M/S Suncity Haryana Sez Developers Pvt.Ltd. v. DCIT, Central Circle - 1, New Delhi
[Citation -2016-LL-1005-104]

Citation 2016-LL-1005-104
Appellant Name M/S Suncity Haryana Sez Developers Pvt.Ltd.
Respondent Name DCIT, Central Circle - 1, New Delhi
Court ITAT-Delhi
Relevant Act Income-tax
Date of Order 05/10/2016
Assessment Year 2009-10
Judgment View Judgment
Keyword Tags assessment proceeding • performance guarantee • cost of construction • plant and machinery • business expediency • work in progress • interest on fdrs • interest earned • interest income • bank guarantee
Bot Summary: The brief facts of the case are that assessee filed its return declaring net loss of Rs. 32,167/- was filed on 29.9.2009. The reasons for making addition arose from the fact that during the assessment proceeding the AO found that the assessee had a deposit in the shape of FDR with the Indusind Bank on which during the year the assessee has earned interest of Rs. 12,15,015/-. Aggrieved with the aforesaid assessment order, assessee preferred appeal before the Ld. CIT(A), who vide impugned order dated 4.3.2013 has dismissed the appeal of the Assessee by upholding the action of the AO in assessing the interest income of Rs. 12,15,015/- under the head Income from other sources. Against the aforesaid order of the Ld. CIT(A), assessee is in appeal before the Tribunal. In the present case also it was obligatory to provide the bank guarantee for which fixed deposit has been made by the assessee to commence its business. The interest income earned is nothing but the business income of the assessee and the act of assessee to reduce work in progress to the extent of interest received and Ld. CIT(A) for the assessment years mentioned above deleted the similar additions made by the AO in assessee s own case. Ld. Counsel for the assessee also filed the copies of the order dated 23.9.2015 passed by the Ld. CIT(A) in assessee s own case for the assessment years 2010-11 and 2011- 12 as well as the copy of the Hon ble High Court of Delhi in the case of CIT vs. Jaypee DSC Ventures Ltd. 7.


IN INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G , NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER I.T.A. No. 3513/DEL/2013 A.Y. : 2009-10 M/S SUNCITY HARYANA SEZ DCIT, CENTRAL CIRCLE -1 DEVELOPERS PVT. LTD., VS. NEW DELHI N-49, (1ST FLOOR) CONNAUGHT ROOM NO. 322, E-2, ARA PLACE, CENTRE NEW DELHI 110 001 JHANDEWALAN EXTN., NEW (PAN: AAJCS9416N) DELHI (APPELLANT) (RESPONDENT) Assessee by : Sh. Ved Jain, Adv., Sh. Ashish Chadha, CA Department by : Sh. IPS Bindra, CIT(DR) Date of Hearing : 29-09-2016 Date of Order : 05-10-2016 ORDER PER H.S. SIDHU : JM This Appeal filed by Assessee is directed against Order dated 4.3.2013 passed by Ld. Commissioner of Income Tax(Appeal-III), New Delhi relevant for assessment year 2009-10. 2. grounds raised in Appeal read as under:- 1. On facts and circumstances of case, order passed by learned Commissioner of Income Tax (Appeals) [CIT(A)] is bad both in eye of law and on facts. 2. (i) On facts and circumstances of case, learned C1T(A) has erred both on facts and in law in confirming action of AO in treating amount of Rs. 12,15,015/- on account of interest on FDRs to be 'income from other sources'. ii) That above said addition has been confirmed rejecting contention of assessee that FDRs being made out of business expediency, interest earned on jem, as such, goes to reduce cost of work in progress. 3. Without prejudice to above and in alternative, learned CIT(A) has erred in not at owing benefit of expenses incurred in relation to earning of said interest on FDRs. 4. On facts and circumstances of case, learned CIT(A) has erred, both on facts and in law, in rejecting contention of appellant that interest earned during construction period will go to reduce cost of construction and as such will not be assessable as 'income from other sources'. 2 5. In alternative and without prejudice to above, learned CIT(A) has erred, both on facts and in law, in ignoring fact that business having been set up all expenditure incurred thereafter shall be allowable and to be set off against any other income during year. 6. Appellant craves leave to add, amend or alter any of grounds of appeal. 3. brief facts of case are that assessee filed its return declaring net loss of Rs. (-) 32,167/- was filed on 29.9.2009. search u/s. 132 was conducted in this case on 25.9.2008. Accordingly, case was taken up for scrutiny. Statutory notices were issued and duly complied with. In response to notices assessee s AR filed various details. Thereafter, AO made addition of Rs. 12,15,015/-. reasons for making addition arose from fact that during assessment proceeding AO found that assessee had deposit in shape of FDR with Indusind Bank on which during year assessee has earned interest of Rs. 12,15,015/-. AO observed that since said interest was not shown as income under head income from other sources instead same was adjusted from cost of work-in- progress. AO accordingly, assessed interest income 3 under head income from other sources vide his order dated 19.11.2010 passed u/s. 153A read with section 143(3) of I.T. Act, 1961. 4. Aggrieved with aforesaid assessment order, assessee preferred appeal before Ld. CIT(A), who vide impugned order dated 4.3.2013 has dismissed appeal of Assessee by upholding action of AO in assessing interest income of Rs. 12,15,015/- under head Income from other sources. 5. Against aforesaid order of Ld. CIT(A), assessee is in appeal before Tribunal. 6. At time of hearing, ld. Counsel of assessee has stated that issue in dispute is squarely covered by decision of Hon ble Jurisdictional High Court in case of CIT vs. Jaypee DSC Ventures Ltd. reported in (2012) 17 taxmann.com 257 (Delhi). He further stated that Ld. CIT(A)-29, New Delhi has also decided issue in dispute in favour of assessee in assessee s own case for assessment year 2010-11 and 2011- 12 and held that this case is not one where assessee had made deposit of surplus money lying idle with it in order to earn interest; on contrary, amount of interest was earned from fixed deposits which were kept in bank for furnishing bank guarantee. He further stated that CIT(A) observed that 4 deposit in cited case was directly linked with purchase of plant and machinery and hence held that income earned on such deposits is incidental to acquisition of assets and accordingly, capitalized. In present case also it was obligatory to provide bank guarantee for which fixed deposit has been made by assessee to commence its business. Therefore, interest income earned is nothing but business income of assessee and act of assessee to reduce work in progress to extent of interest received and Ld. CIT(A) for assessment years mentioned above deleted similar additions made by AO in assessee s own case. Ld. Counsel for assessee also filed copies of order dated 23.9.2015 passed by Ld. CIT(A) in assessee s own case for assessment years 2010-11 and 2011- 12 as well as copy of Hon ble High Court of Delhi in case of CIT vs. Jaypee DSC Ventures Ltd. 7. On other hand, Ld. DR did not controvert arguments advanced by Ld. Counsel for assesse and relied upon orders passed by Ld. CIT(A) as well as decision mentioned by Ld. CIT(A) in impugned order. 8. We have heard both parties and perused records. We have also gone through orders of Ld. CIT(A) for subsequent assessment years i.e. 2010-11 & 2011-12 wherein assessee s contention was accepted by Ld. CIT(A) and similar additions was deleted by Ld. CIT(A). We find that Ld. 5 DR could not produce any order of higher authorities contrary to finding of Ld. CIT(A) given on issue in dispute for AY 2010-11 & 2011-12, as aforesaid. We have also gone through Hon ble Jurisdictional High Court decision in case of CIT vs. Japyee DSC Ventures Ltd. (Supra) and find that issue in dispute is squarely covered by said judgment of Hon ble Jurisdictional High Court decision of Jaypee DSC Ventures (Supra) wherein Hon ble High Court has held as under:- As is noticeable from stipulations in agreement, performance guarantee by way of bank guarantee was required for faithful performance of its obligations. non- submission of guarantee would have entailed termination of agreement and NHAI would have been at liberty to appropriate bid security. That apart, release of such performance security depended upon certain conditions. Thus, it is clearly evincible that bank guarantee was furnished as condition precedent to entering into contract and further it was to be kept alive to fulfill obligations. Quite apart from above, release of same was dependent on satisfaction of certain conditions. Thus, instant case is not one where assessee had made deposit of surplus money lying idle with it in order 6 to earn interest; on contrary, amount of interest was earned from fixed deposits which were kept in bank for furnishing bank guarantee. It had inextricable nexus with securing contract. Accordingly, view expressed by Tribunal cannot be found fault with. [Para 21] 9. In background of aforesaid discussions and respectfully following precedents, as referred above, we allow appeal of Assessee. 10. In result, Appeal filed by Assessee stands allowed. Order pronounced in Open Court on 05/10/2016. Sd/- (Sd/- (O.P. KANT) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 05/10/2016 *SR BHATNAGAR* Copy forwarded to: - 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY By Order, ASSISTANT REGISTRAR 7 M/S Suncity Haryana Sez Developers Pvt.Ltd. v. DCIT, Central Circle - 1, New Delhi
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