SMS Paryavaran Ltd, New Delhi v. DCIT, New Delhi

ITA 3007/DEL/2009 | 2005-2006
Pronouncement Date: 07-01-2010 | Result: Partly Allowed

Appeal Details

RSA Number 300720114 RSA 2009
Assessee PAN AAACS2177F
Bench Delhi
Appeal Number ITA 3007/DEL/2009
Duration Of Justice 6 month(s) 11 day(s)
Appellant SMS Paryavaran Ltd, New Delhi
Respondent DCIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 07-01-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted G
Tribunal Order Date 07-01-2010
Date Of Final Hearing 07-01-2010
Next Hearing Date 07-01-2010
Assessment Year 2005-2006
Appeal Filed On 26-06-2009
Judgment Text
ITA NO. 3007/DEL/2009 A.Y. 2005-06 1 IN THE INCOMETAX APPELATE TRIBUNAL DELHI BENCH G: NEW DELHI BEFORE SHRI RAJPAL YADAV JUDICIAL MEMBER & SHRI SHAMIM YAHYA ACCOUNTANT MEMBER ITA NO. 3007/DEL/ 2009 A.Y. : 2005-06 M/S SMS PARYAVARAN LIMITED VS. DY. COMMIS SIONER OF INCOME TAX SMS HOUSE E1/4 SECTOR-7 CIRCLE 9(1) NEW D ELHI ROHINI DELHI 110 085 [PAN: AAACS2177F] (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE DEPARTMENT BY : SH. KISHORE B. SR. DR O R D E R PER SHAMIM YAHYA: AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDERS OF THE LD. CIT(A) DATED 17.03.2009 PERTAINING TO ASSESSMENT YE AR 2005-06. 2. THE ISSUE RAISED IS THAT INCOME FROM INTEREST ON BANK DEPOSITS OF RS. 1250031/- SHOULD BE TREATED AS INCOME FROM BUSI NESS.S IT HAS FURTHER BEEN URGED THAT IF THE INTEREST IS TO BE TA KEN AS SEPARATE INCOME THE RELEVANT INTEREST INCURRED SHOULD ALSO BE CONSI DERED WITH IT. 3. IN THIS CASE ASSESSEE COMPANY HAS BEEN ENGAGED IN BUSINESS OF PROVIDING INFRASTRUCTURE DURING THE YEAR. IT HAD CLAIMED DEDUCTION UNDER SECTION 80IA ON PROFITS INCLUDING INTEREST ON FDR. AO DISALLOWED THE CLAIM OF THE ASSESSEE OF DEDUCTION U/S. 80IA D EDUCTION ON FDR ITA NO. 3007/DEL/2009 A.Y. 2005-06 2 INTEREST. AO IN THIS REGARD REFERRED TO SEVERAL C ASE LAWS INCLUDING TWO CASE LAW OF CIT VS. PANDIYAN CHEMICAL LTD. 233 ITR 497 AND THE CASE OF FENNER INDIA LTD. VS. CIT 241 ITR 579. 4. UPON ASSESSEES APPEAL LD. CIT(A) CONFIRMED THAT INTEREST INCOME CANNOT BE TREATED AS INCOME FROM THE BUSINESS OF PR OVIDING INFRASTRUCTURE FACILITIES. 5. AGAINST THIS ORDER THE ASSESSEE IS IN APPEAL BE FORE US. 6. WE FIND THAT THERE IS AN ADJOURNMENT PETITION FI LED BY THE ASSESSEE. HOWEVER THE LD. DR POINTED OUT THAT THE MAIN ISSUE INVOLVED IS COVERED BY THE HONBLE APEX COURT DECISION IN THE CASES OF M/S PANDIYAN CHEMICALS AND M/S FENNER INDIA LTD.. UPON PERUSING THE RECORDS WE FIND THAT THERE IS ALSO AN ALTERNATE PRAYER OF THE ASSESSEE WITH REGARD TO ADJUSTMENT OF INTEREST EXPENDITURE FOR EARNING INTE REST INCOME. UNDER THE CIRCUMSTANCES WE PROCEED AND ADJUDICATE THE I SSUE BY REJECTING THE REQUEST OF ADJOURNMENT. 6.1 SECTION 80IA POSTULATES DEDUCTION WHERE THE GRO SS TOTAL INCOME OF THE ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED BY UNDERTAKING OR AN ENTERPRISE FROM THE BUSINESS. SO THE ISSUE BEFOR E US IS WHETHER THE INTEREST RECEIVED FROM FDRS CAN BE SAID TO BE PART O F THE PROFITS AND GAINS OF THE ASSESSEE DERIVED FROM THE BUSINESS OF PROVIDING INFRASTRUCTURE. WE FIND THAT IN A CATENA OF CASE L AWS THE COURTS HAVE HELD INTEREST INCOME OF FDR CANNOT BE TREATED AS INC OME DERIVED FROM INDUSTRIAL UNDERTAKING. IN THIS CASE WE DERIVE S UPPORT FROM HONBLE APEX COURT IN THE CASE OF PANDIYAN CHEMICALS LTD. 2 62 ITR 278. IN THIS CASE IT WAS HELD THAT THE WORD DERIVED FROM IN SEC TION 80HH MUST BE UNDERSTOOD AS SOMETHING WHICH HAS DIRECT OR IMMEDI ATE NEXUS WITH AN ITA NO. 3007/DEL/2009 A.Y. 2005-06 3 INDUSTRIAL UNDERTAKING. IN THAT CASE IT WAS HELD THAT ALTHOUGH ELECTRICITY MAY BE REQUIRED FOR THE PURPOSE OF INDU STRIAL UNDERTAKING THE DEPOSITS REQUIRED FOR ITS SUPPLY IS A SUBJECT REMOV ED FROM THE BUSINESS OF THE INDUSTRIAL UNDERTAKING. THE DERIVATION OF PROF ITS ON THE DEPOSITS MADE WITH ELECTRICITY BOARD CANNOT BE SAID INFLOW D IRECTLY FROM THE INDUSTRIAL UNDERTAKING ITSELF. IN THIS REGARD WE F URTHER REFER THE HONBLE MADRAS HIGH COURT DECISION IN CIT VS. MENON IMPEX P . LTD. 259 ITR 403. IN THIS CASE ASSESSEE WAS REQUIRED TO OPEN LETTERS OF CREDIT WITH BANKS FOR WHICH THE DEPOSITS WERE MADE INTEREST EARNED ON DE POSITS WAS CLAIMED TO BE EXEMPT ON THE GROUND THAT IT WAS DERIVED FRO M UNDERTAKING. IT WAS HELD THAT DEPOSITS MADE FOR THE PURPOSE OF OBTA INING LETTERS OF CREDIT WHICH WERE IN TURN USED FOR THE PURPOSE OF BUSINESS OF INDUSTRIAL UNDERTAKING DID NOT ESTABLISH THE DIRECT NEXUS BETW EEN THE INTEREST AND THE INDUSTRIAL UNDERTAKING. 6.2 MOREOVER SPECIAL BENCH OF THE ITAT IN THE CAS E OF DCIT VS. ALLIED CONSTRUCTION 291 ITR AT 16 HAS HELD THAT INTEREST I NCOME ON BANK DEPOSITS HAS TO BE TAKEN AS INCOME FROM OTHER SOURC ES. UNLESS THE ASSESSEE IS CARRYING ON MONEY LENDING BUSINESS OR S OME VERY SPECIAL CIRCUMSTANCES EXIST TO HOLD INTEREST INCOME TO BE B USINESS INCOME. AS SUCH WE DO NOT FIND MERIT IN THE ASSESSEES CONTEN TION THAT INTEREST ON FDRS WILL QUALIFY FOR DEDUCTION UNDER SECTION 80-IA IN THE CASE OF THE ASSESSEE. 6.3 HOWEVER THERE IS AN ALTERNATIVE CONTENTION BY THE ASSESSEE THAT ALL THE INTEREST BEARING FDRS WERE OUT OF OVERDRAFT/LOA N FACILITIES ENJOYED BY THE ASSESSEE WHEREIN INTEREST ON SUCH OVERDRAFT/LOA N IS IN EXCESS OF THE INTEREST ON FDRS. HENCE IT HAS BEEN URGED THAT IF IN TEREST IS TO BE TAKEN AS SEPARATE INCOME THE RELEVANT INTEREST INCURRED S HOULD ALSO BE ITA NO. 3007/DEL/2009 A.Y. 2005-06 4 CONSIDERED WITH IT. WE FIND CONSIDERED COGENCY IN THE SUBMISSION. SECTION 57(III) OF THE IT ACT RELATING TO COMPUTAT ION OF INCOME FROM OTHER SOURCES PERMITS IN ALLOWANCE OF EXPENDITURE LAID O UT OR INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNI NG SUCH INCOME. AS SUCH WE REMIT THIS ASPECT TO THE FILES OF THE AO T O EXAMINE THE VERACITY OF THE ASSESSEES CLAIM IN THIS REGARD AND DECIDE AS PER LAW. 7. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 07/01/2010. SD/- SD/- [RAJPAL YADAV] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE 07/01/ 2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT DELHI BENCHES