TaxTMI 
TaxTMI 
2024 (10) TMI 644
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....ed before the AO earlier and adjudicating in favour of Assessee on that basis without fulfilling the conditions of Rule 46A of IT Rules, 1962, thereby denying AO the opportunity to examine the same? 2. Whether on the facts and in the circumstances of the case and in law, the decision of Ld.CIT(A) is not perverse in admitting the additional evidence filed by the assessee after a time gap of 7 years (between original assessment proceedings concluded on 15.10.2009 and hearing before CIT(A) in impugned order) and allowing relief to the assessee without appreciating that such statement of interest to establish the nexus of borrowed funds and investment in FDRs was never filed by the assessee before any of the authorities who had decided the issue earlier and without examining why the same was not filed before any of these authorities who had decided the issue earlier? 3. The appellant prays that the order of CIT(A) on the above grounds be set aside and that of Assessing Officer be restored" 2.1. Grounds taken by the assessee are reproduced as under: A. Grounds of Appeal vide Form 36 dt. 01-02-2019 1) That appeal effect order passed by the AO/CIT (A) is illegal, bad in law, witho....
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....s" to the extent of additional interest income of Rs. 10,56,49,189/-made by the id. Assessing Officer under the heat Income From Other Sources' which was reduced by the assessee from Capital Work in Progress in its Balance Sheet General 3) The above grounds of appeal are without prejudice to one another and the original grounds a appeal and the appellant craves leave to add, alter, amend, delete or modify any of the above grounds of appeal. C. Revised Ground of Appeal vide letter dt. 26-12-2023 in respect of Ground No.04 in Form 36 1) a) The Id. CIT(A) erred in facts and in law in restricting the deduction of interest expenditure u/s. 57(iii) of the Act to Rs. 1,72,15,048/- from the interest income on Fixed deposit as against the interest expense of Rs. 8,87,83,570-claimed by the assessee b) The Id. CIT(A) and ld. Assessing Officer failed to appreciate that one to one nexus per se is not relevant for allowing the deduction of interest expense u/s. 57(iii) of the Act. c) Without prejudice, the Id. CIT(A) failed to appreciate that the Liabilities side of the Balance Sheet of the appellant reflects both interest bearing funds and interest free funds which indicates that m....
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....sessing Officer and directed the ld. Assessing Officer to decide afresh the quantum of interest expenditure to be allowed against interest income. It is worthwhile to reproduce the directions of the Coordinate Bench given while setting aside the matter as aforesaid: "10.1 Para no.5 of Hon'ble ITAT order dated December 16, 2015 Both Id. AR add DR fairly conceded that in view of the above decision of Tribunal, matter is required to be set aside to the file of AO for deciding afresh the quantum of interest expenditure to be allowed against interest income" 10.2 Para no. 6 of Hon'ble ITAT order dated December 16, 2015: ............Respectfully following the order of the Tribunal in assessee's own case, we set aside the matter back to the file of AO for deciding afresh the quantum of interest expenses to be allowed against interest expenses, in terms of direction given by the Tribunal. Copy of Hon'ble ITAT order "B" Bench, Mumbai dated December 16, 2015 is attached herewith. (Pg. No. 1 to 4 of P.B.)" 4. In view of the above, being a set aside matter, scope before us in the present appeals is limited to the direction so given, whereby we have to ascertain whether t....
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....s". Aggrieved, assessee went in appeal before the ld. CIT(A). 4.3. Ld. CIT(A) partly allowed the appeal of the assessee and directed the ld. Assessing Officer to ascertain those expenses which are directly related to earning of this income from other sources and the same should be allowed as expense for earning such income u/s 57 of Act. Ld. Assessing Officer, passed an order on 03.02.2012, giving effect to directions of ld. CIT(A), in respect of allowing expenditure u/s 57 of the Act, related to earning of income from other sources, but did not allow the aforesaid expenses. Aggrieved, assessee once again went in appeal before the ld. CIT(A) who vide order dated 21.12.2012, allowed only 10% of expenditure which is debited to Profit and Loss account as expenditure u/s 57 against income from other sources. Aggrieved, assessee went in appeal before the Tribunal. Co-ordinate Bench of ITAT heard the case on 16.12.2015 and the matter was set aside to the file of ld. Assessing Officer for deciding afresh the quantum of interest expenses to be allowed against interest income. However, while giving effect to the directions of ITAT, ld. Assessing officer denied assessee's claim of deduction....
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....the assessee. 5.3. In the present case, only a fresh appraisal of the facts in the context of the legal issue raised by the assessee is required to be undertaken and no new facts are to be investigated. The bonafide of the additional ground so raised by the assessee are not contested and therefore, in the given set of facts and circumstances, the additional ground so raised is admitted for adjudication. While doing so, the ratio of the judgment of Hon'ble Supreme Court in the case of National Thermal Power Company Ltd. (supra) fortifies the admission of the said ground for adjudication. Since this additional ground goes to the root of the matter, we are inclined to take it up first before dealing with all other grounds taken by the assessee as well as by the Revenue, in their respective appeals. 6. To deal with this additional ground, we appraise ourselves with Article 289 of the Constitution of India which is reproduced as under: "(1) The property and income of a State shall be exempt from Union taxation. (2) Nothing in clause (1) shall prevent the Union from imposing, or authorizing the imposition of, any tax to such extent, if any, as Parliament may by law provide in r....
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....al of the corporation is held by the Government, It would go a long way towards indicating that the corporation is an instrumentality or agency of the Government. 2. Existence of deep and pervasive State control may afford an indication that the corporation is a State agency or instrumentality. 3. Whether the Corporation enjoys monopoly status which is State conferred or State protected. 4. If the functions of the corporation are of public importance and closely related to governmental functions. It would be a relevant factor in classifying the corporation as an instrumentality or agency of the Government 5. If a department of a Government is transferred to a corporation, it would be a strong factor supporting this inference of the corporation being an instrumentality or agency of the Government." 7.2. After applying the cumulative effect of all the relevant factors mentioned above, if the body is found to be an instrumentality of the agency of the Government, it would be an authority included in term "State" under Article 12 of the Constitution of India. However, the tests indicated by the Hon'ble Apex Court in the case of Som Prakash Rekhi are merely indicative and n....
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....p of the assessee, we note that identical additional ground was raised by the assessee before the Co-ordinate Bench of ITAT in its appeal for Assessment Year 2012-13 and 2015-16 in ITA No. 3682/Mum/2017 and ITA No.522/Mum/2019, respectively, which was admitted and adjudicated upon to hold that assessee is an arm of the State, thus an instrumentality of the State. The relevant observations and findings of the Co-ordinate Bench in this respect are reproduced below for ready reference. 22. In order to decide the issue in controversy we would decide if the assessee company is a state while executing the work of development of airports, repair and maintenance of airports as an arm of the state, 23. Undisputedly the assessee company was incorporated as a company under the Companies Act, 1956 by the Government of Maharashtra as a special purpose company to develop multi model international hub airport at Nagpur and aviation infrastructure in the State of Maharashtra in order to provide regional air connectivity and operationalising certain government schemes. It is also not in dispute that the assessee company was formed with equity participation from various government companies name....
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....ve the special planning authorities and upon dissolution its properties, the liabilities, undischarged functions shall get transferred to the state government. vii) that as per sub-section 3A of section 113 of MRTP Act any corporation/company or subsidiary company which is into the work of developing and disposing of land in the area of a new town is an agent of the state government. Sub section 3A of section 113 of the Act reads as under: "(3A) Having regard to the complexity and magnitude of the work involved in developing any area as a site for the new town, the time required for setting up new machinery for undertaking and completing such work of development, and the comparative speed with which such work can be undertaken and completed in the public interest, if the work is done through the agency. of a corporation including a company owned or controlled by the State or a subsidiary company thereof, set up with the object of developing an area as a new town, the State Government may, notwithstanding anything contained in sub-section (2) require the work of developing and disposing of land in the area of a new town to be done by any such-corporation, company or subsidiary c....
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....overnment and after development and completion of the project the entire property vests in the state government. The entire control over the assessee company is of state government being exercised through the officer of the state government. In these circumstances the assessee company is an agent of the state not assessable to tax. As such grant-in-aid received by the assessee company from the Government of Maharashtra for land acquisition, development of airports, repair and maintenance of airports etc. is not a capital receipt as has been held by the Ld. CIT(A) rather the assessee company has performed these functions as an agent of the state and as such not assessable to income tax xii) that the assessee company has been formulated with a specific purpose i.e. to acquire the land for development of airports, repair and maintenance of airports etc, for which it receives grant-in-aid from the state of Maharashtra which is not taxable under Income Tax Act. xiii) that it is however brought on record and candidly admitted by the Ld. A.R. for the assessee that other income derived by the assessee company from its project is not claimed as exempt. xiv) that the contention of the ....