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TMI Blog2022 (7) TMI 254X X X X Extracts X X X X X X X X Extracts X X X X ..... IDENT AND SHRI B. R. BASKARAN, ACCOUNTANT MEMBER Assessee by: Shri. A. Shankar, Advocate Revenue by: Shri. Sumer Singh Meena, CIT(DR)(ITAT), Bengaluru. ORDER Per N V Vasudevan, Vice President This is an appeal by the assessee against the order dated 15.03.2012 of CIT(A)-1, Bengaluru, passed under section 250 of the Income Tax Act, 1961 (hereinafter called the Act ), relating to Assessment Year 2009-10. 2. The impugned order of CIT(A) was received on 22/03/2013 and the appeal ought to have been preferred within 60 days of receipt of the order of the CIT(A) i.e., on or before 21.05.2013. The appeal was filed only on 06.10.2015. There is therefore a delay in filing appeal. The actual number of days of delay would be 1240 days which has been affirmed in the revised application for condonation of delay in filing appeal. Before we deal with the application for condonation of delay in filing the appeal, we shall set out the facts and circumstances. 3. The assessee is a wholly owned company of Government of Karnataka. It was established with the approval of the Government of India, for the implementation of rail based mass rapid transit system which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st and dividends as follows: Sl.No. Source of income Amount (In Rs.) 1. Interest earned on Term Deposit 26,84,84,585 2. Interest others 44,53,456 3. Dividend Mutual Fund SBI 36,80,124 4. Dividend UTI 56,08,307 5. Dividend UTI 9,22,766 Apart from the above, the assessee also received miscellaneous income of Rs.2,55,96,584/- in the form of tender fees of Rs.2,18,24,568/- and other receipts of Rs.37,72,016/-. In the return of income filed on 29.09.2009 for Assessment Year 2009-10, the assessee claimed the aforesaid income as exempt. 7. The assessee explained that : (a) The corporation is a special purpose vehicle to implement the metro Rail project. (b) The assessee had taken requisite permission and approval to invest the surplus funds. (c) The funds were invested in Fixed Deposits of Banks which earned interest until they are req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fund which belongs to the State Exchequer to be spent for the purpose of welfare of the public and hence no profit motive can be ascribed to such nodal agency. However M/s BMRCL is a joint venture company and its intention was to earn profit from the trains operated on metro Rail after its installation by issuance of tickets to customers. This profit motive is germane to the project as against the welfare motive of KUIDFC. The A.O. has thereafter rightly applied the ratio of the decision of Tuticorin Alkali case 227 ITR 172 to bring the interest earned of Rs.10,57,20,194/- to tax net. Besides the appellant in earlier A.Y. had shown these interest as income and paid tax thereon since 1995. Facts being same, it should not have opted to go out of tax net. In view of the above, I (see) no reason to interfere in the order of the AO. 7. However, the AR, at the appellate stage has cited 4 more cases vide para 4 page 7. I find these case laws are on charitable trusts whose income is not taxable at all. The status of the assessee is company whereas the status of the assessee in these cited cases are Trust. Therefore I hold the ratio of those cases is not applicable to the present cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee and the amount involved in the appeal is very huge. This tribunal has already held that the amount in dispute is not exigible to Income Tax, and therefore if this appeal is dismissed on the technical ground of delay in filing, it would amount to taxes being collected on amounts that do not constitute income under section 4 of the Act, which is not the intention of the legislature. Dismissing this appeal on account of delay, would deprive the justice by not giving the assessee the refund that it deserves and therefore it was pleaded that the Tribunal may take a lenient view and condone the delay. It was further submitted that the assessee is a government company and the decision making body is the board consisting of the representatives of both the Government of India and the Government of Karnataka and due to frequent restructuring of the Board, delays take place in decision making as regards to tax and financial matters. 13. Reliance was placed on the decision of the Hon ble jurisdictional High Court in the matter of Karnataka Forest Development Corporation Limited v. ACIT in ITA No. 83/2009 where the Hon ble Court held : No doubt, it is the law that every days dela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilarly for identical reason, the Hon ble jurisdictional High Court condoned a delay of five years in filing of appeal in the case of CIT v. ISRO Satellite Centre in ITA No. 532/2008, and this Tribunal in the case of M/s Raghavendra Constructions supra relied on this decision also, while condoning the delay. 15. The learned DR opposed the prayer of the assessee for condoning the delay in filing the appeal. He pointed out that the order of the Tribunal for Assessment Year 2007-08 and 2008-09 was passed on 31.10.2014 but the appeal was filed only on 06.10.2015. Even going by the reason that the reason for not filing the appeal within time was advise by professional not to file appeal against the order of the CIT(A) for Assessment Year 2009-10, that advise would not hold good after 31.10.2014. 16. The learned Counsel for assessee pointed out that all Metro Rail Corporations which come under the Ministry of Urban Development made representation to the Ministry of Urban Development to seek exemption of interest income and miscellaneous income generated during project implementation. The Secretary to Govt. of India, Ministry of Urban Development wrote a letter dated 23.01.2013 to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all consider the claim of the assessee in the present case. Admittedly the advice was given by the counsel who appeared on behalf of the assessee before the Tribunal for Assessment Years 2007-08 and 2008-09. The decision of the Tribunal was rendered on 31.10.2014. The appeal was filed by the Revenue before Hon ble High Court in the year 2015 against the order of Tribunal dated 31.10.2014. A final call could be taken only later based on the professional advise of the later Counsel. Moreover, the assessee has also been pursuing claim for exemption of income during construction period from the Government. Hence, we find that there has been no willful neglect on the part of the assessee. In such matters the advice of the professional would be the point of time at which the assessee would begin to explore the option of exhausting all legal remedies. We are also of the view that by condonation of delay there is no loss to the revenue as legitimate taxes payable in accordance with law alone would be collected. We therefore accept the reason given for condonation of delay in filing the appeal. The delay in filing the appeal is accordingly condoned. 19. As far as the merits of the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mean that until and unless the company commences its business, its income from any other source will not be taxed. if the company, even before it commences business, invests the surplus fund in its hand for purchase of land or house property and later soils it at profit, the gain made by the company will be assessable under the head `Capital gains'. Similarly, lf a company purchases a rented house and gets rent, such rent will be assessable to tax, under s. 22 as income from house property. Likewise, a company may have income from other sources. It may buy shares and get dividends. Such dividends will be taxable under s. 56 of the Act. The company may also, as in this case, keep the surplus fund in short-term deposits in order to earn interest. Such interests will be chargeable under s. 56 of the Act. 14. The co-ordinate bench of this Court in the case of KUIDFC [(2009) 315 ITR 301], supra, has held thus:- An identical question had come up for consideration before a Division Bench of this Court in (CIT v. Karnataka Urban Infrastructure Development and Finance Corporation 12006] 284 ITR 582), I.T.A. No. 2418 of 2005 between the same parties, decided on February 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Revenue that the assessee ',vac carrying on any business or activities of its own while implementing the scheme in question. The unutilised money, during which the project could not be fully implemented, is deposited in a bank to earn interest. That interest earned is aso again utilised for the implementation of the mega city scheme which is also permitted under the scheme. Therefore, in computing the total income of the assessee for any previous year the interest accrued on the bank deposits cannot be treated as an income of the assessee as the interest is earned out of the money given by the Government of India for the purpose of implementation of the mega city scheme. Therefore, we do not find any error in the conclusion reached by the Tribunal that there was no income earned by way of interest by the assessee and setting aside the order of the Assessing Officer which is affirmed by the first appellate authority. The finding given by the Tribunal is purely a question of fact. We do not find any substantial question of law involved in this appeal and, therefore, this appeal is liable to be dismissed at the stage of admission itself In the light of the afo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d., (supra) and it is not the case of the Revenue that the said interest earned on these fixed deposits was utilized by the Company for any other purpose other than the purpose for which the grants were made by the State Government. Even if we peruse the preamble to the Government Order dated January 23, 2007, by which the grant of Rs.10 crores is made by the Government of Karnataka it is clear that in view of the National Horticultural Machine Programme implemented in Karnataka and major thrust given by the State Government for the development of horticultural sector, there is unlimited potentiality for export of horticultural produce, but the main constraint is lock of post harvest infrastructures viz., procurement centres, grading, washing, waxing, packing units, refrigerated transport, pre-cooling and cold storages, intermediate cold storages, processing units and export house. In order to harness the potentiality and to increase exports. Further KAPPEC has proposed to create these infrastructure facilities in various parts of State in a phased manner and efforts will also be made to rope in funds from Government of India under the relevant scheme from different agencies . The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f law in favour of the assessee and against the Revenue. 20. The decision rendered as above in assessee s own case is that interest income cannot be considered as income and has to be capitalized. Respectfully following the same, we hold that interest income in question brought to tax by the AO has to be held as not taxable and the addition made in this regard is directed to be deleted. 21. As far as other income being tender fees and miscellaneous income is concerned, we find the Hon ble Madras High Court in the case of M/s. Indian Power Projects Ltd., Vs. DCIT TCA No.543 of 2007 judgment dated 27.04.2015 dealt with identical issue arising in the case of an assessee which is a public sector undertaking such as the assessee and held as follows: 5. The short issue that arise for consideration in this appeal is Whether on the admitted facts, the receipt of amount on the sale of tender documents should be treated as income from other sources or as capital receipt? . 6. For better appreciation of the case on hand, the reasoning of the Tribunal, as found in para-3 of its order, is extracted hereinbelow 3. We have considered the rival submissions made by both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supreme Court found that the activities of the assessee was in connection with three receipts, viz., rent charged by the assessee to its contractors for housing workers and staff employed by the contractor for the construction work of the assessee including certain amenities granted to the staff by the assessee; hire charges for plant and machinery which was given to the contractors by the assessee for use in the construction work of the assessee and finally the interest from advance made to the contractors by the assessee for the purpose of facilitating the work of construction of its plant undertaken by the assessee. The activities of the assessee in connection with all these three receipts were directly connected with or incidental to the work of construction of its plant undertaken by the assessee. The advances which the assessee made to the contractors to facilitate the construction activity of putting together a very large project was as much to ensure that the work of the contractors proceeded without any financial hitch as to help the contractors. The arrangements which were made between the assessee-company and the contractors pertaining to these three receipts were arra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... setting up of business could not be construed in any other manner other than in the nature of capital receipt. 11. The Tribunal fell in error in merely stating that the decision in Bokaro Steel case (supra) is distinguishable from Tuticorin Alkali Chemicals Fertilizers case (supra), without even understanding the scope of the decision in Bokaro Steel case (supra). The admitted fact in this case is that the amount received by the appellant/assessee in sale of tender documents at the pre-commencement stage is in relation to the establishment of the unit and, therefore, it could be clearly stated that it is intrinsically connected with the purpose of setting up of the unit. This Court is in agreement with the view expressed by the Supreme Court in Bokaro Steel case (supra), which has affirmed the view of the Delhi High Court in Indian Drugs Pharmaceuticals case (supra) and is of the considered view that the said decision is squarely applicable to the facts of the present case. Accordingly, the first substantial question of law is answered in favour of the appellant/assessee and against the respondent/Revenue . 22. Following the ratio laid down as above, we hold that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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