The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) ruled that the interest income made on FDs held as security for performance guarantees would be subjected to be taxed as income from business and could set off against the expansion of the project.
The single bench of Saktijit Dey (Judicial Member) rendered the Assessing Officer to refund the TDS amount to the taxpayer.
The taxpayer would be the resident corporate entities and are owned subsidiaries of National Commodities Management Services Ltd. (NCML). The taxpayer would be gone in the concession agreement with the Food Corporation of India (FCI) for the purpose of construction, operation, and maintenance of the Silo Complex for the food grain storage on the FCIs behalf at Varanasi and Bhattu beneath the design, build, finance, own, and operating model for a 30 years duration.
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Towards the concession agreements, the taxpayer needs to build the Silo complex in the mentioned duration from the signing date of the concession agreements.
The taxpayers have furnished their income return showing NIL income and claim for the refund of the tax deducted at sources (TDS). During income return processing, the centralized processing centre (CPC) in Banglore would deny the claim of the taxpayer for the refund quoting a mismatch between the income return and Form 26AS.
The taxpayer has furnished the appeal for the intimation provided under Section 143(1) rejecting the claim for a refund.
The taxpayer opposes that beneath the terms of the concession agreement with FCI, the taxpayer should furnish a bank guarantee along with that to take the bank guarantee the taxpayer should maintain the amount in FDs that earn the interest.
The taxpayer has furnished that the interest income made on FDs would be linked to the business activity that has been done towards the construction and maintenance of the Silo complex, the income of the interest would be managed against the construction cost along with the balance amount that would show as a capital work in progress inside the audited financial statement. As the interest income would get arise in the assessment year beneath the issue, the taxpayer would be qualified for the claim of the refund of the TDS amount. The taxpayer would be laid on the rule 37BA of the income tax rules 1962.
The commissioner (appeals) does not see the advantage in the submissions of the taxpayer. He sees that as the interest income would be provided to the tax as a revenue receipt instead has managed the construction, the interest income concern to Tax Deducted at Source amount does not entitle to be the income. Hence he ruled that the TDS can not be refunded to the taxpayers.
ITAT permitting the appeal provided that the mere cause of the council has denial of providing the refund of the TDS amount would be that the interest income would get managed against the expenses of construction.
| Case Title | NCML Varanasi Private Limited Versus ITO |
| Citation | ITA No. 347/Del/2022 |
| Date | 14.11.2022 |
| Appellant | CA Nitish Ranjan |
| Revenue | Sr. DR Om Prakash |
| Delhi ITAT | Read Order |
