TaxTMI 
TaxTMI 
2022 (7) TMI 254
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.... filing the appeal, we shall set out the facts and circumstances. 3. The assessee is a wholly owned company of Government of Karnataka. It was established with the approval of the Government of India, for the implementation of rail based mass rapid transit system which was called as "Bangalore Metro Rail Project" in five years in five stages. The Government of India contributed in the form of equity and sub-ordinate debt to the extent of 25% of the project cost. The design and technology for the project was as per the assessee's project report which was also approved by the Government of Karnataka. It was the Government of India that assigned the working of the assessee to work as a 'special purpose vehicle' for the implementation of the project. Further, as per the directions of the Government of India, the Board of the assessee was to be reconstituted with ten Directors with each promoter nominating five Directors. The Chairman was to be The Secretary, Ministry of Urban Development, Government of India. Appointment of the Managing Director was at the option of the Govt. of Karnataka, with the prior consent of the Govt. of India. The entire operation of the assessee....
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.... & Finance Corporation (herein after referred to as KUIDFC) 155 Taxman 228 (Kar). 8. The submissions made by the assessee were however not accepted by the AO. The AO was of the view that the decision of the Hon'ble Karnataka High Court relied upon by the Assessee in the case of KUIDFC was distinguished by the AO by pointing out that KUIDFC after implementation of urban infrastructure would not commercially exploit the infrastructure developed whereas the Assessee would after creation of BMRCL would commercially exploit the facility by charging for travel from the commuters. The AO also observed that in the case of KUIDFC there was no profit motive. According to the AO though the ultimate goal of the Assessee is to develop infrastructure, the said infrastructure facility will be ultimately used for commercial purpose. According to the AO after completing the project passenger will necessarily have to purchase the ticket and commute. The revenue so earned will result in profit. So a comparison cannot be drawn between a company which would utilize the fund for welfare schemes and the company which would be using the fund for commercial purposes. The AO also observed that from the f....
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....ts involved in the assessment for the assessment year 2007-08. I am in agreement with the views expressed therein by my predecessor for dismissing the appeal- When the appellant had offered similar income for tax for the assessment years prior to the assessment year 2007-08, there was no reason for the appellant to take a different stand with respect to the assessability of the income to tax. For the same reasons, I confirm the assessment under appeal and confirm the AO's action in bringing to tax the sum of Rs.29,85,34,673/-." 10. Aggrieved by the order of the CIT(A), the assessee has filed appeal before the Tribunal. 11. As far as the application for condoning delay in filing this appeal is concerned, it has been submitted in an affidavit in support of the application for condonation of delay that the assessee was subjected to wrong professional advice on the matter that no relief may be expected in the appellate forum and therefore no appeal may be preferred, and the disputed taxes may be remitted. The assessee followed the professional advice. The order of the CIT(A) for the preceding A.Ys.2007-08 & 2008-09 were challenged before this Hon'ble Tribunal. The Hon'ble 'A'....
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....t the Government and its officers function, the Courts have been taking lenient view in condoning the delay in the appeals filed by them. In the instant case, it is not disputed after the order came to be passed, the Managing Director was changed and thereafter, the Chartered Accountant took a decision to prefer the appeal and though papers were sent for signature was not signed and appeal was not filed. What is to be seen in such matters is that, the appellant was negligent and by not filing the appeal within time, whether there is any valuable right of the appellant, which would be taken away by not condoning the delay in the matters arising under the Income-tax Act, ultimately the question is, what is the tax payable under law. It is not an adversary litigation. An assessee cannot be charged without statutory authority. [emphasis supplied] 14. Reliance was also placed on the following decisions wherein it has been held that for the purpose of condoning the delay in filing of appeal, the appellate authority/court have to take a lenient view and dispose-off the matter based on the merits of the matter and not on the basis of technicalities. (i) Collector, Land Acqui....
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....tter dated 15.04.2013, 13.05.2013 and 04.06.2013 regarding the pendency of request for exemption. He further pointed out that as against the order dated 31.10.2014 of the Tribunal for Assessment Year 2007-08 and 2008- 09, the Revenue preferred appeal before Hon'ble Karnataka High Court in ITA Nos.117 and 118 of 2015 and the Hon'ble Karnataka High Court by its judgment dated 23.11.2021 affirmed the order of the Tribunal. It was submitted that the pendency of appeals by the Revenue against Tribunal order dated 31.10.2014 was another reason why the assessee was in a dilemma whether to file appeal before Tribunal for Assessment Year 2009- 10 and it was only on subsequent concrete advise of the Counsel that a firm decision was taken to file appeal for Assessment Year 2009-10 before the Tribunal. 17. We have carefully considered the rival submission. At the outset, we observe that the Hon'ble Supreme Court, in the case of Mst. Katiji (supra), has explained the principles that need to be kept in mind while considering an application for condonation of delay. The Hon'ble Apex Court has emphasized that substantial justice should prevail over technical considerations. The Court has also e....
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.... High Court in its order dated 23.11.2021 in ITA Nos.117 and 118/2015 in assessee's own case for Assessment Years 2007-08 and 2008-09 held that identical interest income is not taxable for the following reasons: "We have carefully considered the rival submissions of the learned counsel appearing for the parties and perused the material on record. In Tuticorin Alkali Chemicals and Fertilizers Ltd., supra, the facts were that M/s. Tuticorin Alkali Chemicals and Fertilizers Ltd., which was incorporated on 03.12.1971 for the purpose of, inter alia, manufacturing heavy chemicals such as ammonium chloride and soda ash, begun its production during June. 1982. The term loans taken from various banks and financial institutions for the purpose of setting up the factories, which was not immediately required by the company, were kept invested in short-term deposits with banks, which was specifically permitted by the Memorandum and Articles of Association of the Company. Interest earned by the company from the various loans given by the company and also from the bank deposit:; which were considered by the departmental authorities as income and brought to tax was the subject matter of t....
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.... have gone through it. Essentially, the Tribunal has also placed reliance on the said judgment and accordingly held in favour of the assessee. We have no doubt in our mind that the said judgment squarely covers the issue involved in this appeal it has been held by the Division Bench of this Court in the aforesaid judgment in the relevant paragraph as under (page 584): "The material on record shows that the very purpose of constitution of the assessee was to act as a nodal agency for implementation of the mega city scheme worked out by the Planning Commission. Both the Central and the State Governments are expected to provide requisite finances for implementation of the said project. The funds from the Central and State Governments will flow directly to the specialised institutions/nodal agencies as grant and the nodal agency will constitute a revolving fund with the help of Central and State shares out of which finance could be provided to various agencies such as water, sewerage boards, municipal corporations, etc. The objective is to create and maintain a fund for the development of infrastructural assets on a continuing basis and, therefore, the assessee is a n....
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.... are of the considered opinion that there is no merit or substance in this appeal. No substantial question of law arises to be answered by this Court. Thus, the appeal is hereby dismissed." 15. In the case of Karnataka State Agricultural Produce Processing and Export Corporation Ltd., supra, the co-ordinate bench of this Court (where one of us the Hon'ble SSJ was a member) following the judgments in the case of KUIDFC [(2006) 284 ITR 582], Tuticorin Alkali Chemicals and Fertilizers Ltd., supra, as well as Bongaigaor Refinery and Petrochemicals Ltd., vs. Commissioner of Income-tax reported in (2001) 251 ITR 329 (SC) and Commissioner of Inconte-tax vs. Jokaro Steel Ltd., reported in (1999) 236, ITR 315 (SC), has held thus:- "in the light of the judgments referred to above, we have examined the case on hand. It is clear that the assessee has received the grant of Rs.10 crores from the Government of Karnataka for a particular project i.e., for improvement of infrastructure and to promote export of horticultural produce. Before the said grant was utilized for the specific purpose it was parked in fixed deposits and the interest was earned and by the subsequent addi....
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....nd to promote export of horticultural produce. Hence, the very purpose of granting Rs.10 crores to the assessee was to act as a nodal agency for implementation of the scheme. There is no profit motive as the entire fund entrusted and the interest accrued therefrom from deposits has to be utilised only for the purpose of the scheme originally granted. The whole of the fund belongs to the State exchequer and the assessee has to channelise them to achieve the objects of centrally sponsored scheme of infrastructural development as specified in the Government Order. Hence, interest on all these fixed deposits are considered to be capitalized and not revenue receipts to treat it as an income. The Tribunal considering these aspects and more particularly, following the judgment of this Court in KUIDC case has held that the interest earned on these grants is not an income, which we do not find fault with." 16. As could be seen from the Government Order dated 25.03.2008 now placed on record, it is ex-facie apparent that the unutilized funds of the project, before the commencement of the functional operation of the project, was invested by the assessee in fixed deposits and ....
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.... the materials available on record. It is an admitted position that the receipt by way of sale of tender documents is pre commencement receipt. There is no strong denial of the above fact. When it is pre commencement receipt the decision of the Hon'ble Supreme Court in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd., cited supra, is directly on the point at issue. The decision of the Hon'ble Supreme Court in the case of Bokaro Steel Ltd., on which the Commissioner (Appeals) relied on, is distinguishable as the decision in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd., has directly dealt with the pre commencement expense and receipts. We are of the view that the order of the Assessing Officer bringing the receipt as income from other sources is perfectly justified and the deletion of the same by the Commissioner (Appeals) is not in accordance with law. We therefore set aside the order of the Commissioner (Appeals) and restore that of the Assessing Officer." 7. In Tuticorin Alkali Chemicals & Fertilizers case (supra), the issue before the Supreme Court was whether interest earned from borrowed capital, lying idle, should be treated as income fro....
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....ch were intrinsically connected with the construction of its steel plant. The receipts had been adjusted against the charges payable to the contractors and had gone to reduce the cost of construction. While considering this issue, the Supreme Court had occasion to take into consideration the judgment of the Delhi High Court in the case of ACIT - Vs - Indian Drugs & Pharmaceuticals (1983 (141) ITR 134 (Del.)) and endorsed the view of the Delhi High Court and, finally it was held that the receipts were capital receipts and not income of the assessee from any independent source. The relevant portion of the decision of the Supreme Court is extracted hereinbelow for better appreciation :- "In the case of Addl. CIT v. Indian Drugs and Pharmaceuticals Ltd. (1983 (141) ITR 134), the Delhi High Court considered a case where the work of construction of the factory of the assessee was in progress and production had not commenced. Receipts from sale of tender forms and supply of water and electricity to the contractors engaged in construction as also receipts on account of sale of stones, boulders, grass and trees were held to be receipts not from independent sources but were consider....