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TMI Blog2020 (2) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... untant Member And Ram Lal Negi, Judicial Member For the Appellant : Ms Bharti Singh For the Respondent : Shri Rakesh Mohan ORDER PER SHAMIM YAHYA, ACCOUNTANT MEMBER: These are appeals by the Revenue against separate orders of CIT(A) for A.Ys. 2012 -13, 2013-14 and 2014-15 respectively. Since the issues involved in these appeals are common they were heard together and are being disposed off by this consolidated order for the sake of convenience. 2. We shall first take up the appeal for A.Y. 2012-13, wherein the following grounds have been raised: i. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) was right in treating the interest receipt of ₹ 59,11,170/- as business receipt as against treatment of the Assessing Officer as revenue receipt and taxed under the head income from other sources which is supported by the Apex Court decision in the case of Tuticorin Alkali Chemical Fertilizers Ltd. V/s CIT (1997) 227 ITR 172. ii. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) was right in not adjudicating upon the disallowance made in respect of interest expenses u/s 57 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,903/-. Out of the total interest expenditure of ₹ 8,93,02,861/- the assessee had transferred an amount of ₹ 6,15,25,903/- to the WIP and the balance interest of ₹ 2,77,76,958/- was claimed as an expense. Further, during the year under consideration, the assessee had received interest income of ₹ 61,51,523/- the breakup of which is as under:- Particulars Amount (Rs.) Remark Interest on ICD's 58,21,480 The appellant has offered interest earned on ICD of ₹ 10 crores made with its group concern Antevorta Developers Pvt. Ltd under the head 'Business'. Interest on bank deposits 89,690 The appellant has offered interest earned on bank deposits under the head 'Business'. Interest on IT refund 2,40,353 The appellant has offered Interest on IT refund under 'Income from other sources' Total interest income 61,51,523 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed in WIP are interest expenses which were not incurred for the purpose of the business activity of the assessee company since there was admittedly no business activity whatsoever conducted by the assessee company and the expenses shown by the it could not be allowed. In absence of any business activity, the expenses could not be allowed. Moreover, the fact that there was no project in this case was admitted by the assessee vide its letter dated 12.03.2015.The Assessing Officer disallowed the entire project development expenses shown in WIP and the WIP of the assessee for AY 2012-13 was computed at Rs.Nil. The assessing officer further observed from the accounts that the assessee had made long-term investments, the income from which is exempt from tax. Therefore, the assessee was asked to furnish details of expenses incurred for making long term investments and also show cause as to why the expenses incurred and claimed in respect of such a business should not be disallowed as per the provisions of section 14A read with Rule 8Dof the Income Tax Rules, 1962. In response, the assessee vide its letter dated 12/03/201 contended that there is no change in the position of facts in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder. 6,15,25,903 project development expenses Nil The assessing officer completed the assessment u/s. 143(3) of the Income Tax Act, 1961 and vide order dated 25/03/201 assessed the appellant's total income at ₹ 2,58,60,490/- and book loss u/s. 115JB at ₹ 1,87,35,451/-. 5. The assessee s appeal as regards the issue relating to treatment of interest income, the learned CIT(A) noted that the said issue was considered and decided in favour of the assessee by his predecessor in A.Y. 2011-12. Noting that the facts for the year under consideration are same except for the amount involved, the learned CIT(A) decided the issue in favour of the assessee. 6. As regards the issue of disallowance of interest claimed, the learned CIT(A) was of the opinion that the same was decided in favour of the assessee. The learned CIT(A) held as under: 5.2.1 This ground relates to the claim of interest expenditure amounting to ₹ 2,77,76,985/- debited to profit loss account. The assessing officer has discussed this disallowance in para 6 of the assessment order. The assessing officer during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... project management consultancy income. Since the appellant company had borrowed funds for business purpose and invested part of funds in sister concerns for strategic purpose or given as ICD to sister concern with whom the appellant has deep business relations is eligible for as deduction as business expenditure the benefit of deduction u/s.36(1)(iii) of the I.T. Act are applicable. Interest paid on borrowed capital and that is invested in shares for strategic purpose is eligible for deduction. 5.2.5 In view of the facts and circumstances of the instant case, assessing officer is directed to deleted the disallowance of interest expenditure of ₹ 2,77,76,985/- 7. As regards the issue of disallowance of interest expenditure debited to workin- progress amounting to ₹ 6,15,25,903/-, the CIT(A) held that on same facts the issue had been decided in favour of the assessee for A.Y. 2011-12. Accordingly, the learned CIT(A) decided the issue in favour of the assessee. 8. As regards the disallowance of ₹ 7,75,59,640/- u/s. 14A with reference to Rule 8D, learned CIT(A) held that identical issue on similar facts was decided in the favour of the assessee by h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 by funds borrowed from promoters and other group companies. 7) As far as the fixed deposit with banking institutions is concerned, the amounts are negligible in proportion to the total funds and are utilized for business purpose of the assessee. The quantum is as under: A.Y. Amount (Rs.) 2011-12 12.03 crores 2012-13 Nil The fixed deposits with banks as on last day of the previous year for assessment year 2011-12 continued during the period relevant for A.Y. 2012-13 but at the end of the year stood at NIL. The total interest income earned from FDs during A.Y. 12-13 is ₹ 89,690/- only. These are an extension of FDs existing in earlier year and Hon'ble ITAT in their order for A.Y. 2011-12 have categorically held that FDs have been taken for commercial consideration, having been pledged with banks for related concerns to obtain loans from banks. Therefore the interest earned in . A.Y. 12-13 has a business character as it does in the earlier year. 8)It follows that the borrowed funds have essentially gone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordance with the findings given by Tribunal in the assessee's own case for A.Y. 2011-12. 10. Per contra, the learned DR relied on the assessment order. 12. Upon careful consideration we find that identical grounds 1, 2 and 3 were adjudicated by the tribunal, vide order dated 30.08.2019, in assessee s own case for assessment year 2011-12, as under: 11. After having gone through the facts of the present case, we find from the records that AO treated the interest income as income from other sources by relying upon the decision in the case of CIT vs Commandal Cements Ltd,, 234 ITR 412 (SC) find Shams Tabrez Vamti vs CIT of Authority of Advance Rulings (Delhi) in AAR 635 of 2005 dt J 7/01/2005. Whereas on the contrary, we notice that assesse had taken demand loan from various financial institutions which had been procured by the assessee company for the sole business purpose of constructing and developing a project at Bangalore and investing in the SCPL which is an SPY of the group for the purposes of project at Bannergatta, Bangalore. On perusal of the balance sheet of 31.03.11 and also notes forming Part of Accounts relating to AS 18, disclosure given under pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h regard to the status of business of the assessee. The funds obtained by the assessee for its infrastructure project has been temporarily parked to reduce interest burden thereon and accounted for in accordance with Accounting Standard 16 of ICAI The principle that the interest earned out of term deposits made out of the business funds available with the assessee before they are utilized for actual business, is incidental to business activity of the assessee and accordingly, should be considered as business income and not income from other sources. In this respect, we also relied upon the judgments, which are contained in para no. 5.5.5 of the order of Ld. CIT(A). 15. Thus, considering the facts and circumstances of the present case, no new facts or contrary judgments have been brought on record before us. Therefore, we see no reasons to interfere into or deviate from the findings so recorded by the Ld. CIT (A). Hence, we are of the considered view that the findings so recorded by the Ld. CIT (A) are judicious and are well reasoned. Resultantly, this ground raised by the revenue stands dismissed. 16. The other ground raised by the revenue relates to allowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 14A of the Act without appreciating the fact that the issue stands squarely covered by the decision of the Hon'ble ITAT 'D' Bench in the case of ITO vs. RBK Share Broking Pvt. Ltd. - 37 taxman 128(2013) and the decision of the Hon'ble ITAT 'F' Bench in the case of D.C.I.T. Cen. Cir. 18 19, Mumbai vs. Viraj Profiles Ltd. (2015) 64 taxmann.com 52 (Mumbai -Trib.)/2016, 156 ITD 72 (Mumbai - Trib.) wherein it is clear that the provisions of section 14A r.w.r. 8D is applicable for computation of book profit u/s 115JB of the Act. 16. The learned counsel for the assessee submitted that the ground raised by the Revenue is misplaced in as much as the learned CIT(A) has not held that the interest receipt of ₹ 3,78,21,104/- for A.Y 2014-15 and business receipt of ₹ 7,56,61,324 for A.Y. 2013-14 should be treated as business receipt. Hence, the learned counsel claimed that the ground itself is misconceived and, accordingly, the same is liable to be dismissed. 17. As regards the issue of disallowance u/s. 14A learned counsel contended that this issue is also covered in favour of the assessee in as much as the assessee has not earned any exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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