AP State Housing Corporation Limited, Hyderabad v. DCIT, Hyderabad

ITA 377/HYD/2010 | 2003-2004
Pronouncement Date: 21-01-2011 | Result: Partly Allowed

Appeal Details

RSA Number 37722514 RSA 2010
Assessee PAN AABCA7206L
Bench Hyderabad
Appeal Number ITA 377/HYD/2010
Duration Of Justice 10 month(s) 13 day(s)
Appellant AP State Housing Corporation Limited, Hyderabad
Respondent DCIT, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 21-01-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 21-01-2011
Date Of Final Hearing 13-01-2011
Next Hearing Date 13-01-2011
Assessment Year 2003-2004
Appeal Filed On 09-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A HYDERABAD BEFORE SHRI G.C. GUPTA VICE PRESIDENT AND SHRI AKBER BASHA ACCOUNTANT MEMB ER ITA NOS.376 TO 380/HYD/10 : ASST. YEARS: 2002- 03 TO 2006-07 AND ITA NO.381/HYD/10 : ASST. YEAR : 2006-07 AP STATE HOUSING CORPORATION LTD. HYDERABAD. (PAN:AABCA 7206 L) VS DCIT CIRCLE-1(1) HYDERABAD. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.A.SUBBA RAOJI RESPONDENT BY : SRI V. SRINIVAS & SMT. NIVEDITA BISWAS O R D E R PER BENCH THESE SIX APPEALS BY THE ASSESSEE FIVE I.E IN ITA NOS. NOS.376 TO 380/HYD/10 ON THE ASSESSMENT PASSED UNDER SECTIO N 143(3) OF THE ACT AND ITA NO.381/HYD/10 ON THE ORDER OF THE ASSESSING OFFICER UNDER SECTION 115WE [3] OF THE ACT AND ARE DIRE CTED AGAINST TWO SEPARATE ORDERS OF THE CIT (A)-II HYDERABAD DATED 11- 12-2009 AND 28- 1-2010 AND THEY PERTAIN TO THE ASSESSMENT YEARS 2002-03 TO 2006-07. SINCE COMMON AND IDENTICAL ISSUES ARE INVOLVED IN ALL T HESE APPEALS ITA NOS. 376 TO 38 1 OF 2010 A.P.STATE HOUSINMG CORPN HYD. ========================== ==== 2 THESE ARE CLUBBED TOGETHER AND DISPOSED OFF BY THIS COMB INED ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST WE WILL TAKE UP THE APPEALS FILED THE ASSESSEE IN ITA NOS. 376 TO 380/HYD/2010. THE ONLY GRIEVANCE OF THE ASSESSEE IS WITH REGARD TO THE DISALLOWANCE OF INTEREST PAID TO THE BAN K AND FINANCIAL INSTITUTIONS BY THE DEPARTMENT ON THE GROUND THAT THE ASSESSEE HAS NOT OFFERED THE INTEREST INCOME EARNED BY IT IN ITS PROFIT AND LOSS ACCOUNT. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN UNDER TAKING OF THE GOVERNMENT OF ANDHRA PRADESH AND IS A LIMITED COMPAN Y ESTABLISHED TO PROVIDE HOUSES TO THE WEAKER SECTIONS IN ANDHRA PRADESH. THE ASSESSEE PROVIDES FINANCES BY WAY OF LOANS TO THE BENEFICIAR IES AS PER THE AP GOVERNMENTS POLICY AND RECOVERS THE LOAN TOGETH ER WITH INTEREST IN INSTALLMENTS. A PART OF THE LOAN IS RECEIVED BY TH E ASSESSEE FROM THE GOVERNMENT OF ANDHRA PRADESH BY WAY OF SUBSIDY. DURI NG THE COURSE OF SCRUTINY PROCEEDINGS THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS NOT PRODUCED ITS AUDITED BOOKS OF ACCOUNTS FOR HIS SCRUTINY. ON BEHALF OF THE ASSESSEE IT WAS INFORMED THAT AT THE TIME OF SCRUTINY THE BOOKS OF ACCOUNT WERE NOT YET AUDITED AND THE ASSESSEE HAD NOT PRO VIDED THE DETAILS OF INTEREST INCOME EARNED BY WAY OF RECEIPTS FR OM THE BENEFICIARIES/CUSTOMERS. ON THE OTHER HAND THE ASSESSEE CLAIMED EXPENDITURE BY WAY OF INTEREST PAYMENT TO VARIOUS COMM ERCIAL BANKS AND FINANCIAL INSTITUTIONS. SINCE THE ASSESSEE HAS NOT SHO WN ANY INTEREST INCOME THOUGH ITS HAS EARNED THE ASSESSING OFFICE R FOUND THAT ALLOWING ITS INTEREST CLAIM AS EXPENDITURE WAS NOT ACCEP TABLE AND THEREFORE DISALLOWED THE ENTIRE INTEREST AND FINALI ZED THE ASSESSMENTS. AGGRIEVED AGAINST THE ORDER OF THE ASSESSING OFFICER T HE ASSESSEE WENT IN APPEAL BEFORE THE CIT (A). ON APPEAL THE CIT (A) CONFIRMED THE ITA NOS. 376 TO 38 1 OF 2010 A.P.STATE HOUSINMG CORPN HYD. ========================== ==== 3 ACTION OF THE ASSESSING OFFICER. AGGRIEVED FURTHER THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT T HE LOWER AUTHORITIES DISALLOWED THE INTEREST PAID BY THE ASSESSEE COMPANY MAINLY ON THE IMPRESSION THAT THE ASSESSEE COMPANY IS IN T HE BUSINESS OF CONSTRUCTION OF HOUSES AND NOT OFFERED ANY INCOME ON THE CONSTRUCTION ACTIVITY WHICH IS FACTUALLY INCORRECT. IT IS SUB MITTED THAT THE UNIT COST OF THE HOUSE INCLUDES SUBSIDY LOAN AND BENEFICI ARY CONTRIBUTION. AT PRESENT THE UNIT COST OF THE HOUSE IS R S.25 000/- WHICH COMPRISES OF SUBSIDY OF RS.7 000/- LOAN OF RS.17 500/- A ND THE BENEFICIARY CONTRIBUTION OF RS.500/-. DEPENDING ON THE PHYSICAL TARGETS FIXED BY THE GOVERNMENT THE LOAN COMPONENT REQUIREM ENT WILL BE WORKED OUT AND THE LOANS ARE MOBILIZED UNDER TWO DIF FERENT CATEGORIES (1) DEFERENTIAL RATE OF INTEREST (DRI) AND (2) NON-D EFERENTIAL RATE OF INTEREST (NON DRI CATEGORY). THE 50% OF THE LOANS RE QUIRED WILL BE MOBILIZED UNDER THE DRI CATEGORY WHICH CARRIES 4% OF IN TEREST PER ANNUM WHICH IS A MANDATORY FOR THE COMMERCIAL BANKS TO LEND UNDER THIS CATEGORY. THE BALANCE 50% OF THE LOAN REQUIREMEN T WILL BE MOBILIZED UNDER NON-DRI CATEGORY MAINLY FROM HUDCO L IC/GIC AND OTHER FINANCIAL INSTITUTIONS. THE GOVERNMENT WILL G IVE GUARANTEE FOR THE LOANS MOBILIZED UNDER THE ABOVE TWO CATEGORIES AND THE CORPORATION WILL NOT OFFER ANY ASSETS TO THE LENDING INSTITUTIONS AS SECURI TY. THE LOAN AMOUNTS ARE MOBILIZED BEING THE PART OF UNIT COST WILL BE DISBURSED TO THE BENEFICIARIES ON NOMINAL RATE OF INTEREST. THE R ECOVERIES FROM THE BENEFICIARIES ARE NOT EQUAL TO THE DEMAND RAISED IN SPI TE OF VARIOUS CONCESSIONS SUCH AS OTS LOW RATE OF INTEREST ETC. EXTENDED TO THE BENEFICIARIES. ON THE OTHER HAND THE REPAYMENT OF P RINCIPAL AND ITA NOS. 376 TO 38 1 OF 2010 A.P.STATE HOUSINMG CORPN HYD. ========================== ==== 4 INTEREST AMOUNTS TO THE FINANCIAL INSTITUTIONS IS PAID B Y THE GOVERNMENT ON BEHALF OF THE CORPORATION. THE AMOUNTS SO PAID TO WARDS REPAYMENT OF LOANS ARE TREATED AS LOANS GIVEN TO THE CORPORATION . HENCE THE INTEREST ON LOANS FORM PART OF THE EXPENDITURE AND DE BITED TO INCOME AND EXPENDITURE ACCOUNT. IT IS SUBMITTED THAT THE AMOUN TS RECOVERED FROM ITS BENEFICIARIES HAS NOT BEEN OFFERED AS INCOME AN D INSTEAD IT IS SHOWN UNDER CURRENT LIABILITIES. THE RECOVERIES ONLY R EPRESENT THE PRINCIPAL LOAN AMOUNT AND NOT THE INTEREST AMOUNT. S INCE THE ASSESSEE COMPANY MAINTAINS THE ACCOUNTS ON CASH BASIS THE ENTIRE FI NANCIAL CHARGES PAID BY THE ASSESSEE COMPANY ARE TO BE ALLOWED AS E XPENDITURE ON CASH BASIS AND NO INCOME ON ACCRUAL BASIS CAN BE ASSUMED WI TH REGARD TO THE RECOVERY OF INTEREST FROM THE BENEFICIAR IES. 4. ON THE OTHER HAND THE LEARNED DEPARTMENTAL REP RESENTATIVE SUBMITTED THAT THE ASSESSEE COMPANY HAS NOT MAINTAINED NOR FILED ANY ACCOUNT FOR THE INTERESTS RECEIVED FROM THE BENEFICIARIES. SIMILARLY THE DETAILS OF ACTUAL COLLECTIONS OF PRINCIPAL AND INTEREST A MOUNT SEPARATELY FROM ITS BENEFICIARIES WERE ALSO NOT FILED BEFORE THE ASSESSING OFFICER AND THE SAME WERE NOT PRODUCED EVEN BEFORE THE CIT (A) FO R HIS PERUSAL ON THE DATE OF HEARING BEFORE HIM. THEREFORE THERE SH OULD NOT BE ANY GRIEVANCE FROM THE ASSESSEE FOR DISALLOWING THE ASSESSEES CLAI M OF INTEREST PAYMENTS WHEN IT HAD NOT PROVIDED DETAILS OF INTEREST EARNED BY IT PARTICULARLY WHEN IT HAD NOT OFFERED THE INTEREST INCOME IN THE PROFIT AND LOSS ACCOUNT. 5. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTI ES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LEARNED COUNSEL FOR THE ASSESSEE CLEARLY PROVED THAT THE ASSESSEE COMPANY IS NOT IN T HE ITA NOS. 376 TO 38 1 OF 2010 A.P.STATE HOUSINMG CORPN HYD. ========================== ==== 5 BUSINESS OF CONSTRUCTION OF HOUSES. HENCE THERE IS NO QUESTION OF OFFERING INCOME FROM THE CONSTRUCTION ACTIVITY. WE FIN D THAT THE INCOME OF THE ASSESSEE CORPORATION ONLY COMPRISES OF ADMISSION FEES SUPERVISIONS CHARGES INTEREST DIFFERENTIAL COST OF CEMENT AND OTHER MATERIAL AND MANAGERIAL SUBSIDY FROM THE STATE GOVER NMENT. WE FIND MERIT IN THE ARGUMENT OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT DUE TO THE G.OS ISSUED BY THE STATE GOVERNMENT FROM TIME TO TIME FOR ONE TIME SETTLEMENT OF DUES OR WAIVER OF INTEREST THE ASSESS EE CORPORATION IS NOT COLLECTED ANY INTEREST FROM THE BENEFICIARIES AND ALSO THE PRINCIPAL AMOUNT IN SEVERAL CASES. HOWEVER IT IS FACT THAT SOME AMOU NTS ARE RECOVERED FROM THE BENEFICIARIES AND THE SAME ARE SHOWN AS RECOVERIES FROM THE BENEFICIARIES IN THE BALANCE SHEET. THERE IS NO DISPUTE WITH REGARD TO THE PAYMENT OF INTEREST TO THE BANK AND FI NANCIAL INSTITUTIONS. THE DEPARTMENT DISALLOWED THE ENTIRE INTEREST PAYMENT MADE BY THE ASSESSEE CORPORATION ONLY ON THE GROUND THAT THE ASSESSEE HAS NOT OFFERED ANY INCOME ON INTEREST RECOVERED FROM ITS BENEF ICIARIES. AFTER CONSIDERING THE TOTALITY OF FACTS AND THE CIRCUMSTANCES OF T HE CASE WE ARE OF THE VIEW THAT THE LOWER AUTHORITIES ARE NOT CO RRECT IN DISALLOWING THE INTEREST PAYMENT TO VARIOUS COMMERCIAL BANKS AND FI NANCIAL INSTITUTIONS. HENCE WE ALLOW THE GROUNDS RAISED BY THE ASSESSEE ON THIS ISSUE. HOWEVER WE DIRECT THE ASSESSEE CORPORATION TO FURN ISH THE DETAILS OF INTERESTS RECEIVED FROM ITS BENEFICIARIES FO R ALL THE ASSESSMENT YEARS UNDER CONSIDERATION AND WE DIRECT THE ASSESSING OFFICE R TO TREAT THE SAID INTEREST RECEIPTS AS THE INCOME OF THE ASSESSEE COR PORATION IN THE RESPECTIVE ASSESSMENT YEARS. ACCORDINGLY THE GROUN D RAISED BY THE ASSESSEE IS PARTLY ALLOWED AS INDICATED ABOVE. ITA NOS. 376 TO 38 1 OF 2010 A.P.STATE HOUSINMG CORPN HYD. ========================== ==== 6 ITA NO.381/HYD/10- ASSESSMENT YEAR 2006-07 :- 6. THIS APPEAL IS FILED BY THE ASSESSEE CORPORATION AGAIN ST THE ORDER PASSED BY THE CIT (A)-II HYDERABAD UNDER SECTION 250 OF THE ACT WITH REGARD TO THE FRINGE BENEFIT TAX. THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE CORPORATION IS A WHOLLY STATE OWNED COM PANY OF GOVERNMENT OF ANDHRA PRADESH AND IT FILED ITS FRINGE BENEFITS TAX RETURN ON 27-11-2006 ADMITTING VALUE OF FRINGE BENEFITS OF RS.43 01 863. AFTER SCRUTINIZING THE RETURN THE ASSESSING OFFICER IMPOSED FRIN GE BENEFITS TAX THEREON AND COMPLETED THE ASSESSMENT ON 28-11-2008. AGG RIEVED BY THE ORDER OF THE ASSESSING OFFICER THE ASSESSEE WENT IN APP EAL BEFORE THE CIT (A). ON APPEAL THE CIT (A) HELD THAT THE ASSESSEE IS LIABLE TO FRINGE BENEFITS TAX AND ACCORDINGLY HE UPHELD THE ORDE R OF THE ASSESSING OFFICER ON THIS ISSUE AND DISMISSED THE APPEAL FILED BY T HE ASSESSEE. FURTHER AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 7. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT T HE CORPORATION FILED ITS RETURN OF FBT ON 27-11-2006 D ECLARING VALUE OF FRINGE BENEFITS AT RS.43 01 863 AND DURING THE SCRUTINY PROCEEDINGS ALONG WITH INCOME-TAX THE CORPORATION FILED LETTER D ATED 20-11-2008 STATING THAT THE CORPORATION FILED APPLICATION FOR RE GISTRATION UNDER SECTION 12A IN FORM NO.10A IN THE YEAR 1989 AND THERE FORE NO FBT IS PAYABLE AS THE CORPORATION DOES NOT FALL UNDER THE ST ATUS OF AN EMPLOYER UNDER SECTION 115 W OF THE ACT AND THE FBT R ETURN FILED AND PAYMENT OF TAX THEREON IS UNDER PROTEST AND THE ASSESSI NG OFFICER ASSESSED THE CORPORATION TO FBT. IT IS FURTHER SUBMITTED THAT IN THE YEAR 1989 AS THERE IS NO PROPER DISPATCH SYSTEM ACKNOWLEDGME NT NUMBER ITA NOS. 376 TO 38 1 OF 2010 A.P.STATE HOUSINMG CORPN HYD. ========================== ==== 7 OF HAVING FILED FORM NO.10A WAS NOT OBTAINED. BUT THE CORPORATION IS IN POSSESSION OF CORRESPONDENCE WITH THE CA AND THE ORIGINAL FORM NO.10A DULY SIGNED BY THE THEN MANAGING DIRECTOR AND ALSO TH E ORDER SHEET OF THE RELEVANT INCOME-TAX FILE. AFTER FILING FORM 10A IN 1989 THE CORPORATION FILED RETURNS AND IN ALL THE COMPUTATIONS SECTION 11 EXEMPTION WAS CLAIMED AND ON THE BASIS OF THE ABOVE ESTA BLISHED FACTS AND AS THERE ARE NO FURTHER VERIFICATIONS UNDER SECTION 12 AT THAT TIME THE CORPORATIONS NAME WOULD HAVE BEEN ENTERED IN TH E REGISTER OF APPLICATION UNDER SECTION 12A(A) MAINTAINED IN THE OFF ICE OF THE COMMISSIONER OF INCOME-TAX AND FURTHER SUBMITTED THAT T HE FRINGE BENEFITS ASSESSMENT MAY KINDLY BE DIRECTED TO ASSESS AT NIL V ALUE. IT IS FURTHER SUBMITTED THAT THE CORPORATION AGAIN FILED A PPLICATION FOR REGISTRATION UNDER SECTION 12AA ON 26-10-2006 AND IS AP PLICABLE FOR THE ASSESSMENT YEAR 2007-08 WHICH WAS REJECTED BY THE DIT(E) VIDE ORDER DATED 24-4-2007 AND ON APPEAL THE TRIBUNAL HAS SET A SIDE THE PROCEEDINGS VIDE ITS ORDER DATED 19-12-2008 IN ITA N O.762/HYD/07. 8. ON THE OTHER HAND THE LEARNED DEPARTMENTAL REP RESENTATIVE RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THA T THE ASSESSEE HAS NOT BEEN ABLE TO PRODUCE ANY EVIDENCE TO SHOW THAT ITS INCOME IS EXEMPT UNDER SECTION 12A OF THE ACT FOR THE YEAR UNDER CONSIDERATION. UNDER THESE CIRCUMSTANCES WE DO NOT FIND ANY INFIRMITY I N THE ORDER OF THE LOWER AUTHORITIES AND HENCE THE SAME ARE CONFIRMED . ITA NOS. 376 TO 38 1 OF 2010 A.P.STATE HOUSINMG CORPN HYD. ========================== ==== 8 10. IN THE RESULT ALL THE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE EXCEPT IN ITA NO.381/HYD /2010 WHICH IS HEREBY DISMISSED. ORDER PRONOUNCED IN THE COURT ON 21 -01-2011. SD/- SD/- (G.C. GUPTA)) (AKBER BASHA) VICE PRESIDENT. ACCOUNTANT MEMBER. DT/- 21-01-2011. COPY FORWARDED TO: 1. A.P. STATE HOUSING CORPORATION LIMITED 3-6-184 U RDU GALLY HIMAYATNAGAR HYDERABAD. 2. 3. 4.. 5. JMR* DCIT CIR-1(1) HYDERABAD. CIT (A)-II HYDERABAD. CIT AP. HYDERABAD. THE DR ITAT HYDERABAD.