IN THE INCOME TAX APPELLATE TRIBUNAL
`G' : NEW DELHI
DELHI BENCH `G
G.D.AGRAWAL, VICE PRESIDENT AND
BEFORE SHRI G.D.AGRAWAL,
I.C.SUDHIR, JUDICIAL MEMBER
SHRI I.C.SUDHIR,
No.3717/Del/2012
ITA No.3717/Del/2012
2009-10
Assessment Year : 2009-
Income Tax Officer, Vs. Digivision Pvt.Ltd.,
M/s Smart Digivision
Ward-9(1),
Ward- 8, Commercial Complex,
New Delhi. GK-II,
Masjid Moth, GK-
New Delhi 110 048.
PAN : AALCS1437P.
(Appellant) (Respondent)
CROSS- No.333/Del/2012
CROSS-OBJECTION No.333/Del/2012
2009-10
Assessment Year : 2009-
M/s Smart Digivision Pvt.Ltd., Vs. Income Tax Officer,
Complex,
8, Commercial Complex, Ward-
Ward-9(1),
GK-II,
Masjid Moth, GK- New Delhi.
New Delhi 110 048.
PAN : AALCS1437P.
(Appellant) (Respondent)
Revenue by : Shri Sukhveer Choudhary, DR.
Assessee by : Shri Ved Jain, CA and
Shri Venkatesh, Advocate.
ORDER
G.D.AGRAWAL, VP :
PER G.D.AGRAWAL,
This appeal by the Revenue is directed against the order of
learned CIT(A)-XII, New Delhi dated 4th April, 2012 for the AY 2009-10.
2. The only ground raised by the Revenue reads as under:-
"On the facts and circumstances of the case, the ld.CIT(A)
has erred in deleting the addition of Rs.1,65,81,054/- under
2 ITA-3717/D/2012 &
C.O.333/D/2012
the head income from "other sources" by treating it pre-
operative income earned."
3. We have heard both the sides and perused the material placed
before us. We find that the learned CIT(A) has allowed the relief to the
assessee following the decision of Hon'ble Jurisdictional High Court in
the case of CIT Vs. Jaypee DSC Ventures Ltd. (2011) 335 ITR 132
(Delhi), wherein it was held as under:-
"As is noticeable from the stipulations in the agreement,
the performance guarantee by way of bank guarantee was
required for faithful performance of its obligations. The
non-submission of the guarantee would have entailed in
termination of the agreement and NHAI would have been
at liberty to appropriate bid security. That apart, the
release of such performance security depended upon
certain conditions. Thus, it is clearly evincible that the
bank guarantee was furnished as a condition precedent to
entering the contract and further it was to be kept alive to
fulfill the obligations. Quite apart from the above, the
release of the same was dependent on the satisfaction of
certain conditions. Thus, the present case is not one
where the assessee had made the deposit of surplus
money lying idle with it in order to earn interest; on the
contrary, the amount of interest was earned from fixed
deposit which was kept in the bank for furnishing the bank
guarantee. It had an inextricable nexus with securing the
contract. The view expressed by the Tribunal cannot be
found fault with. The Tribunal was therefore justified in
holding that the interest earned by the assessee on the
FDRs has intrinsic and inseggregable nexus with the work
undertaken and, therefore, the interest earned by the
assessee is capital in nature and shall go towards
adjustment against the project expenditure and the same
cannot be assessed as income from other sources."
4. After considering the arguments of both the sides and the facts
of the case, we are of the opinion that the above decision of Hon'ble
Jurisdictional High Court is squarely applicable to the facts of the
assessee's case which is evident from the assessee's letter dated 1st
3 ITA-3717/D/2012 &
C.O.333/D/2012
November, 2011 written to the Assessing Officer and reproduced in the
assessment order. For ready reference, the same is reproduced
below:-
"As the main activity of the company is to provide IPTV
service all over India for which company has been awarded
license by BSNL Govt. of India. For getting the license the
company has to give a bank guarantee to BSNL Govt. of
India for issuing the bank guarantees the require margin
money in the form of FDR only. According the company
has to make a FDR of Rs.19.31 crore and the same has
been pledged with the bank as margin money for issuing
the bank guarantee. The company has earned interest of
Rs.16501064/- on FDR pledged with bank as margin money
for issuing bank guarantee. The same has been shown
under miscellaneous income in the schedule 4 of the
accounts and being set off with the preoperative expenses.
The project is not commenced during the current financial
year. Hence no profit & loss account is prepared rather a
statement of preoperative expenses (pending allocation) is
prepared as per schedule 4 of the annual accounts for all
the expenses and interest earned on FRD has been set off
with the expenses.
This is, therefore, not a case where any surplus share
capital money which was lying idle had been deposited in
the bank for the purpose of earning interest. The deposit
of money in present case was directly linked with the
business activity of the company. The same is intricately
connected with the business activity of the company.
Hence any income earned on such deposit was incidental
to the business operation activity. The interest was a
capital receipt, which would got reduce the cost of asset.
Hence interest earned should not form part of profit & loss
account and accordingly can not be taxed as income."
5. Since the facts in the case of the assessee are identical to the
facts before the Hon'ble Jurisdictional High Court in the case of Jaypee
DSC Ventures Ltd. (supra), in our opinion, learned CIT(A), rightly
relying upon the above decision, deleted the addition. We, therefore,
4 ITA-3717/D/2012 &
C.O.333/D/2012
uphold the order of learned CIT(A) and dismiss the appeal filed by the
Revenue.
6. In the cross-objection, the assessee has raised the following
grounds:-
"1(i) On the facts and circumstances of the case, the
assessment is bad in the eye of law and on facts and
unsustainable in view of the fact that the assessee having
set up the business is entitled to claim all the expenditure
of Rs.11,25,88,953/- during the year while computing the
income for the year under consideration.
(ii) On the facts and circumstances of the case, the
assessee having incurred an expenditure of
Rs.11,25,88,953/- in the course of its business is entitled to
deduction of the same while computing its income."
7. However, at the time of hearing before us, it was stated by the
learned counsel for the assessee that if the Revenue's appeal would be
dismissed on merits, the assessee shall not press the cross-objection.
8. Since we have already dismissed the Revenue's appeal, we treat
the cross-objection filed by the assessee as not pressed and,
accordingly, the same is dismissed.
9. In the result, the appeal of the Revenue as well as the cross-
objection of the assessee are dismissed.
Decision pronounced in the open Court on 15th February, 2013.
Sd/- Sd/-
I.C.SUDHIR)
(I.C.SUDHIR) (G.D.AGRAWAL)
JUDICIAL MEMBER VICE PRESIDENT
Dated : 15.02.2013
VK.
5 ITA-3717/D/2012 &
C.O.333/D/2012
Copy forwarded to: -
1. Revenue Ward-9(1), New Delhi.
: Income Tax Officer, Ward-
2. Assessee : M/s Smart Digivision Pvt.Ltd.,
GK-II,
8, Commercial Complex, Masjid Moth, GK-
New Delhi 110 048.
3. CIT
4. CIT(A)
5. DR, ITAT
Assistant Registrar
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