Income Tax Appellate Tribunal - Delhi
M/S. Jubilant Foodworks Ltd., Noida vs Dcit, New Delhi on 25 January, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES : C : NEW DELHI
BEFORE SHRI R.S. SYAL, VICE PRESIDENT
AND
SMT. BEENA A. PILLAI, JUDICIAL MEMBER
ITA No.483/Del/2016
Assessment Year : 2011-12
DCIT, Vs. Jubilant Food Works Pvt. Ltd.,
Circle-13(2), B-214, Phase-2,
CR Building, District Gautam Budh Nagar,
New Delhi. Noida.
PAN: AABCD1821C
ITA No.615/Del/2016
Assessment Year : 2011-12
Jubilant Food Works Pvt. Ltd., Vs. DCIT,
B-214, Phase-2, Circle-13(2),
District Gautam Budh Nagar, CR Building,
Noida. New Delhi
PAN: AABCD1821C
(Appellant) (Respondent)
Assessee By : Shri K.M. Gupta, Advocate
Department By : Smt. Simran Bhullar, CIT, DR
Date of Hearing : 25.01.2018
Date of Pronouncement : 25.01.2018
ITA Nos.483 & 615/Del/2016
ORDER
PER R.S. SYAL, VP:
These two cross appeals - one filed by the assessee and the other by the Revenue - arise out of the order passed by the CIT(A) on 02.11.2015 in relation to the assessment year 2011-12.
2. The only issue raised in the assessee's appeal is against the confirmation of disallowance of Rs.13 lac made by the AO by treating the same as non-refundable security deposit.
3. Briefly stated, the facts of the case are that the assessee is engaged in the business of manufacturing and sale of Pizzas and related fast food products and sells the same through its retail outlets spread throughout the country. On perusal of the details filed along with the return, the Assessing Officer required the assessee to furnish the reconciliation statement of income with Form No.26AS. Such reconciliation statement was filed, in which it was shown that a sum of Rs.34,60,163/- was received from Travel Food Services Pvt. Ltd., on which TDS was made to the tune of Rs.3,46,018/-. The Assessing Officer found that income to the tune of Rs.20.19 lac was declared and a sum of Rs.13 lac was shown as security and not as an income. On being called upon to explain as to why the sum of Rs.13 lac be not treated as income, the assessee submitted that the security deposit of Rs.13 lac was for securing supplies and as per para 6.3 of the 2 ITA Nos.483 & 615/Del/2016 Agreement, the aforesaid security deposits were refundable in nature. Not convinced with the assessee's reply and in view of the fact that the deduction of tax at source was made on this sum of Rs.13 lac as per the assessee's own admission, he added income of Rs.13 lac to the total income. No relief was allowed in the first appeal.
4. Having heard both the sides and perused the relevant material on record, it is observed that page 233 of the paper book is reconciliation of income with the amount shown in TDS certificate submitted by the assessee before the Assessing Officer. In such reconciliation, income of Rs.34,60,163/- has been shown to have been received from Travel Food Services Pvt. Ltd., with the corresponding amount of tax deducted at source for a sum of Rs.3,46,018/-. In the next column, it has been mentioned that Rs.20.19 lac is on account of Franchisee fee and the other sum of Rs.13 lac is a part of security deposit in Schedule 8 of the balance sheet. Thus, it is apparent that as per the assessee's own admission, there was deduction of tax at source on the security deposit to the tune of Rs.13 lac, which, in normal circumstances, should have been considered as non-refundable and consequently, the income in the hands of the assessee. The ld. AR submitted that the assessee committed a mistake in showing amount of Rs.34.10 lac as income and TDS of Rs.3.46 lac from Travel Food Services Pvt. Ltd. He submitted that no deduction of tax at source was made from security deposit of Rs.13 lac which was in the nature 3 ITA Nos.483 & 615/Del/2016 of refundable security deposit. He took us through clause 6.3 of the agreement which, as per his understanding showed the amount to be non-refundable. However, on going through this clause, it is not borne out as to whether the amount of Rs.13 lac is refundable or not inasmuch as there is no stipulation for the refund of the amount. Admittedly, if there has been a deduction of tax at source, then, the corresponding amount has to be treated as income in the hands of the assessee. Since the claim of the assessee is that the reconciliation statement was wrongly drawn, we consider it expedient to set aside the impugned order and remit the matter to the file of Assessing Officer for examining the assessee's claim with reference to the relevant details. If, on such examination, it is found that there was deduction of tax at source on the sum of Rs.13 lac, then, of course, the amount of security deposit should be taken as non-refundable and consequently revenue receipt and vice versa. Needless to say, the assessee will be allowed a reasonable opportunity of hearing in such proceedings.
5. The only issue raised in the Revenue's appeal is against the deletion of disallowance of Rs.30,68,700/- made by the Assessing Officer on account of interest cost which was not capitalized by the assessee in its capital work-in- progress (CWIP) amounting to Rs.2,25,73,000/-.
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ITA Nos.483 & 615/Del/2016
6. Briefly stated, the facts of this ground are that the assessee was required to explain as to why proportionate interest on Capital work in progress (CWIP) should not be disallowed. In response to the same, the assessee submitted that no interest cost was incurred by the assessee in respect of the CWIP. Not convinced with the assessee's submissions, the Assessing Officer computed proportionate interest @ 12% of opening CWIP of Rs.255.73 lac and the resultant amount of Rs.30,68,760/- was disallowed from interest expenditure. The ld. CIT(A) deleted the addition by observing that the assessee had sufficient reserves and capital etc. The Revenue is aggrieved against the deletion of addition.
7. Having heard both the sides and perused the relevant material on record, we find from the assessee's balance sheet, a copy of which has been placed on record, that there was opening balance of term loan, under the head `Secured loans' to the tune of Rs.8.00 crore, which is different from the loan of vehicle. There can be no dispute that if the assessee has a common pool of funds and some investment is made from it, the inference should be drawn that the amount came out of interest free funds available with the assessee in the nature of share capital and reserves etc. If, however, specific borrowings are made for making such investments, then the theory 'investments from common funds' will cease to apply and the interest actually incurred on loan taken for the purposes of investment etc. would be disallowable in terms of proviso to section 36(1)(iii). The ld. AR could not place 5 ITA Nos.483 & 615/Del/2016 on record the details of term loan of Rs.8.0 crore appearing as opening balance in the balance sheet of the assessee which stood cleared during the year. We, therefore, set aside the impugned order and remit the matter back to the Assessing Officer for examining the nature of term loan. If such term loan is found to be relating to construction activity which has been capitalized as CWIP, then, the interest actually paid on such term loan should not be allowed as deduction in terms of proviso to section 36(1)(iii) and vice versa. Needless to say, the assessee will be allowed a reasonable opportunity of being heard in such proceedings.
8. In the result, both the appeals are allowed for statistical purposes.
The order pronounced in the open court on 25.01.2018.
Sd/- Sd/-
[BEENA A. PILLAI] [R.S. SYAL]
JUDICIAL MEMBER VICE PRESIDENT
Dated, 25th January, 2018.
dk
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT (A)
5. DR, ITAT
AR, ITAT, NEW DELHI.
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