By Sri. K v. Aravind, Advocate

1 IN THB HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 6 DAY OF AUGUST 2012 PRESENT: THE HON’BLE MR.JUSTICE K.SREBDHAR RAO AND THR HON’BLBE MR.JUSTICBK B.MANOQHA INCOME TAX APPEAL No. 1188/2006 (1IT) C/W INCOME TAX APPEAL No. 1193/2006 (1IT)( INCOME TAX APPEAL No. 1076/2006 (1IT) IN I.T.A.NO.1188/2006 BBRITWRE 1.THR COMMISSIONER OF INCOME-TAXCRHNTRAL CIRCLEC.R.BUILDING, QUEENS ROADBANGALORE,CRHNTRAL CIRCLEC.R.BUILDING, QUEENS ROADBANGALORE, ?.THR ASST COMMISSIONBR OF INCOMBE-TAXCIRCLE-12(2), C.R.BUILDINGQUEENS ROADBANGALORE_.. APPBLLANTSCIRCLE-12(2), C.R.BUILDINGQUEENS ROADBANGALORE_.. APPBLLANTS (BY SMT. C. SHYAMALA, ADVOCATE) 2 AND: M/S STI PRODUCTS INDIA LTD.NO.44-45, 2 FLOOR, VINAYAKA COMPLEX|REBESIDBNCY ROA BANGALORE _ RESPONDENT. (BY SRI. NAGANAND, SR. COUNSEL FOR JUST LAW) THIS I.T.A. IS FILED UNDER SKBCTION 260-A OFLT.ACT, 1961 ARISING OUT OF ORDER DATED 26-04-2006 PASSED IN ITA NO.144/BANG/2004 FOR THE|ASSESSMENT YEAR 2002-2003, PRAYING THAT THIS|HON'BLE COURT MAY BB PLBASBKD TO: I FORMULATE THE SUBSTANTIAL QUESTIONS|OF LAW STATED THEREIN, Il. ALLOW THR APPBAL AND SBHT ASIDE THEORDERSORTHEITAT,BANGALORE,INITA.NO.144/BANG/2004 DTD: 26-04-2006 CONFIRMING|THR ORDER OF THR APPELLATE COMMISSIONBR ANDCONFIRM THR ORDER PASSED BY THE ASSISTANT|COMMISSIONBRORINCOMETAX,CIRCLE-12(2),BANGALORE, IN THE INTEREST OF JUSTICE AND|EQUITY. | IN 1.T.A.NO.1193/2006 BBRITWRE 1.THR COMMISSIONER OF INCOME-TAXCRHNTRAL CIRCLEC.R.BUILDING QUEENS ROADBANGALORE, 2.THERE ASST COMMISSIONER OF INCOME-TACIRCLE-12(2)C.R.BUILDING|QUEENS ROADBANGALORE | _.. APPBLLANTS (BY SMT. C. SHYAMALA, ADVOCATE) ANT) M/S STI PRODUCTS INDIA LTD.NO.44-45, 2 FLOOR, VINAYAKA COMPLEX|REBESIDBNCY ROABANGALORE ... RESPONDENT. (BY SRI. NAGANAND, SR. COUNSEL FOR JUST LAW). THIS I.T.A. IS FILED UNDER SKBCTION 260-A OFLT.ACT, 1961 ARISING OUT OF ORDER DATED 26-04-2006 PASSED IN ITA NO.143/BANG/2004 FOR THE|ASSESSMENT YEAR 2001-2002, PRAYING THAT THIS|HON'BLE COURT MAY BB PLBASBKD TO: I FORMULATE THE SUBSTANTIAL QUESTIONS|OF LAW STATED THEREIN, Il. ALLOW THR APPBAL AND SBHT ASIDE THEORDERSOFTHEITAT,BANGALORE,INITA.NO.143/BANG/2004 DTD: 26-04-2006 CONFIRMING|THR ORDER OF THR APPELLATE COMMISSIONBR ANDCONFIRM THR ORDER PASSED BY THE ASSISTANT|COMMISSIONBRORINCOMETAX,CIRCLE-12(2),BANGALORE, IN THE INTEREST OF JUSTICE AND|EQUITY. IN I.T.A.NO.1076/2008 BBRITWRE 1.THR COMMISSIONER OF INCOME-TAX C.R.BUILDING QUEENS ROADBANGALORE,QUEENS ROADBANGALORE, 2.THR ASST COMMISSIONBR OF INCOMBE-TAX CIRCLE-12(95)C.R.BUILDING QUEENS ROADBANGALORE ... APPELLANTS (BY SRI. K. V. ARAVIND, ADVOCATE) AND: M/S STI PRODUCTS INDIA LTD.NO.44-45, 2 FLOOR, VINAYAKA COMPLEX|RBSIDBNCY ROAD CROSS.BANGALORE-560 046 | ... RESPONDENT (BY SRI. NAGANAND, SR. COUNSEL FOR JUST LAW) THIS I.T.A. IS FILED UNDER SECTION 2J60-A OFLT.ACT, 1961 ARISING OUT OF ORDER DATED 11-07-2008 PASSED IN ITA NO.1175/BANG/2007 FOR THE|ASSESSMENT YEAR 2003-2004, PRAYING THAT THIS|HON'BLE COURT MAY BB PLBASBKD TO: I FORMULATE THE SUBSTANTIAL QUESTIONS|OF LAW STATED THEREIN, Il ALLOW THR APPBAL AND SBT ASIDE THE|ORDERSOFTHEITAT,BANGALORE,INITA.NO.1175/BANG/2007 DTD: 11-07-2008 CONFIRMING|THR ORDER OF THR APPELLATE COMMISSIONER ANDCONFIRM THR ORDER PASSED BY THR ASSISTANT|COMMISSIONBRORINCOMETAX,CIRCLE-12(5),BANGALORE, IN THE INTEREST OF JUSTICE AND|EQUITY. THESE APPEALS COMING ON FOR HEARING, ON|THIS DAY, SREEDHAR RAO, J., DELIVERED THEHOLLOWING:” JUDGMENT Sri. Sriranga, advocate undertakes to file Vakalathfor the respondent in ITA No. 1193/2006. 2 |TheMadhya|PradeshStateIndustrialDevelopment Corporation (MPSIDC) had kept certain|deposits with the respondent — assessee. The assessee’scontention before the assessing officer was that the|deposit was in the nature of Inter corporate deposit. Theassessing officer rejected the contention and held the|said deposit was a loan. The interest payable on the saiddeposit/loan was not paid in time. Therefore, the| THESE APPEALS COMING ON FOR HEARING, ON|THIS DAY, SREEDHAR RAO, J., DELIVERED THEHOLLOWING:” JUDGMENT Sri. Sriranga, advocate undertakes to file Vakalathfor the respondent in ITA No. 1193/2006. 2 |TheMadhya|PradeshStateIndustrialDevelopment Corporation (MPSIDC) had kept certain|deposits with the respondent — assessee. The assessee’scontention before the assessing officer was that the|deposit was in the nature of Inter corporate deposit. Theassessing officer rejected the contention and held the|said deposit was a loan. The interest payable on the saiddeposit/loan was not paid in time. Therefore, the| deduction was not allowed in view of Section 43B(d). ©The CIT(A) called for a remand report from the assessingofficer to consider “whether the deposited amount in|question was Inter corporate deposit or a loan2?” Theassessingotticerafterconsideringthematerialssubmitted a report to the CIT(A), who, in view of thereport of the assessment officer held that the amount inquestion was Inter corporate deposit. The appellatetribunal confirmed the order of the CIT. The revenueaggrieved by the said order has filed these appeals. Thefollowing questions of law are framed while admitting theappeals. “1. Whether the Appellate Authorities wereright in holding that the assessee has received thedeposits from the MPSIDC in the form of Inter|Corporate Deposit and there was no loan orborrowing and the provisions of Sec. 43B of the IT|Act are not applicable. Admittedly when the|assessee had classified the amounts received from|MPSIDC under loans and advances. 2. Whether the Appellate Authorities failed totake into consideration that the interest on the'amounts borrowed are not paid within the due date|for filing the return of income and hence, the|assessee was entitled to deduction of amount ofinterest under the provisions of Sec. 43B of the Act.” 3.|It is the contention of the appellants that theamount in question cannot be considered as_ Intercorporate deposit and it constitutes a loan. Since the|interest 1s not paid in time, as per the agreements of thesaid deduction will not be valid. The question raised in|the appeal is a mixed question of law and fact and|puritans to appreciation of the evidentiary materials|while coming to the conclusion whether the said amountrepresents inter Corporate deposit or a loan. In this|regard the CIT appellate had specifically remanded the|matter to the assessing officer to consider the material|and give a report. The CIT (A) in para 4.4 of its order hasextracted the contents of the report of the assessing| officer submitted pursuant to the remand which is in thefollowing words: “ This its an acceptable fact, as per materials madeavailable before the CIT(A). The materials and|documents which existed and now made quvailable tothe Department, VIZ., the demand promissory note.and the deed of corporate guarantee/indemunity(Annexure C) show that funds were placed at thehands of the assessee by MPSIDC by way of Inter|Corporate Deposits (ICDs). The copies of statementof accounts as appearing in the books of MPSIDC|also show that the interests are payable on maturity|and at certain stages, the interests are compounded|and added to the principal sum.” The assessee has furnished copies of the saidMPSIDC’s accounts wherein the transaction i1sshown as ICD, and the same has also been shown|as ICD in the Balance Sheet, under Schedule-6-Current Assets-Item “‘C’ being Balances with NonFinancialInstitutions/ CosLS|‘InterCorporateDeposit with Cos.” The assessee’s contention ts that|the loans and advances given by the said MPSIDC is_Shown under a different shcedule-7 as ‘loans and| advances’. The assessee also relies upon the|Schedule 10 wherein the interest on ICDs aqreseparately shown. All these are contended to say|that the nature of transaction is ‘deposits’ (beingICDs) and not loan or borrowing. Considering the above materials now furnished, itwould appear that the assessee’s objections havesome substance, which may kindly be considered on|merits. ” The assessee has furnished copies of the saidMPSIDC’s accounts wherein the transaction i1sshown as ICD, and the same has also been shown|as ICD in the Balance Sheet, under Schedule-6-Current Assets-Item “‘C’ being Balances with NonFinancialInstitutions/ CosLS|‘InterCorporateDeposit with Cos.” The assessee’s contention ts that|the loans and advances given by the said MPSIDC is_Shown under a different shcedule-7 as ‘loans and| advances’. The assessee also relies upon the|Schedule 10 wherein the interest on ICDs aqreseparately shown. All these are contended to say|that the nature of transaction is ‘deposits’ (beingICDs) and not loan or borrowing. Considering the above materials now furnished, itwould appear that the assessee’s objections havesome substance, which may kindly be considered on|merits. ” 4Boththeappellateauthorities|haveconcurrently found on the basis of the materials that theamount in question is an Inter corporate deposit and notaloan. In fact, there was an effective consultation of the|assessing officer who after remand has gone into the|factual aspects and the materials and has submitted a|report that the amount in question amounts to Inter|corporate deposit. In that view of the matter there does|not appear to be any perversity in appreciation and|coming to the conclusion by the appellate authorities in question. In that view the question of law answeredagainst the revenue. The appeals are dismissed. ori. Sriranga, advocate is permitted to file memo for|appearance within four weeks. _ BSV od/-|JUDGE|od/- JUDGE