Income Tax Appellate Tribunal - Hyderabad
Sri Harsha Constructions, Hyderabad vs Assessee on 26 November, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH 'B', HYDERABAD
BEFORE P.M. JAGTAP, ACCOUNTANT MEMBER and
SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER
MA No. 144/Hyd/2014
In ITA No. 929/Hyd/2011
Assessment year 2007-08
M/s. Sri Harsha Constructions, Vs. The Asst. CIT
Hyderabad Circle-6(1)
PAN: AACFS8025M Hyderabad
Appellant Respondent
Appellant by: Sri K.A. Sai Prasad
Respondent by: Sri Rajat Mitra
Date of hearing: 14.11.2012
Date of pronouncement: 26.11.2012
ORDER
PER ASHA VIJAYARAGHAVAN, JM:
By this MA the assessee seeks recall of Tribunal order in ITA No. 929/Hyd/2011 dated 31.10.2012.
2. The learned counsel submitted that in the appeal No. 929/H/2011 the assessee raised the following grounds as ground Nos. 11 & 12.
11. The Commissioner of Income Tax (A) erred in holding that the entire arbitration amount of Rs. 1,31,18,770 included in the amount of Rs. 1,55,97,428/- is liable to tax.
12. The Commissioner of Income Tax(A) ought to have observed that the assessee incurred certain expenses for having the arbitration amount of Rs. 1,31,18,770/- and therefore only profit in respect of that amount should be brought to tax.
3. He further submitted that the Tribunal disposed of these grounds in para 20 page 12 of its order dt. 31.10.2012. The relevant observations and findings of the Tribunal are extracted as under:
"Further the assessee challenged the treating the entire amount of Rs. 1,31,18,770 which represents the arbitration amount received as income of the assessee. According to the assessee expenditure relating to this income has to be allowed.2 MA No. 144/Hyd/2014
M/s. Sri Harsha Constructions ========================= However, there was a finding by the lower authorities that the assessee already claimed all the expenses relating to this income in earlier years. If it is so there cannot be any further deduction. The assessee counsel pleaded before us that the findings of the CIT(A) are wrong, however, not placed any material or documents to controvert the above findings. In these circumstances, we are inclined to confirm the findings of the CIT(A)."
4. The learned counsel submitted that the Tribunal was of the opinion that the assessee had not placed any material or documents in support of the claim of expenditure incurred. He drew our attention to para 5.6 at page 4 of the written submissions filed before the Tribunal in the course of hearing of the appeal which are as under:
"5.6 Though the assessee had received this sum against the contracts executed in earlier year, it had to incur some expenditure in connection with award proceedings. Most of the payments are to the consultants and the amount incurred is Rs. 15,98,500 as per the details enclosed. Since the expenditure incurred through Banking Channels related to award amount received, it is prayed that the Hon'ble Income Tax Appellate Tribunal be pleased to direct the Assessing Officer to assess only net arbitration amount received as other income. This issue is covered by ground Nos. 11 & 12."
5. It was submitted that the AR of the assessee had also filed the details of expenditure incurred through Banking Channels, as referred to in the written submissions. It was submitted that since all the details are already on record, the observation of the Tribunal that such details are not filed is not correct. Further it was pointed out by this MA that another issue related to ground No. 8 reads as under:
"8. The Commissioner of Income Tax(A) ought to have observed that the interest on margin money of Rs. 3,81,972/- has to be considered as profits from business and therefore no separate addition was required to be made."
6. The learned counsel stated that in the written submissions filed the assessee at paras 4 page 3 submitted as under:
"4. Interest on margin money - Ground No. 8:
Since the fixed deposits are taken for getting Bank guarantees in the course of business for the work contracts 3 MA No. 144/Hyd/2014 M/s. Sri Harsha Constructions ========================= awarded, it is prayed that the interest of Rs. 3,81,972 on margin money fixed deposits cannot be separately added after estimating the income from the business as a whole. We rely on the decision of Karnataka High Court in the case of CIT vs Producin, 290 ITR 598 for the proposition that if the fixed deposits have link to the business activity the interest thereon is business income.
In the case of CIT vs Vidyut Steel Ltd 219 ITR 30, the AP High Court held that the interest on margin money deposits cannot be assessed u/s 56 of the IT Act."
7. The learned counsel submitted that the Tribunal disposed of this ground at para 19 on page 11 with the following observations / findings:
"19. Regarding the interest on margin money this issue came for consideration before this Tribunal in the case of KNR Constructions in ITA No 1141/Hyd/2005. The Tribunal while passing the order dated 30.11.2009 considered the judgement of the jurisdictional High Court in the case of Vidyuth Steels Ltd. (cited supra), wherein it was held that interest earned on margin money was inextricably connected with the contract of guarantee itself. The income derived from the margin money for obtaining bank guarantee could not be separately assessed under section 56 of the Act. Further the Tribunal considered the judgement of jurisdictional High Court in the case of CIT vs. Sponge Iron India Ltd. (201 ITR 770). Further, while deciding the case of Vidyuth Steels Ltd., judgement in the case of Sponge Iron India Ltd. was not brought to the notice of the Court. It is also on record that the Supreme Court judgement in the case of Tuticorin Alkali Chemicals and Fertilisers vs. CIT (227 ITR 172) is also against the assessee which was followed by the Tribunal while disposing the appeal of the assessee on this issue.
20. Further in that case the assessee filed MA and the same was dismissed vide order dated 12th October, 2012 in MA Nos. 113 & 114/Hyd/2012."
8. The learned counsel submitted that though the Tribunal recorded that the issue is covered in assessee's favour by the decision of jurisdictional High Court in the case of CIT vs Vidyuth Steels Ltd (219 ITR 30) (AP), the issue was decided against the assessee placing reliance on two other decisions which are distinguishable on facts. Hence the order of the Tribunal in this regard needs rectification. The learned counsel prayed that the order of Tribunal in ITA No. 929/H/11 may be recalled in the interest of justice and appropriate orders may be passed.
4 MA No. 144/Hyd/2014M/s. Sri Harsha Constructions =========================
9. The learned DR did not oppose the proposition of the learned counsel.
10. We have heard both the parties and perused the Tribunal order. We are of the view that a mistake had crept in while passing the Tribunal order. Hence, the order of the Tribunal in ITA No. 929/Hyd/2011 dated 31.10.2012 is hereby recalled and the appeal is restored on the file of the Tribunal. The Registry is directed to post the appeal for hearing in regular course under intimation to the parties concerned.
11. In the result, MA by the assessee is allowed.
Order pronounced in open court on 26th November, 2014.
Sd/- Sd/-
(P.M. JAGTAP) (ASHA VIJAYARAGHAVAN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad, dated 26th November, 2014
tprao
Copy forwarded to:
1. M/s. Sri Harsha Constructions, c/o. M/s. B. Narsing Rao & Co., Chartered Accountants, Plot NO. 554, Road NO. 92, Jubilee Hills, Hyderabad-96.
2. The Asst. CIT, Circle-6(1), 7th Floor, D Block, IT Towers, Masab Tank, Hyderabad.
3. The CIT-IV, Hyderabad.
4. The CIT-III, Hyderabad.
5. The DR - B Bench, ITAT, Hyderabad