Case Law Details
Coastal Ceramics and Clay Works Private Ltd Vs Union of India (Andhra Pradesh High Court)
Introduction: The case of Coastal Ceramics and Clay Works Pvt Ltd vs Union of India, adjudicated by the Andhra Pradesh High Court, revolves around the taxation implications of a Rs.50.00 lakhs refundable security deposit received by Coastal Ceramics from M/s. Royal Mindz Infra Ltd. under a Development Agreement. The central argument is whether this interest-free deposit is subject to income tax under the head “Income from other sources” for the Assessment Year 2019-20.
Detailed Analysis: The petitioner contends that the Rs.50.00 lakhs deposit is solely an interest-free refundable security amount received for the due completion of a commercial complex project in Rajahmundry. In contrast, the Standing Counsel for Income Tax argues that the amount, received and retained by the Managing Director, is to be treated as revenue receipt and subjected to taxation for AY 2019-20. The dispute arises from the fact that the petitioner did not disclose the deposit in their books of accounts as a liability.
Upon examining the Development Agreement-cum-GPA No.7592/2011, the court finds that the amount in question is explicitly mentioned as an interest-free refundable security deposit. The document outlines that this deposit is repayable to the builder within two months after the completion of the commercial units. The court observes that the Department does not challenge the genuineness of the Development Agreement.
The judgment concludes that, considering the terms of the agreement and the nature of the amount, it is inappropriate for the Department to treat the Rs.50.00 lakhs as revenue receipt for AY 2019-20. The petitioner is directed to account for the amount as an interest-free security deposit in their books until refunded to M/s. Royal Mindz Infra Ltd. The Department is instructed to cease tax proceedings against the petitioner regarding this amount.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
Author Bio
many muncipal corporation , tax , property ,taking into acount of intrest on refundable deposit . is it right .