IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "B" : HYDERABAD
BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER
AND
SHRI SAKTIJIT DEY, JUDICAL MEMBER
ITA.No.1648, 1649 & 1650/Hyd/2012
Assessment Years 2008-09, 2009-10 & 2010-11
M/s. Bhavya Cements vs. DCIT, CC-5
Ltd., Hyderabad. Hyderabad
PAN AADCB-1182-A
(Appellant) (Respondent)
For Assessee : Mr. A. Srinivas
For Revenue : Mr. D. Sudhakar Rao
Date of Hearing : 25.08.2014
Date of Pronouncement 03.09.2014
ORDER
PER B. RAMAKOTAIAH, A.M.
These three appeals are by assessee against the order
of the Ld. CIT(A) common order for A.Ys. 2008-09, 2009-10 dated
18.07.2012 and another order for A.Y. 2010-11 of the same day.
Since common issues are involved, these three appeals are heard
together and decided by this common order.
2. At the outset, the appeals are filed with delay of 2
days and assessee has furnished valid reasons for filing the
appeal. It was explained that Managing Director was away
travelling and could not reach Hyderabad on the due date.
Therefore, the appeal was filed with a delay of 2 days. Considering
2
ITA.No.1648, 1649 & 1650/Hyd/2012
M/s. Bhavya Cements Ltd., Hyderabad
the affidavit and submissions, we condone the delay and admit the
appeals.
2.1. All three appeals are on common issue of bringing to
tax the interest earned during the pre-operative period of the
assessee company. Assessee company was incorporated on
16.04.2007 with a intention of manufacturing of cement. It pertain
to the group of Sri Venigalla Ananda Prasad and Bhavya
constructions and search and seizure operations were carried on
07.10.2009. For the years under reference, returns were filed
declaring NIL income. A.O. noticed that assessee has earned
interest in respective years as under :
A.Y. Interest earned (Rs.)
2008-09 5,14,834
2009-10 15,45,397
2010-11 71,94,260
2.2. Assessing Officer was of the opinion that the
interest earned has to be treated as income from other sources
and cannot be set off to pre-operative expenditure as was done by
the assessee in the books of accounts. Therefore, he brought the
amounts to tax in the respective assessment years.
3. Before the Ld. CIT(A) it was submitted that assessee
had parked its business funds temporarily in the form of short
term deposits with the banks and the sources for the amounts are
share application money as well as term loans obtained. Assessee
submitted that there are no surplus funds and interest earned has
to be adjusted in the pre-operative expenditure. Without prejudice
to the contention, assessee also gave bifurcation that amounts of
3
ITA.No.1648, 1649 & 1650/Hyd/2012
M/s. Bhavya Cements Ltd., Hyderabad
interest earned in A.Y. 2008-09 was entirely from the share
application money whereas in A.Y. 2009-10 an amount of
Rs.2,65,798 was earned on share application money whereas
balance of Rs.12,79,599 and the entire interest in A.Y. 2010-11
was earned on term loan obtained which are parked with the same
bank pending purchase of machinery etc., Assessee relied on the
decision of the Hon'ble Supreme Court in the case of CIT vs.
Bokaro Steels Ltd., 236 ITR 315 and also various other decisions
as listed in Ld. CIT(A) order in para 5.2 in page 4.
3.1. Ld. CIT(A) without examining the facts of the case,
however, analysed the position of law and confirmed the amounts
in his detailed order running from paras 5.4 to 5.10. We do not
intend to extract the detailed analysis of the case law on the issue
by the Ld. CIT(A).
4. Ld. Counsel submitted that the interest was earned
out of the business funds which cannot be treated as surplus and
therefore, the amounts are rightly adjusted to the pre-operative
expenditure.
5. Ld. D.R. however relied on the orders of the A.O. and
Ld. CIT(A) on the issue.
6. After perusing the annual returns placed on record
and submissions before the Ld. CIT(A), we are of the opinion that
both the A.O. and Ld. CIT(A) considered the issue only on the
principles of law without examining the facts of the case. Assessee
in fact, before the Ld. CIT(A) gave a table indicating the interest
earned in share application money and interest earned on term
loans which are temporarily parked. The Ld. CIT(A) did not
examine the facts at all. We are of the opinion that the decision as
4
ITA.No.1648, 1649 & 1650/Hyd/2012
M/s. Bhavya Cements Ltd., Hyderabad
to tax the amount as income from other sources or to be allowed
as adjustment in pre-operative expenditure cannot be decided on
legal principles alone, without examining the facts of interest
earning by the assessee company. A.O. could have examined the
details of TDS certificates to verify whether the deposits are for
short period or the deposits for a longer period during the years
2008-09 to 2009-2010. A.O. also could have examined the source
of funds whether there are share application money or term loans
directly obtained by the company for purchase of
machinery/assets or for working capital. A.O. also required to
examine whether there are any margin money deposits or any
other compulsory deposits required while conducting business
activity. A.O. can as well obtain the relevant ledger copies of the
interest earned/fixed deposits made so as to analyse whether
assessee had surplus funds or only business funds temporarily
parked in deposits. Unless these facts are examined, it is not
possible to decide the issue only on legal principles. In view of this,
we are of the opinion that the issue requires detailed examination
first to analyse the facts of earning the interest and then to decide
in view of judgments of Hon'ble Supreme Court in the case of
Bokaro Steels Ltd. 236 ITR 315 (SC) wherein the amounts are to
be adjusted in the pre-operative expenditure or on the basis of
decision of the Hon'ble Supreme Court in the case of Tuticorin
Alkali Chemicals & Fertilizers Ltd., vs. CIT 227 ITR 122 wherein
the interests are considered as income from other sources. A.O. is
also directed to keep in mind the decision of Hon'ble Supreme
Court in the case of Karnal Cooperative Sugar Mills 243 ITR 2 and
also the decision of Hon'ble Delhi High Court in the case of Indian
Oil Panipat Power Consortium vs ITO 315 ITR 255 in analyzing the
facts and deciding according to the principles of law on the issue.
For this purpose, we set aside the order of the Ld. CIT(A) and A.O.
5
ITA.No.1648, 1649 & 1650/Hyd/2012
M/s. Bhavya Cements Ltd., Hyderabad
and restore the issue to the file of A.O. for fresh consideration
according to the facts and law.
7. In the result, appeals of the assessee are allowed for
statistical purposes.
Order pronounced in the open Court on 03.09.2014.
Sd/- Sd/-
(SAKTIJIT DEY) (B.RAMAKOTAIAH)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, Dated 03rd September, 2014
VBP/-
Copy to
1. M/s. Bhavya Cements Ltd., Plot No.A-1, 2nd Floor,
Bhavya Spoorthi, Road No.1, Jubilee Hills, Hyderabad.
2. DCIT, Central Circle-5, Aayakar Bhavan, Basheerbagh,
Hyderabad.
3. CIT(A)-VII, Hyderabad
4. CIT-(Central), Hyderabad
5. D.R. "B" Bench, ITAT, Hyderabad.
|
