Express Infrastructures Pvt. Ltd. v. The Deputy Commissioner of Income-tax, Company Circle-II(1), Chennai
[Citation -2020-LL-1001-32]

Citation 2020-LL-1001-32
Appellant Name Express Infrastructures Pvt. Ltd.
Respondent Name The Deputy Commissioner of Income-tax, Company Circle-II(1), Chennai
Court HIGH COURT OF MADRAS
Relevant Act Income-tax
Date of Order 01/10/2020
Assessment Year 2009-10
Judgment View Judgment
Keyword Tags capital work in progress • income from other source • interest income earned • pre-operative period • benefit of deduction • interest received • project cost
Bot Summary: 930/Chny/2017 on the file of the Income Tax Appellate Tribunal, Chennai B Bench for the assessment year 2009-10. 930/Chny/2017 on the file the Income Tax Appellate Tribunal, Chennai B Bench for the assessment year 2009-10. The assessee filed this appeal by raising the following substantial questions of law : i. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the interest income earned from the fixed deposits is to be treated under the head income from other source and not business income ii. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in upholding that the interest received by the appellant is income on commercial principles and not allowing the same to be netted off against the capital work in progress iii. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that there was no direct nexus between the interest earned and the short deposits, which were fully made with the borrowed funds and v. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that income tax is attracted at the point when the income is earned without controverting on the point that the appellant had not commenced its business during this year 3. The assessee, which is a company engaged in the business of developing and maintenance of commercial complex, filed its return of income for the assessment year under consideration namely AY 2009- 10 on 30.9.2009 declaring a total income of Rs.2,98,060/-. 783 of 2018 order dated 30.11.2011 arriving the income at Rs.65,75,730/- after bringing to tax the interest income of Rs.62,77,671/- under the head Income from Other Sources.


TCA.No.783 of 2018 In High Court of Judicature at Madras Dated : 01.10.2020 Coram Honourable Mr.Justice T.S.SIVAGNANAM and Honourable Mrs.Justice V.BHAVANI SUBBAROYAN Tax Case Appeal No.783 of 2018 M/s.Express Infrastructures Pvt. Ltd., Chennai-2. Appellant Vs Deputy Commissioner of Income Tax, Company Circle -II(1), Chennai-34. Respondent APPEAL under Section 260A of Income Tax Act, 1961 against order dated 13.6.2018 made in ITA.No.930/Chny/2017 on file of Income Tax Appellate Tribunal, Chennai B Bench for assessment year 2009-10. For Appellant : Mr.G.Baskar For Respondent : Mr.Karthik Ranganathan, SSC 1/8 http://www.judis.nic.in TCA.No.783 of 2018 Judgment was delivered by T.S.SIVAGNANAM,J This appeal, filed by assessee under Section 260A of Income Tax Act, 1961 (for short, Act), is directed against order dated 13.6.2018 made in ITA.No.930/Chny/2017 on file Income Tax Appellate Tribunal, Chennai B Bench (for brevity, Tribunal) for assessment year 2009-10. 2. assessee filed this appeal by raising following substantial questions of law : i. Whether, on facts and in circumstances of case, Income Tax Appellate Tribunal was right in holding that interest income earned from fixed deposits is to be treated under head income from other source and not business income ? ii. Whether, on facts and in circumstances of case, Income Tax Appellate Tribunal was right in upholding that interest received by appellant is income on commercial principles and not allowing same to be netted off against capital work in progress ? iii. Whether Tribunal misdirected itself in law in holding that interest which accrued on funds deployed with bank could be taxed as income from other sources and 2/8 http://www.judis.nic.in TCA.No.783 of 2018 not as capital receipt liable to be set off against pre-operative expenses ? iv. Whether, on facts and in circumstances of case, Income Tax Appellate Tribunal was right in holding that there was no direct nexus between interest earned and short deposits, which were fully made with borrowed funds ? and v. Whether, on facts and in circumstances of case, Income Tax Appellate Tribunal was right in holding that income tax is attracted at point when income is earned without controverting on point that appellant had not commenced its business during this year ? 3. We have heard Mr.G.Baskar, learned counsel for appellant assessee and Mr.Karthik Ranganathan, learned Senior Standing Counsel appearing for respondent Revenue. 4. assessee, which is company engaged in business of developing and maintenance of commercial complex, filed its return of income for assessment year under consideration namely AY 2009- 10 on 30.9.2009 declaring total income of Rs.2,98,060/-. Subsequently, revised return was filed on 28.9.2010. Assessing Officer completed assessment under Section 143(3) of Act vide 3/8 http://www.judis.nic.in TCA.No.783 of 2018 order dated 30.11.2011 arriving income at Rs.65,75,730/- after bringing to tax interest income of Rs.62,77,671/- under head Income from Other Sources . 5. Aggrieved by such addition, assessee filed appeal before Commissioner of Income Tax (Appeals)-9, Chennai-34 [for brevity, CIT(A)]. In grounds of appeal filed before CIT(A), assessee contended that Assessing Officer ought to have seen that fixed deposits were made in pre-operative period and hence, same were to be considered as part of project cost and that Assessing Officer erred in relying upon decision of Hon ble Supreme Court in case of Tuticorin Alkali Chemicals & Fertilizers Ltd. Vs. CIT [reported in (1997) 227 ITR 172]. Further, assessee faulted Assessing Officer for relying upon decision of this Court in case of CIT Vs. Nizar Ahmed & Co. [reported in 259 ITR 244]. 6. CIT(A), after considering factual position as submitted by assessee that interest amount earned from fixed deposits was in nature of pre-operative periods, examined case and held that stand taken by assessee could not be accepted and supported his conclusion by referring to decision of Hon ble Supreme Court in case of Tuticorin Alkali Chemicals & 4/8 http://www.judis.nic.in TCA.No.783 of 2018 Fertilizers Ltd. 7. assessee, being aggrieved by order dated 30.12.2016 passed by CIT(A) dismissing their appeal, preferred appeal before Tribunal. Before Tribunal, assessee contended that they obtained loans from various financial institutions solely for purpose of constructing shopping mall and that interest received was inextricably connected with business purpose. Tribunal, considering factual position, concurred with view taken by Assessing Officer and CIT(A) and dismissed appeal by impugned order. Hence, assessee is before us. 8. After hearing learned counsel for appellant, we find that plea raised by assessee before us that their business had commenced and therefore, interest amount should be allowed, appears to be raised for first time before this Court, as assessee, before Assessing Officer, CIT(A) and Tribunal, submitted that fixed deposits were in pre-operative period and therefore, it had to be considered as part of project cost. Thus, plea raised before us for first time appears to be contrary to factual position as pleaded by assessee themselves. Thus, said contention raised by assessee is not acceptable. 9. learned counsel for assessee has relied upon 5/8 http://www.judis.nic.in TCA.No.783 of 2018 decision rendered by us in case of Daimler India Commercial Vehicles (P.) Ltd. Vs. DCIT [reported in (2019) 416 ITR 343]. 10. This decision is relied upon in support of submission that assessee before us commenced business. facts in decision rendered by us in case of Daimler India Commercial Vehicles (P.) Ltd., are totally different from facts before us. In said case, assessee, which was company formed with objective of manufacture and sale of commercial vehicles in India and design and development of vehicles to suit for Indian market sourcing of components for sale, claimed deduction of operating and financial expenses on ground that it had already commenced various activities and merely because manufacture and sale of vehicles did not take place during relevant year due to non completion of construction, it was denied benefit of deduction on ground that business of assessee had not been set up. Upon going through facts, we had held that order passed by Assessing Officer was erroneous noting that assessee in said case was in composite business or in other words, it had bucket of business activities, which had been clearly spelt out in Memorandum of Association and sufficient proof had been filed by assessee therein to establish that several of its activities had already commenced 6/8 http://www.judis.nic.in TCA.No.783 of 2018 except for manufacturing and sale of commercial vehicles, which could be done only after construction was completed. We find said decision to be only inapplicable to facts and circumstances of case on hand. 11. As rightly pointed out by learned Senior Standing Counsel appearing for respondent Revenue, issue involved has been settled by Hon ble Supreme Court in case of Tuticorin Alkali Chemicals & Fertilizers Ltd. We find that Assessing Officer, CIT(A) and Tribunal applied two decisions of Hon ble Supreme Court in case of Tuticorin Alkali Chemicals & Fertilizers Ltd., and in case of CIT Vs. Bokaro Steels Ltd. [reported in 236 ITR 315]. For all above reasons, we find no grounds to interfere with order passed by Tribunal. 12. Accordingly, above tax case appeal is dismissed and substantial questions of law raised are answered against assessee. No costs. 01.10.2020 7/8 http://www.judis.nic.in TCA.No.783 of 2018 T.S.SIVAGNANAM,J AND V.BHAVANI SUBBAROYAN,J RS To 1.The Income Tax Appellate Tribunal, Chennai B Bench 2.The Deputy Commissioner of Income Tax, Company Circle-II(1), Chennai-34. TCA.No.783 of 2018 01.10.2020 8/8 http://www.judis.nic.in Express Infrastructures Pvt. Ltd. v. Deputy Commissioner of Income-tax, Company Circle-II(1), Chennai
Report Error