9911796707
TMI Blog2008 (10) TMI 591X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the interest of Rs.27,94,929 which has been adjusted against the project and other expenses to be capitalised. The Assessing Officer relying on the decision of the Supreme Court in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd. v. CIT [1997] 227 ITR 172 charged interest of Rs. 27,94,929 to tax. On an appeal filed by the assessee, the Commissioner of Income-tax (Appeals) upheld the assessment order relying on the decisions of Tuticorin Alkali Chemicals and Fertilizers Ltd. v. CIT [1997] 227 ITR 172 (SC) and CIT v. Bokaro Steel Ltd. [1999] 236 ITR 315 (SC); 102 Taxman 94. The second appeal was filed by the assessee before the Tribunal and the Tribunal has set aside the assessment order with specific directions to decide the issue de novo in the light of discussions made in paragraph 7 of the Tribunal's order. While giving effect to the order of the Tribunal, the Assessing Officer re-examined the issue in the light of the assessee's contention and the relevant clauses of appendix 1 of the IDBI and the letter dated April 19, 1995 and concluded that clause (iii) of the precondition of the IDBI appendix 1 only states that company shall ensure that the unsecured loan to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the judgment of CIT v. Bokaro Steel Ltd. [1999] 236 ITR 315 (SC) ; 102 Taxman 94 treated the interest income as income from other sources and assessed it to tax. He has ignored the directions of the Tribunal in first round of appeal and did not take into account the documents placed before him in support of the assessee's contention that placing the amount in fixed deposit was a condition precedent for the disbursement of loan. Learned counsel for the assessee further placed a reliance upon the judgment of the apex court in the case of CIT v. Karnal Co-op. Sugar Mills Ltd. [2000] 243 ITR 2. Learned counsel for the assessee further stated that if the Assessing Officer was not satisfied with the evidence furnished by the assessee, he should have made independent enquiries from the IDBI in order to determine whether they placed a condition that promoters' contribution was required to be deposited in fixed deposits with the bank. The word used in the pre-condition is "ensure". The ensure concept was the responsibility of the promoters and these could be satisfied only by keeping the funds with known banks and its deposit accounts which could not be freely used by the promoters. On s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as never put a condition to put the contribution or the unsecured loan in fixed deposit with it before the disbursement of loan. Under these circumstances, the Revenue has rightly treated the interest income as income from other sources following the judgment of Tuticorin Alkali Chemicals and Fertilizers Ltd. v. CIT [1997] 227 ITR 172 (SC). Having heard the rival submissions and from careful perusal of the record and documents placed before us we find that in the first round of appeal, appendix 1 of the IDBI letter dated April 19, 1995 were placed before the Tribunal and the Tribunal has examined the same, but, could not arrive at a conclusion whether it can be held that to place the promoters' contribution and unsecured loan in fixed deposits with the bank, was a condition precedent for disbursement of loan. The Tribunal, accordingly, restored the matter to the file of the Assessing Officer with a direction to readjudicate the issue de novo in the light of its discussion in paragraph 7 of the order. For the sake of reference, we extract paragraphs 7 and 8 of the order of the Tribunal in which the Tribunal has examined appendix 1 and made observations: "7. We have considered th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of setting up of the factories, the company had taken term loans from various banks and financial institutions. That part of the borrowed funds which was not immediately required by the assessee was kept invested in short-term deposits with banks. Such investments were specifically permitted by the memorandum and articles of association of the company. But, there was no condition for keeping these funds in short-term deposits. Under these facts, the hon'ble Supreme Court held that the company had surplus funds in its hands which were invested for earning income and the same was taxable under section 56. The facts of the present case are stated to be akin to a case where interest was earned on account of some precondition associated with the funds obtained. It is stated not to be a case of surplus money not immediately required. We, therefore, set aside the order of the learned Commissioner of Income-tax (Appeals) and restore the matter back to the file of the Assessing Officer to decide the issue documentary evidence de novo in the light of the aforementioned discussion." While restoring the matter to the Assessing Officer the Tribunal has observed that if the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd. v. CIT [1997] 227 ITR 172 is squarely applicable. More over, it is seen that in the cases of Karnal Co-op. Sugar Mills Ltd. [2000] 243 ITR 2 decided by the Supreme Court, the ratio of the apex court in the cases of Tuticorin Alkali Chemicals and Fertilizers Ltd. [1997] 227 ITR 172 and CIT v. Bokaro Steel Ltd. [1999] 236 ITR 315 ; 102 Taxman 95 were not considered." The contention of the Revenue that out of equity share capital of Rs. 10 crores and unsecured loan of Rs. 5 crores, the assessee had made the deposits of Rs. 2.59 crores in fixed deposits with the bank, cannot be ignored. If the assessee's contentions are accepted, then, according to clauses (ii) and (iii) of pre-disbursement conditions, the entire equity shares of Rs. 10 crores and unsecured loan of Rs. 5 crores was required to be deposited in fixed deposit account with the bank before the disbursement of loan, but, it was not done by the assessee. Meaning thereby, a deposit of equity shares on unsecured loan was not a condition precedent for the disbursement of loan. The assessee has tried to interpret the word "ensure" used in clauses (ii) and ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
