Income Tax Appellate Tribunal - Jaipur
Road Infrastructure Development Co., ... vs Dcit, Jaipur on 19 December, 2016
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ ITA No. 963/JP/12
fu/kZkj.k o"kZ@Assessment Year : 2007-08
M/s Road Infrastructure cuke The DCIT, Circle-6, Jaipur
Development Co. of Rajasthan Vs.
Ltd. 1st floor, LIC New
Investment Building, Bhawani
Singh Road, Jaipur
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No. AACCR 9953 J
vihykFkhZ@Appellant izR;FkhZ@Respondent
vk;dj vihy la-@ ITA No. 282/JP/15
fu/kZkj.k o"kZ@Assessment Year : 2008-09
M/s Road Infrastructure cuke The DCIT, Circle-6, Jaipur
Development Co. of Rajasthan Vs.
Ltd. 1st floor, LIC New
Investment Building, Bhawani
Singh Road, Jaipur
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No. AACCR 9953 J
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.P. Pareek (CA)
jktLo dh vksj ls@ Revenue by : Shri D.S. Kothari (CIT)
lquokbZ dh rkjh[k@ Date of Hearing : 15.12.2016
?kks"k.kk dh rkjh[k@ Date of Pronouncement : 19/12/2016.
vkns'k@ ORDER
PER SHRI VIKRAM SINGH YADAV, A.M.
These are two appeals filed by the assessee against the order of the ld CIT(A)-II dated 30.10.2012 for AY 2007-08 and dated 30.01.2015 for AY 2008- ITA No. 963/JP/2012 & ITA No.282/JP/2015 Road Infrastructure Development Company of Rajasthan, Ltd. Jaipur 09 respectively. Given the identical fact pattern, the same were taken up for hearing together and are being disposed off by this consolidated order.
In ITA No. 963/JP/2012, the assessee has taken following grounds of appeal:
(i) That the order passed by the DCIT, Circle-6, Jaipur or initiating proceedings u/s 147/148 is bad in law and CIT(A-II, has further erred in confirming the initiating proceedings u/s 147/148 of the IT Act, 1961.
(ii) That the ld. AO has erred and Ld. CIT(A)-II has also erred in confirming initiated passing an order u/s 147/143(3) by changing of mind, by the ld.
DCIT against provisions of act and well established principle of law as pronounced by the various Courts including Supreme Court.
(iii) The ld. AO has erred and ld. CIT(A) -II has also erred in law as well as in facts in considering setting off interest earned against the interest paid inspite of clear cut distinction pointed out by the assessee vis-a-vis the case of Tuticorn Alkalis Chemicals and Fertilizers Ltd. vs. CIT (1997) 222 ITR 172 (SC) referred by the Ld. DCIT.
(iv) That the ld. AO erred and the Ld. CIT(A)-II has also erred in confirming raising demand as interest on illegal addition ignoring the fact that assessee is entitled for refund in spite of adjusting illegal demand which is subject matter of this appeal.
In ITA No. 282/JP/2015, the assessee has taken following effective grounds of appeal:
(1) That the order passed by ld. AO and the ld. CIT(A), Bikaner (Camp at Jaipur) has also erred in considering Rs. 3,37,76,623/- as Income from Other sources rather than reducing it from the capital cost for the construction, as this amount pertains to prior to commercial operations of the road for which this amount was borrowed.
(2) Without prejudice to ground 2 above it is submitted that the ld. AO has erred and ld. CIT(A) Bikaner (camp at Jaipur) has also erred in wrongly calculating the amortisation amount by not increasing the project coast by the amount of interest income Rs. 3,37,76,623/- earned from fixed deposit and taxed under income from other sources.2 ITA No. 963/JP/2012 & ITA No.282/JP/2015
Road Infrastructure Development Company of Rajasthan, Ltd. Jaipur
2. At the outset, the ld. AR submitted that ground No. 3 & 4 of assessee's appeal in ITA No. 963/JP/12 for A.Y. 2007-08 are covered by the judgement of this Hon'ble Bench in assessee's own case in ITA No. 628/JP/2014 for A.Y. 2009-10 dated 11.08.2016. Likewise, the ld AR submitted that in the case of ITA No. 282/JP/15 for A.Y.2008-09, all the grounds are again covered by the said judgement referred above.
3. The ld CIT DR is heard who has fairly accepted that the issue under consideration is covered by the decision of the Coordinate Bench referred supra. However, he relies upon the order of the lower authorities.
4. We have heard the rival contentions and perused the material available on record. The issue under consideration for the both the years relate to treatment of the interest received prior to commencement of commercial operations of the specified mega road projects. As per the Revenue, the same is to be brought to tax under the head "income from other sources." As per the assessee, it is in the nature of capital receipt and will be required to be set off against the pre-operative expenditure capitalized under the head "Capital work in progress" and the same cannot be brought to tax under the head "income from other sources." The said issue has been examined at great length by the Coordinate Bench in its decision referred supra and therein the decision of the Hon'ble Supreme Court in case of Tuticorin Alkali Chemicals and Fertilizers (227 ITR 172) as well as decision in case of Bokaro steel Ltd (236 ITR
316) has been duly considered. The relevant findings of the Coordinate Bench in assessee's own case in ITA No. 628/JP/2014 for A.Y. 2009-10 dated 11.08.2016 are reproduced as under:
3 ITA No. 963/JP/2012 & ITA No.282/JP/2015Road Infrastructure Development Company of Rajasthan, Ltd. Jaipur "2.18 From the above, it is evident that there are two sets of judgements of Hon'ble Supreme Court, proceedings on different lines of reasonings. The Hon'ble Delhi High court in case of Indian Oil Panipat Consortium Ltd.
(supra) has considered and interpreted the decisions of Hon'ble Supreme Court in case of Tuticorin Alkali Chemicals & Fertilizers (supra) as well as Bokaro Steel Ld. (supra). After analyzing both the decisions of Hon'ble Supreme court, it held that "the test which premeates through the judgement of the Supreme court in Tuticorin Alkali Chemicals & fertilizers Ltd's case (supra) is that if funds have been borrowed for setting up of a plant and if the funds are 'surplus' and then by virtue of that circumstance they are invested in fixed deposits the income earned in the form of interest will be taxable under the head "Income from other sources". On the other hand the ratio of the Supreme court judgement in Bokaro Steel Ltd.'s case (supra) to our mind is that if income earned, whether by way of interest or in any other manner on funds which are otherwise 'inextricably linked" to the setting up of the plant such income is required to be capitalized to be set off against pre- operative expenses ."
"2.19 The facts in the instant case are pari materia with the facts of the Indian Oil Panipat (supra) and the ratio decidendi of Hon'ble Delhi High Court in that case will squarely apply to the facts of the assessee. In the instant case, undisputedly, the funds have been borrowed for the specific purpose of execution of the mega road projects and as per the loan agreement executed between the consortium of bankers and the assessee dated 23.11.2005, all the disbursements shall be deposited in the trust and retention account which shall be subject to strict control and verification by the Senior lenders and all disbursements shall be utilised solely for the purposes of implementation of the project and no other purpose. The funds are thus inextricably linked to the setting up of the mega road projects and interest earned on such borrowed funds infused in the business could not be classified as income from other sources. We also note a distinguishing feature in the instant case that the assessee is not at liberty to use the interest so earned as per its will and discretion unlike the case in Tuticorin Alkali Chemicals & Fertilizers (supra) and the interest has to be used solely for the purposes of implementation of the specified projects only. The impunged interest receipt of Rs. 35,39,479/- on such borrowed funds relates to the mega road projects/stretches which were under construction and the completed road projects/stretches upto the date of commencement of commercial operations. Therefore, the interest received prior to 4 ITA No. 963/JP/2012 & ITA No.282/JP/2015 Road Infrastructure Development Company of Rajasthan, Ltd. Jaipur commencement of commercial operations of the specified mega road projects will be in the nature of capital receipt and will be required to be set off against the pre-operative expenditure capitalized under the head "Capital work in progress" and the same cannot be brought to tax under the head "income from other sources". Hence, ground no. 1 of the assessee is allowed."
5. Undisputedly, there are no changes in the facts and circumstances of the case. No contrary authority has been brought to our notice subsequent to above decision of the Coordinate Bench or the fact that said decision of the Coordinate Bench has been stayed by the Hon'ble High Court. In view of the similar facts and circumstances of the case and respectfully following the decision of Coordinate Bench in assessee's own case (supra), we hold that the interest received prior to commencement of commercial operations of the specified mega road projects will be in the nature of capital receipt and will be required to be set off against the pre-operative expenditure capitalized under the head "Capital work in progress" and the same cannot be brought to tax under the head "income from other sources".
6. Therefore, in ITA No. 963/JP/2012, the ground no. 3 taken by the assessee is allowed, ground no. 4 is consequential in nature and doesn't require separate adjudication. Given that the issue has been decided on merit in favour of the assessee, we donot think its necessary to examine and adjudicate upon ground no. 1 and 2, hence the same are dismissed.
7. In ITA No. 282/JP/2015, the ground no. 2 taken by the assessee is thus allowed and ground no. 3 becomes infructuous, hence the same is dismissed.
In the result, both the appeals filed by the assessee are partly allowed.
5 ITA No. 963/JP/2012 & ITA No.282/JP/2015Road Infrastructure Development Company of Rajasthan, Ltd. Jaipur Order pronounced in the open court on 19/12/2016.
Sd/- Sd/-
(KUL BHARAT) (VIKRAM SINGH YADAV)
U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member
Jaipur
Dated:- 19/12/2016
Pillai
vkns'k dh izfrfyfi vxzfs "kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- Road Infrastructure Development co. Ltd. Jaipur
2. izR;FkhZ@ The Respondent- The DCIT, Circle-6, Jaipur
3. vk;dj vk;qDr@ CIT -II, Jaipur
4. vk;dj vk;qDr¼vihy½@The CIT(A)-II, Jaipur
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No.963/JP/2012 & ITA No. 282/JP/2015) vkns'kkuqlkj@ By order, lgk;d iathdkj@ Assistant. Registrar.6