; c. the purchases of the materials is required for the development of the project at positra in Gujrat; d. the interest on deposits for Margin / LC & BO is intrinsically A.Y. 2004-05 [Mumbai Integrated SEZ Ltd. vs. DCIT] Page 3
linked with the development of entire project and hence should be reduced from the Capital Work in progress. e. The ratio laid down by the decision of the Supreme Court in Bokaro Steel Ltd. (236 ITR 315) is squarely applicable to the facts of the Appellants case.
GROUND III WITHOUT PRJUDICE TO GROUND II ABOVE,
1. The Commissioner of Income Tax (Appeals) - V, erred in upholding the order of AO, in disallowing expenditure in respect of interest and bank charges on LC & BG amounting to Rs. 12,26,209/- on the alleged ground that the expenditure is not inextricably linked to earning the interest on staff loan and interest on deposits for Margin / LC & BG.
In the event, the action of the AO is upheld and interest amounting to 12,26,209/- is assessed as Income from Other Sources, the AO be directed to allow deduction of the expenditure incurred in relation to interest and bank charges on LC & BG under section 57(iii) of the Act, restricted to interest receipt.
GROUND IV: Interest u/s. 234B, 234D and 244A of the Act. 1. On the facts and in the circumstances of the case and in law, the Commissioner of Income Tax (Appeals) - V, erred in upholding the order of the AO, of levying interest u/s. 23413, 234D and 244A of the Act of Rs. 1,19,983/- 2. The Appellant prays that the levy of interest u/s. 234B, 234D and 244A of the Act be deleted. GROUND V:
The Appellant craves leave to add to, alter and / or amend all or any of the foregoing grounds of appeal.”
2. Issue before us is that whether assessee’s business was already set up for claiming certain deduction or not. In fact CIT(A) by following its own order in similar issue decided in appeal order no.CIT(A)-5/ITO-4(1)/IT-99/09-10 dated 7.01.2010 for A.Y. 2003-04 against the assessee.
ITA No.3928/Mum/10 A.Y. 2004-05 [Mumbai Integrated SEZ Ltd. vs. DCIT] Page 4 2.1 On alternative contention, learned Authorized Representative has pointed out that this issue is covered by assessee’s own case passed by Hon’ble ITAT ‘A’ Bench, Ahmedabad in for A.Y. 2003-04 order dated 25.04.2014. Matter has been set aside to the AO with certain direction by observing as under: “5.3 We are also of the opinion that the assessee is expected to place on record the purpose of deposit, utilization of funds and most importation fact is also to be brought on record about the nexus of interest earned and interest paid. We, therefore, hereby hold that the matter should go back to the stage of the AO so that the procurement of funds, its utilization and the source of deposit has to be examine afresh by the AO so that the nexus can be established in respect of the interest earned and interest paid. With these directions, the grounds raised by the assessee are partly allowed that too for statistical purpose.
6. In the result, Assessee’s appeal is partly allowed.”
2.2 Nothing contrary was brought to our knowledge on behalf of Revenue. Facts being similar, so, following same reasoning, we restore the matter to AO with similar directions.
In the result, the appeal filed by the assessee is allowed for statistical purposes as indicated above.
Pronounced in the open Court on this the 23rd day of August, 2016.