Prem Conductors Pvt.Ltd.,, Ahmedabad v. The ACIT(OSD).,Circle-5,, Ahmedabad

CO 129/AHD/2011 | 2006-2007
Pronouncement Date: 30-04-2015 | Result: Allowed

Appeal Details

RSA Number 12920523 RSA 2011
Assessee PAN AABCP6700A
Bench Ahmedabad
Appeal Number CO 129/AHD/2011
Duration Of Justice 3 year(s) 10 month(s) 21 day(s)
Appellant Prem Conductors Pvt.Ltd.,, Ahmedabad
Respondent The ACIT(OSD).,Circle-5,, Ahmedabad
Appeal Type Cross Objection
Pronouncement Date 30-04-2015
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 30-04-2015
Date Of Final Hearing 16-04-2015
Next Hearing Date 16-04-2015
Assessment Year 2006-2007
Appeal Filed On 09-06-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD (BEFORE SHRI SHAILENDRA KR. YADAV J.M. & SHRI ANIL CHATURVEDI A.M.) I.T. A. NOS. 3374 & 3375/AHD/2010 & 1239/AHD/2011 & C.O. NO. 129/AHD/2011 (ASSESSMENT YEAR: 2004-05 2005-06 & 2006-07) PREM CONDUCTORS PVT. LTD. 211 NEW CLOTH MARKET NEAR RAIPUR GATE AHMEDABAD V/S D.C.I.T. CIRCLE-5 AHMEDABAD (APPELLANT) (RESPONDENT) ITA .NOS. 2728/AHD/2011 (ASSESSMENT YEAR: 2007-08) D.C.I.T. CIRCLE-5 AHMEDABAD V/S PREM CONDUCTORS PVT. LTD. 211 NEW CLOTH MARKET NEAR RAIPUR GATE AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AABCP6700A APPELLANT BY : SHRI S.N. SOPARKAR A.R. RESPONDENT BY : SHRI ROOP CHAND SR. D.R. ( )/ ORDER DATE OF HEARING : 16-04-2015 DATE OF PRONOUNCEMENT : 30-04-2015 ITA NOS. 337 4 3375/A/10 1239 & 2728 /AHD/2011 & C.O. NO. 129/AHD/2011 . A.YS. 2004- 05 TO 2007-08 2 PER ANIL CHATURVEDI A.M. 1. THESE 3 APPEALS AND 1 C.O. FILED BY THE ASSESSEE AN D 1 APPEAL FILED BY THE REVENUE ARE AGAINST THE ORDER OF CIT(A)-XI DATED 1 5.10.2010 28.02.2011& 24.08.2011 FOR A.YS. 2004-05 TO 2007-08 RESPECTIVEL Y. 2. BEFORE US AT THE OUTSET LD. A.R. SUBMITTED THAT MO ST OF THE ISSUES INVOLVED IN THE APPEALS ARE IDENTICAL EXCEPT FOR THE AMOUNTS AN D ASSESSMENT YEARS AND THEREFORE ON THOSE ISSUES HE HAS COMMON SUBMISSION AND THEREFORE ALL THE APPEALS CAN BE HEARD TOGETHER. LD. D.R. DID NOT OBJ ECT TO THE AFORESAID SUBMISSION OF LD. A.R. WE THEREFORE FOR THE SAKE OF CONVENIENCE PROCEED TO DISPOSE OF ALL THE APPEALS BY A CONSOLIDATED ORDER. WE THUS PROCEED WITH THE FACT FOR A.Y. 2004-05 IN ITA NO. 3374/AHD/2010. 3. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 4. ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE B USINESS OF MANUFACTURING OF CONDUCTORS FROM ALUMINUM ALUMINUM ALLOYS AND OT HERS. ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 2004-05 ON 31.10.2004 DECLARING TOTAL INCOME OF RS. 63 060/-. THE ASSESSMENT WAS INITIALLY FRAME D U/S. 143(3) VIDE ORDER DATED 06.06.2006 ACCEPTING THE RETURNED INCOME. SUB SEQUENTLY THE ASSESSMENT WAS RE-OPENED BY ISSUE OF NOTICE U/S. 14 8 DATED 19.12.2008 AND THEREAFTER THE ASSESSMENT WAS FRAMED U/S. 143(3) R. W.S. 147 VIDE ORDER DATED 04.12.2009 AND THE TOTAL INCOME WAS DETERMINED AT R S. 78 57 790/-. AGGRIEVED BY THE ORDER OF A.O. ASSESSEE CARRIED TH E MATTER BEFORE LD. CIT(A) WHO VIDE ORDER DATED 15.10.2010 DISMISSED TH E APPEAL OF THE ITA NOS. 337 4 3375/A/10 1239 & 2728 /AHD/2011 & C.O. NO. 129/AHD/2011 . A.YS. 2004- 05 TO 2007-08 3 ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER OF LD. C IT(A) ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED VARIOUS GROUNDS WHICH HAVE BEEN SUBSEQUENTLY CONCISED AND THE REVISED CONCISED GROU NDS READS AS UNDER:- 1. LD. CIT(A) ERRED IN LAW AND ON FACTS IN UPHOLDING T HE ACTION OF AO IN REOPENING OF COMPLETED ASSESSMENT BY INVOKING PROVISIONS OF SECT ION 147 OF THE ACT AND FURTHER ERRED IN NOT APPRECIATING THE FACT THAT THE REASONS RECORDED FOR REOPENING OF ASSESSMENT AO HAD MENTIONED THE QUANTUM OF INCOME NOT ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT OF RS. 12 14 554/- WHILE THE INCO ME ESCAPED ASSESSMENT DUE TO EXCESS DEDUCTION U/S 80IB OF THE ACT WAS SHOWN AT R S. 74 02 903/-.THUS NO BASIS OF INCOME ESCAPED ASSESSMENT.( IN REASONS RECORDED FOR REOPENING OF ASSESSMENT INCOME ESCAPED ASSESSMENT DUE TO EXCESS DEDUCTION U /S 80IB OF THE ACT WAS SHOWN OF RS. 74 02 903/- WHILE PASSING ORDER U/S 143(3) R.W .S. 147 OF THE ACT AO HAS MADE ADDITION OF RS. 77 94 726/-). 2. LD. CIT(A) ERRED IN LAW AND ON FACTS CONFIRMING THE ACTION OF AO OF REOPENING OF COMPLETED ASSESSMENT U/S 143(3) OF THE ACT ON THE B ASIS OF CHANGE OF OPINION DUE TO AUDIT OBJECTION. 3. LD. CIT(A) ERRED IN LAW AND ON FACTS IN HOLDING THA T GROSS INTEREST RECEIPT OF RS. 58 94 968/- WERE NOT ELIGIBLE FOR SET OFF AGAINST T HE INTEREST PAID OF RS. 1 18 41 872/- EVEN THOUGH THERE IS DIRECT NEXUS WITH THE INDUSTRI AL ACTIVITY OF THE APPELLANT COMPANY AS AMOUNT USED FOR EARNING INTEREST WERE BORROWED F ROM BANKS. 4. LD. CLT(A) ERRED IN LAW AND ON FACTS THAT NET AMOUN T OF RS. 1 65 865/-BEING REBATE AND CLAIMED RECEIVED ON DIFFERENCE BETWEEN THE CRED IT BALANCE AND DEBIT BALANCE ON SALES MADE DURING THE YEAR AND DISALLOWED GROSS AM OUNT OF REBATE RECEIVED OF RS. 9 46 093/- FOR CLAIM OF DEDUCTION U/S 80IB OF THE A CT. 5. LD. CIT(A) ERRED IN LAW AND ON FACTS NOT ALLOWING D EDUCTION U/S 80IB OF THE ACT OF RS. 9 53 665/- BEING REFUND OF EXCISE DUTY RECEIVED DUR ING THE YEAR ON THE GROUND THAT THERE IS NO NEXUS WITH INDUSTRIAL ACTIVITY IGNORING FACT THAT REFUND OF EXCISE DUTY WAS CHARGED ON INDUSTRIAL PRODUCTION AND LEVY OF EXCISE DUTY HAD REDUCED EXEMPTED BUSINESS INCOME IN THE YEAR OF LEVY OF EXCISE DUTY. 6. WITHOUT PREJUDICE TO THE ABOVE GROUNDS LD. CIT(A) ERRED IN LAW AND ON FACTS NOT ALLOWING NETTING OF VARIOUS EXPENSES INCURRED FOR T HE PURPOSE OF RUNNING THE INDUSTRIAL UNDERTAKING AND ELIGIBLE FOR THE DEDUCTI ON U/S 80IB OF THE ACT. 5. BEFORE US LD. A.R. SUBMITTED THAT IT DID NOT WISH TO PRESS GROUND NO. 1 & 2 AND THEREFORE THE SAME ARE DISMISSED AS NOT PRESSED . 6. THE OTHER GROUNDS ARE WITH RESPECT TO THE DEDUCTION U/S. 80IB AND ALL THE GROUNDS BEING INTERCONNECTED CONSIDERED TOGETHER. ITA NOS. 337 4 3375/A/10 1239 & 2728 /AHD/2011 & C.O. NO. 129/AHD/2011 . A.YS. 2004- 05 TO 2007-08 4 7. ON PERUSAL OF THE PROFIT AND LOSS ACCOUNT A.O NOTI CED THAT ASSESSEE HAD RECEIVED INTEREST OF RS. 58 94 968/- AND PAID INTER EST OF RS. 1 18 41 872/- AND THE NET INTEREST EXPENSES DEBITED TO THE PROFIT AND LOSS ACCOUNT WAS RS. 59 46 904/-. WITH RESPECT TO THE REBATES AND CLAIMS A.O NOTICED THAT ASSESSEE HAD TRANSFERRED NET RECEIPT OF RS. 1 65 86 5/- AFTER NETTING THE EXPENSES OF RS. 7 80 288/- TO THE PROFIT AND LOSS A CCOUNT. HE ALSO NOTICED THAT ASSESSEE HAS CLAIMED INCOME ON ACCOUNT OF EXCI SE DUTY ON FREIGHT AMOUNTING TO RS. 9 53 665/-. WITH RESPECT TO INTERE ST A.O WAS OF THE VIEW THAT THE INTEREST EARNED BY THE ASSESSEE CANNOT BE SAID TO BE PROFIT DERIVED FROM INDUSTRIAL UNDERTAKING AS IT CONSTITUTED SECON DARY SOURCE OF INCOME IN VIEW OF THE DECISION OF APEX COURT IN THE CASE OF L IBERTY SHOE COMPANY REPORTED AT 183 TAXMAN.COM 349. A.O FURTHER RELYIN G ON THE DECISION IN THE CASE OF PANDIAN CHEMICALS 262 ITR 278 AND STERLING FOOD 153 ITR 439 WAS OF THE VIEW THAT ONLY THE INCOME WHICH HAS DIRE CT NEXUS WITH THE INDUSTRIAL UNDERTAKING CAN BE ALLOWED AS DEDUCTION. HE WAS FURTHER OF THE VIEW THAT NETTING OF INTEREST INCOME CANNOT BE ALLO WED AS THE INTEREST PAID WAS FOR BUSINESS PURPOSES WHEREAS THE INTEREST EARN ED BY THE ASSESSEE WAS INCOME FROM OTHER SOURCES. HE THEREFORE RE-COMPUTED THE DEDUCTION U/S. 80IB AFTER EXCLUDING THE INTEREST INCOME EARNED BY THE ASSESSEE. WITH RESPECT TO THE INCOME BY WAY OF REBATE AND CLAIM AN D EXCISE REFUND ON FREIGHT HE WAS OF THE VIEW THAT THE AFORESAID INCO ME CONSTITUTED SECONDARY SOURCE OF RECEIPT AND DOES NOT SPRING DIRECTLY FROM THE ACTIVITIES OF INDUSTRIAL UNDERTAKING AND THEREFORE IT WAS ALSO NOT ELIGIBLE FOR DEDUCTION U/S. 80IB. HE ACCORDINGLY AFTER EXCLUDING INTEREST REBATES AND C LAIMS AND INCOME OF ACCOUNT OF EXCISE DUTY ON FREIGHT RE-WORKED THE DE DUCTION U/S. 80IB AND DISALLOWED THE CLAIM OF RS. 77 94 726/-. AGGRIEVED BY THE ORDER OF A.O. ITA NOS. 337 4 3375/A/10 1239 & 2728 /AHD/2011 & C.O. NO. 129/AHD/2011 . A.YS. 2004- 05 TO 2007-08 5 ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO A FTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE UPHELD THE ORDER OF A.O BY HOLDING AS UNDER:- 3.2 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A.R O F THE APPELLANT AND THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESS MENT ORDER. 3.2.1 THE RELEVANT TABLE FROM PARA 3.1 OF THE ASSES SMENT ORDER IS REPRODUCED BELOW:- ITEM OF INCOME PAID RECEIVED NET TRANSFERRED TO P & L A/C. JOB CHARGES. 2 18 580 2 18 580 INTEREST 1 18 41 872 58 94 968 59 46 904(EXP) SUNDRY BALANCE WRITTEN OFF REBATE AND CLAIM 7 80 288 9 46 093 1 65 865 EXCISE DUTY ON FREIGHT 9 53 665 9 53 665 TOTAL OTHER INCOME CREDITED TO P & L A/C OF SILVASA UNIT AS PER SCHEDULE 10 RS. 13 38 110 3.2.2 AS SEEN FROM THE ASSESSMENT ORDER THE FOLLOW ING RECEIPTS WERE HELD TO BE NOT ELIGIBLE FOR DEDUCTION U/S. 80IB ON THE GROUND THAT THEY CANNOT BE SAID TO BE INCOME DERIVED FROM BUSINESS. (I) INTEREST INCOME. RS. 58 94 968/- (II) REBATE AND CLAIM RS. 9 46 093/- (III) EXCISE REFUND ON FREIGHT RS. 9 53 665/- RS. 77 94 726/- WHILE MAKING THE DISALLOWANCE A.O RELIED ON THE VAR IOUS CASE-LAWS MENTIONED AT PARA 3.1 AND 3.2 OF THE ASSESSMENT ORDER. 3.2.3 AS HELD BY VARIOUS COURTS THE WORDS DERIVED FROM DENOTE DIRECT NEXUS BETWEEN THE INCOME EARNED AND THE BUSINESS. THE NEXUS HAS T O BE FIRST GENERATION OR PROXIMATE. BESIDES THE CASE LAWS RELIED ON BY THE A.O SAME VIE W WAS TAKEN IN THE FOLLOWING CASES:- (I) LIBERTY INDIA VS. CIT (293 ITR 520) (P & H). (II) CIT VS. FIVE STAR RUGS (293 ITR 553) (P & H). (III) CIT VS. FOKHWINDER SINGH ( 317 ITR 209) (P & H). (IV) SHREE BALAJI ALLOYS VS. ITO (127 TTJ 129) (AMR ITSAR) ALL THESE DECISIONS ARE DEALING WITH SECTION 80IB. 3.2.4 FURTHER THE WORDS DERIVED FROM HAVE BEEN INTE RPRETED IN THE FOLLOWING DECISIONS DEALING WITH SEC. 80IA. (I) NAHAR EXPORTS LTD. VS. CIT (288 ITR 494). (II) MENTHA AND ALIED PRODUCTS P. LTDD VS. CIT (AL L.) (III) MR. SUPRIYA GILL VS. CIT (193 TAXMAN 12) (HP) (IV) LIBERTY INDIA VS. CIT (317 ITR 218) (SC) ITA NOS. 337 4 3375/A/10 1239 & 2728 /AHD/2011 & C.O. NO. 129/AHD/2011 . A.YS. 2004- 05 TO 2007-08 6 3.2.5 SUPREME COURTS OBSERVATIONS IN THE CASE OF L IBERTY INDIA VS. CIT 317 ITR 218 (2009) ARE REPRODUCED BELOW:- ANALYZING CHAPTER VI-A WE FIND THAT SECTIO N 80IB/80IA ARE A CODE BY THEMSELVES AS THEY CONTAIN BOTH SUBSTANTIVE AS WELL AS PROCEDURAL PROVISIONS. THEREFORE WE NEED TO EXAMINE WHAT THESE PROVISIONS PRESCRIBE FOR COMPUTATION OF PROFITS OF THE ELIGIBLE BUSINESS. IT IS EVIDENT THAT SECTION 80IB PROVIDES FOR ALLOWING OF DEDUCTION IN RESPECT OF PROFITS AND GAINS DERIVED FROM THE ELIGI BLE BUSINESS. THE WORDS 'DERIVED FROM' ARE NARROWER IN CONNOTATION AS COMPARED TO BE WORDS 'ATTRIBUTABLE TO'. IN OTHER WORDS BY USING THE EXPRESSION 'DERIVED FROM'. PARLIAMENT INTENDED TO COVER SOURCES NOT BEYOND THE. FIRST DEGREE' .................. WE MAY REITERATE THAT SECTIONS 8 0I 80IA AND 80IB HAVE A COMMON SCHEME AND IF SO READ IT IS CLEAR THAT THE SAID SECTIONS P ROVIDE FOR INCENTIVES IN THE FORM OF DEDUCTION(S) WHICH ARE LINKED TO PROFITS AND NOT TO INVESTMENT. ON AN ANALYSIS OF SECTIONS 80IA AND 80IB IT BECOMES CLEAR THAT ANY INDUSTRIAL UNDERTAKING WHICH BECOMES ELIGIBLE ON SATISFYING SUB-SECTION (2) WOULD BE ENTITLED TO DEDUCTION-UNDER SUB SECTION (1) ONLY TO THE EXTENT OF PROFITS DERIVED FROM SUCH INDUSTRIAL UNDERTAKING AFTER SPECIFIED DATE(S). 'HENCE APART FROM ELIGIBILITY SUB-SECTION (1) PUR PORTS TO RESTRICT THE QUANTUM OF DEDUCTION A SPECIFIED PERCENTAGE OF PROFITS. THIS I S THE IMPORTANCE OF THE WORDS 'DERIVED FROM INDUSTRIAL UNDERTAKING' AS AGAINST 'PROFITS AT TRIBUTABLE TO INDUSTRIAL UNDERTAKING'.. '.................. THEREFORE WE ARE OF THE VIEW T HAT THE DUTY DRAW BACK DEPB BENEFITS REBATES ETC. CANNOT BE CREDITED AGAINST THE COST OF MANUFACTURE OF GOODS DEBITED IN THE PROFIT AND LOSS ACCOUNT FOR PURPOSES- OF SECTION '8 0IA/80IB AS .SUCH REMISSIONS (CREDITS) WOULD CONSTITUTE INDEPENDENT SOURCE OF INCOME BEYON D THE FIRST DEGREE NEXUS BETWEEN PROFITS .AND'-THE INDUSTRIAL UNDERTAKING.' 3.2.6. FURTHER IN THE CASE OF NAHAR EXPORTS LTD. VS. CIT 288 ITR 494 ( P & H)(2007) IT WAS HELD THAT INTEREST AND INCOME FROM SALE OF IMPO RT LICENSES CANNOT BE INCLUDED IN THE INCOME OF THE ASSESSEE FOR THE PURPOSE OF COMPUTING DEDUCTION U/S.80IA. 3.2.7. IN VIEW OF THE OVER-WHELMING JUDICIAL OPINIO N THE LAW IS WELL SETTLED THAT THE IMPUGNED INCOMES CANNOT BE SAID TO HAVE BEEN 'DERIV ED FROM' THE BUSINESS AND; THEREFORE ARE NOT ELIGIBLE FOR DEDUCTION U/S. 80IB. 3.2.8. AS REGARDS THE APPELLANT'S CLAIM FOR NETTING OF INT EREST IT IS SEEN THAT THE APPELLANT FAILED TO DEMONSTRATE THAT THE INTEREST EXPENDITURE WAS FOR EARNING INTEREST INCOME. IN OTHER WORDS NEXUS BETWEEN THE TWO HAS NOT BEEN ESTA BLISHED. THEREFORE NO BENEFIT OF NETTING CAN BE GIVEN TO THE APPELLANT. AS SEEN FROM .THE ASSESSMENT ORDER VIDE PARA 3.1 AND 3.2. A. O. OBSERVED THAT THE INTEREST INCOME IS INCOME FROM OTHER SOURCES AND RELYING ON VARIOUS CASE-LAWS HE NEGATED THE APPELLANT'S CL AIM IN THIS REGARD. I DO NOT SEE ANY REASON TO INTERFERE WITH THE FINDING OF THE A. O. 3.2.9. IN VIEW OF THE ABOVE DISALLOWANCE OF DEDUCT ION U/S. 80IB ON THE IMPUGNED INCOMES IS UPHELD. GROUND OF APPEAL 5 TO7 ARE DISMISSED. 8. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A) ASS ESSEE IS NOW IN APPEAL BEFORE US. ITA NOS. 337 4 3375/A/10 1239 & 2728 /AHD/2011 & C.O. NO. 129/AHD/2011 . A.YS. 2004- 05 TO 2007-08 7 9. BEFORE US LD. A.R SUBMITTED THAT THE WHILE GRANTI NG DEDUCTION U/S. 80IB A.O HAS EXCLUDED INCOME CREDITED ON ACCOUNT OF INTE REST REBATES AND CLAIM AND EXCISE DUTY ON FREIGHT. WITH RESPECT TO THE INT EREST INCOME SUBMITTED THAT INTEREST WAS EARNED BY THE ASSESSEE ON THE FDRS BY INCURRING THE INTEREST COST AND THEREFORE THE INTEREST COST SHOULD BE CONS IDERED AS SET OF AGAINST THE INTEREST EARNED. IT WAS FURTHER SUBMITTED THAT THER E WAS DIRECT NEXUS BETWEEN THE FUNDS BORROWED AND INTEREST RECEIVED FROM FIXED DEPOSITS AND OTHER ACCOUNTS AND THEY SHOULD HAVE BEEN GIVEN SET OFF AG AINST EACH OTHER. HE FURTHER SUBMITTED THAT THE HONBLE APEX COURT IN TH E CASE OF ACG ASSOCIATED CAPSULES PVT. LTD. VS. CIT 343 ITR 89 (S C) HAS HELD FOR CLAIMING OF DEDUCTION UNDER 80HHC THE NET PROFIT H AS TO BE EXCLUDED AND NOT THE GROSS PROFIT AND THE AFORESAID DECISION OF THE HONBLE APEX COURT HAS BEEN RELIED UPON BY HONBLE GUJARAT HIGH COURT IN THE CASE OF NIRMA LTD. IN TAX APPEAL NO. 810/A/2003 ORDER DATED 27.01 .2014 AND AFTER RELYING ON THE AFORESAID DECISION OF HONBLE APEX COURT AND VARIOUS OTHER DECISIONS CITED THEREIN THE HONBLE GUJARAT HIGH COURT HAS NO TED THAT WHEN THE PROFIT IS BEING EXCLUDED FROM THE CLAIM OF DEDUCTION IT I S NOT THE GROSS PROFIT BUT THE NET THEREOF THAT IS THE GROSS PROFIT MINUS THE EXPENDITURE INCURRED FOR EARNING SUCH PROFIT WHICH SHOULD BE EXCLUDED. WITH RESPECT TO THE CONSIDERATION OF EXCISE DUTY ON FREIGHT AS PART OF THE INCOME ELIGIBLE FOR DEDUCTION HE PLACED RELIANCE ON THE DECISION OF MA DHYA PRADESH HIGH COURT IN THE CASE OF CIT VS. SIDDHARTHA TUBES LTD. (2008) 296 ITR 221 (MP) WHERE IT HAS BEEN HELD THAT REFUND OF EXCISE DUTY W AS INCLUDABLE IN THE PROFITS COMPUTED FOR THE PURPOSE OF DEDUCTION U/S. 80HH AND 80I. HE THEREFORE PLACING RELIANCE ON THE AFORESAID DECISIO NS AND ALSO PLACING RELIANCE ON THE DECISION OF CIT VS. DHARAMPAL PREMC HAND LTD. (2009) 317 ITA NOS. 337 4 3375/A/10 1239 & 2728 /AHD/2011 & C.O. NO. 129/AHD/2011 . A.YS. 2004- 05 TO 2007-08 8 ITR 353 SUBMITTED THAT THE ASSESSEE BE GRANTED DEDU CTION UNDER 80IB ON THE INTEREST REBATES AND CLAIMS AND EXCISE DUTY ON FRE IGHT. LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF A.O AND LD. CIT(A). 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO T HE GRANTING OF DEDUCTION UNDER 80IB ON THE INCOME RECEIVED ON ACCOUNT OF INT EREST INCOME FROM REBATE AND EXCISE DUTY. WITH RESPECT TO INTEREST IN COME IT IS SEEN THAT THE CLAIM OF ASSESSEE WAS DENIED BY THE A.O FOR THE REA SON THAT HE CONSIDERED IT TO BE NOT DERIVED FROM INDUSTRIAL UNDERTAKING AND T HE CLAIM OF NETTING OF INTEREST INCOME WITH INTEREST EXPENSES WAS ALSO DEN IED BY HIM. WE ALSO FIND THAT LD. CIT(A) HAS NOTED THAT ASSESSEE HAS FAILED TO DEMONSTRATE THAT THE INTEREST EXPENDITURE WAS FOR EARNING INTEREST INCOM E. BEFORE US ALSO THE DETAILS AND THE BREAK UP OF THE INTEREST PAID AND R ECEIVED HAS NOT BEEN PLACED ON RECORD BY THE ASSESSEE. WE FIND THAT THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. NIRMA LTD. ON THE ISSUE NETTING AFTER CONSIDERING VARIOUS DECISIONS CITED THEREIN HAS NOTED AS UNDER: - THE QUESTION IS WHEN CERTAIN INCOME OF THE ASSESSEE IS EXCLUDED FROM THE CLAIM OF DEDUCTION UNDER SECTION 80I OR 80HH OF THE ACT SHO ULD THE GROSS INCOME BE EXCLUDED OR SHOULD IT BE ONLY NET THAT IS TOTAL RECEIPT MINUS THE EXPENDITURE INCURRED BY THE ASSESSEE FOR EARNING SUCH INCOME WHICH SHOULD BE SO EXCLUDED . SUCH A QUESTION IN THE CONTEXT OF DEDUCTION UNDER SECTION 80HHC CAME UP FOR CONSIDERATION BEFORE THE SUPREME COURT IN THE CASE OF ACG ASSOCIATED CAPSULES PVT. LTD V. CIT 343 ITR 89 (SC). THE SUPREME COURT HELD THAT FOR TH E PURPOSE SECTION 80HHC OF THE ACT IT IS NOT THE ENTIRE AMOUNT RECEI VED BY THE ASSESSEE ON SALE OF DEPB CREDIT BUT THE SALE VALUE OF LESS THE FACE VALUE O F THE DEPB THAT WILL REPRESENT PROFIT ON TRANSFER OF DEPB CREDIT BY THE ASSESSEE. HEAVY RELI ANCE WAS PLACED IN THE CASE OF TOPMAN EXPORTS V. CIT 342 ITR 49 (SC). EXTENDING SUCH LOGIC IT WAS FURTH ER HELD THAT EVEN OTHER AMOUNTS SUCH AS INTEREST OR RENT WHEN ARE TO BE EXCLUDED FOR THE PURPOSE OF EXPLANATION (BAA) TO SECTION 80HHC OF THE ACT. NINE TY PER CENT OF NOT THE GROSS RENT OR GROSS INTEREST BUT THE NET THEREOF SHALL HAVE BE E XCLUDED. IT WAS OBSERVED AS UNDER: ITA NOS. 337 4 3375/A/10 1239 & 2728 /AHD/2011 & C.O. NO. 129/AHD/2011 . A.YS. 2004- 05 TO 2007-08 9 'IF WE NOW APPLY EXPLANATION (BAA) AS INTERPRETED B Y US IN THIS JUDGMENT TO THE FACTS OF THE CASE BEFORE US IF THE RENT OR INTEREST IS A RE CEIPT CHARGEABLE AS PROFITS AND GAINS OF BUSINESS AND CHARGEABLE TO TAX UNDER SECTION 28 OF THE ACT AND IF ANY QUANTUM OF THE RENT OR INTEREST OF THE ASSESSEE IS ALLOWABLE AS AS EXPE NSE IN ACCORDANCE WITH SECTIONS 30 TO 44D OF THE ACT AND IS NOT TO BE INCLUDED IN THE PRO FITS OF THE BUSINESS OF THE ASSESSEE AS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSIN ESS OR PROFESSION' NINETY PER CENT OF SUCH QUANTUM OF THE RECEIPT OF RENT OR INTEREST WIL L NOT BE DEDUCTED UNDER CLAUSE (1) OF EXPLANATION (BAA) TO SECTION 80HHC. IN OTHER WORDS NINETY PER CENT OF NOT THE GROSS RENT OR GROSS INTEREST BUT ONLY THE NET INTEREST OR NET RENT WHICH HAS BEEN INCLUDED IN THE PROFITS OF BUSINESS OF THE ASSESSEE AS COMPUTED UND ER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' IS TO BE DEDUCTED UNDER CL AUSE (1) OF EXPLANATION (BAA) TO SECTION 80HHC FOR DETERMINING THE PROFITS OF THE BU SINESS.' IN VIEW OF SUCH DECISION QUESTION NO.3 RAISED BY THE REVENUE GETS AUTOMATICALLY ANSWERED SINCE THE AMOUNTS REFERRED TO IN THE SAID QUESTION ARE TO BE EXCLUDED FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80HHC OF THE ACT . LEARNED COUNSEL FOR THE REVENUE VEHEMENTLY CONTEND ED THAT THE RATIO OF THE DECISION IN THE CASE OF ACG ASSOCIATED CAPSULES PVT . LTD (SUPRA) CANNOT BE APPLIED TO A SITUATION WHERE THE EXCLUSION FROM THE CLAIM OF DED UCTION RELATES TO SECTION 80HH OR SECTION 80-1 OF THE ACT. HE STRENUOUSLY URGED THAT THE LANGUAGE USED IN BOTH THE SETS OF PROVISIONS ARE DIFFERENT. SECTION 80HHC IS ALSO VIT ALLY DIFFERENT AND THAT THEREFORE THE CONCEPT OF NETTING MAY NOT BE AUTOMATICALLY APPLIED TO DEDUCTION UNDER SECTION 80HH AND 80-1 OF THE ACT. HE SUBMITTED THAT NUMBER OF TA X APPEALS HAVE BEEN ADMITTED BY THIS COURT ON THIS ISSUE AND THIS APPEAL MAY ALSO BE LIK EWISE ADMITTED. HE DREW OUR ATTENTION TO THE ORDER DATED 6.5.2013 PASSED BY THIS COURT IN THE CASE OF BLOOM DECOR LTD. IN TAX APPEAL NO.447 OF 2013 WHERE AT THE INSTANCE OF THE ASSESSEE SIMILAR QUESTION WAS NOT CONSIDERED. ON THE OTHER HAND LEARNED COUNSEL SHRI SOPARKAR F OR THE ASSESSEE IN ADDITION TO RELYING ON THE DECISION IN THE CASE OF ACT ASSOCIAT ED CAPSULES PVT. LTD. (SUPRA) ALSO PLACED HEAVY RELIANCE ON AN ORDER DATED 30.11.2013 IN TAX APPEAL NO.213 OF 2006 IN THE CASE OF RAJOO ENGINEERS LTD. IN WHICH THE REVENUE'S APPEAL RAISING SUCH A QUESTION CAME TO BE DISMISSED RELYING ON THE DECISION IN THE CASE OF ACG ASSOCIATED CAPSULES PVT. LTD. (SUPRA). THE COUNSEL ALSO RELIED ON A DECISION OF T HE DELHI HIGH COURT IN THE CASE OF ESSEL SHYAM COMMUNICATION LTD. V. COMMISSIONER OF I NCOME TAX (2012) 28 TAXMANN.COM 243 (DELHI) IN WHICH IN DETAILED CONSI DERATION RELYING ON THE DECISION OF THE SUPREME COURT IN THE CASE OF ACG ASSOCIATED CAP SULES PVT. LTD. (SUPRA) EXCLUSION WAS APPROVED FOR DEDUCTION UNDER SECTION 80-1A OF T HE ACT. HAVING HEARD THE LEARNED COUNSEL FOR THE PARTIES WE SEE NO REASON TO ENTERTAIN THIS TAX APPEAL. THE SUPREME COURT IN THE CASE OF A CG ASSOCIATED CAPSULES PVT. LTD. (SUPRA) HAS ALREADY LAID DOWN THE FOUNDATION FOR TH E LOGIC FOR EXCLUDING THE NET PROFIT AND NOT THE GROSS PROFIT FROM THE CLAIM OF DEDUCTIO N WHEN IT IS FOUND THAT THE SOURCE OF ITA NOS. 337 4 3375/A/10 1239 & 2728 /AHD/2011 & C.O. NO. 129/AHD/2011 . A.YS. 2004- 05 TO 2007-08 10 INCOME DOES NOT QUALITY FOR SUCH DEDUCTION UNDER SE CTION 80HHC OF THE ACT. IT IS TRUE THAT SECTION 80HHC REPRESENTS VASTLY DIFFERENT SCHE ME OF DEDUCTION AND ALSO PROVIDES FOR COMPLEX FORMULA FOR DERIVING FOR THE ELIGIBLE PROFI T FOR DEDUCTION UNDER DIFFERENT SITUATIONS DEPENDING ON WHETHER THE EXPORTER IS ALS O ENGAGED IN THE LOCAL BUSINESS OR NOT. HOWEVER THIS DISTINCTION WOULD NOT BE MATERIAL IN SOFAR AS CENTRAL QUESTION OF EXCLUSION OF CERTAIN PROFIT FROM THE ACTIVITY WHICH IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80HH AND 80-1 ARE CONCERNED. THE LOGIC BEING WHEN THE PROFIT IS BEING EXCLUDED FORM THE CLAIM OF DEDUCTION NOT THE GROSS PROFIT B UT THE NET THEREOF THAT IS THE GROSS PROFIT MINUS THE EXPENDITURE INCURRED FOR EARNING S UCH PROFIT SHOULD BE EXCLUDED. THAT IS PRECISELY HOW THIS COURT IN THE CASE OF RAJOO ENGIN EERS (SUPRA) VIEWED THE SITUATION. THAT IS HOW THE DELHI HIGH COURT IN THE CASE OF ESSEL SHYAM COMMUNICATION (SUPRA) HELD REFERRING TO THE DECISION IN THE CASE OF ACG A SSOCIATED CAPSULES PVT. LTD. (SUPRA). IT IS TRUE THAT IN THE CASE OF BLOOM DECOR LTD. A QUESTION WAS SUGGESTED BY THE ASSESSEE WHICH MAY HAVE SOME BEARING ON THE CONTROV ERSY ON HAND. HOWEVER THE ENTIRE FOCUS OF THE ORDER OF THE COURT WAS REGARDING APPLI CABILITY OF THE DECISION OF THE SUPREME COURT IN THE CASE OF TOPMAN EXPORTS (SUPRA) AND NOT ON THE QUESTION OF NETTING. IN ANY CASE THEREIN THE DECISION IN THE CASE OF ACG ASSO CIATED CAPSULES PVT. LTD WAS NOT NOTICED. IN THE RESULT TAX APPEAL IS DISMISSED WITH A CLAR IFICATION THAT AS FAR AS TRANSPORT INCOME IS CONCERNED IN VIEW OF OUR FINDINGS IT IS CLARIFIED THAT IT WOULD BE THE NET AND NOT THE GROSS INCOME WHICH WOULD BE EXCLUDED. THE Q UESTION IS DECIDED IN FAVOUR OF THE REVENUE. TO THAT EXTENT DECISION OF THE TRIBUNAL I S REVERSED 11. WE ALSO FIND THAT LD. CIT(A) HAS NOTED THAT ASSESSE E HAS FAILED TO DEMONSTRATE THAT THE INTEREST EXPENDITURE WAS FOR E ARNING INTEREST INCOME. BEFORE US ALSO THE DETAILS AND THE BREAK UP OF THE INTEREST PAID AND RECEIVED HAS NOT BEEN PLACED ON RECORD BY THE ASSESSEE. BEFO RE US REVENUE HAS NOT BROUGHT ANY CONTRARY MATERIAL OR BINDING JUDICIAL D ECISION IN ITS SUPPORT NOR COULD POINT OUT AS TO HOW THE RATIO OF THE AFORESAI D DECISION OF HONBLE GUJARAT HIGH COURT WOULD NOT BE APPLICABLE TO THE F ACTS OF THE PRESENT CASE. WITH RESPECT TO INTEREST INCOME WE FIND THAT IN THE ABSENCE OF DETAILS AS NOTED BY LD. CIT(A) THE FACTUAL ASPECT NEEDS VERIF ICATION AT THE END OF A.O. WE THEREFORE ON THE ASPECT OF INTEREST INCOME SET A SIDE THE ISSUE TO THE FILE OF A.O TO DECIDE IT IN ACCORDANCE WITH LAW. NEEDLESS T O STATE THAT A.O SHALL ITA NOS. 337 4 3375/A/10 1239 & 2728 /AHD/2011 & C.O. NO. 129/AHD/2011 . A.YS. 2004- 05 TO 2007-08 11 GRANT ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESS EE. THE ASSESSEE IS DIRECTED TO FURNISH ALL THE REQUIRED DETAILS CALLED FOR BY THE A.O WITH RESPECT TO INCOME ON ACCOUNT OF REFUND OF EXCISE DUTY WE FI ND THAT HONBLE M.P. HIGH COURT IN THE CASE OF CIT VS. SIDDHART TUBES LT D. (2008) 296 ITR 221 (MP) HAS HELD THAT WHEN REFUND OF EXCISE DUTY HAS B EEN MADE TO AN INDUSTRIAL UNDERTAKING IT WAS INCLUDIBLE IN ITS PR OFITS COMPUTED FOR PURPOSE OF DEDUCTION U/S. 80HH AND 80I. IN VIEW OF THE AFO RESAID FACTS WE ARE OF THE VIEW THAT THE NET AMOUNT OF REBATE REFUND OF EXCISE DUTY AND INTEREST IS ELIGIBLE FOR DEDUCTION UNDER 80IB.. IN THE RESULT THE GROUNDS OF ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 12. IN THE RESULT THE APPEAL OF ASSESSEE IS PARTLY ALL OWED FOR STATISTICAL PURPOSES. ITA NO. 3375/AHD/2010 FOR A.Y. 2005-06 THE CONCISED GROUNDS RAISED BY ASSESSEE READS AS UN DER:- 1. LD. CIT(A) ERRED IN LAW AND ON FACTS IN UPHOLDING T HE ACTION OF AO IN REOPENING OF COMPLETED ASSESSMENT BY INVOKING PROVISIONS OF S ECTION 147 OF THE ACT AND FURTHER ERRED IN NOT APPRECIATING THE FACT THAT THE REASONS RECORDED FOR REOPENING OF ASSESSMENT AO HAD MENTIONED THE QUANTUM OF INCO ME NOT ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT OF RS. 8 44 354/- W HILE THE INCOME ESCAPED ASSESSMENT DUE TO EXCESS DEDUCTION U/S 80IB OF THE ACT WAS SHOWN AT RS. 53 55 560/-.THUS NO BASIS OF INCOME ESCAPED ASSESSM ENT.( IN REASONS RECORDED FOR REOPENING OF ASSESSMENT INCOME ESCAPED ASSESSMENT DUE TO EXCESS DEDUCTION U/S 80IB OF THE ACT WAS SHOWN OF RS. 53 55 560/- WHILE PASSING ORDER U/S 143(3) R.W.S. 147 OF THE ACT AO HAS MADE ADDITION OF RS. 50 56 297/-). 2. LD. CIT(A) ERRED IN LAW AND ON FACTS CONFIRMING THE ACTION OF AO OF REOPENING OF COMPLETED ASSESSMENT U/S 143(3) OF THE ACT ON THE B ASIS OF CHANGE OF OPINION DUE TO AUDIT OBJECTION. 3. LD. CIT(A) ERRED IN LAW AND ON FACTS IN HOLDING THA T GROSS INTEREST RECEIPT OF RS. 43 52 506/- WERE NOT ELIGIBLE FOR SET OFF AGAINST T HE INTEREST PAID OF RS. 84 05 811/- ITA NOS. 337 4 3375/A/10 1239 & 2728 /AHD/2011 & C.O. NO. 129/AHD/2011 . A.YS. 2004- 05 TO 2007-08 12 EVEN THOUGH THERE IS DIRECT NEXUS WITH THE INDUSTRI AL ACTIVITY OF THE APPELLANT COMPANY AS AMOUNT USED FOR EARNING INTEREST WERE BO RROWED FROM BANKS. 4. LD. CIT(A) ERRED IN LAW AND ON FACTS THAT NET AMOUN T OF RS. 46 888/-BEING REBATE AND CLAIMED RECEIVED ON DIFFERENCE BETWEEN THE CRED IT BALANCE AND DEBIT BALANCE ON SALES MADE DURING THE YEAR AND DISALLOWED GROSS AMOUNT OF REBATE RECEIVED OF RS. 6 11 805/- FOR CLAIM OF DEDUCTION U/S 80IB OF THE ACT. 5. LD. CIT(A) ERRED IN LAW AND ON FACTS THAT NET AMOUN T OF RS. 71 375/- BEING DIFFERENCE BETWEEN THE CREDIT BALANCE AND DEBIT BAL ANCE WRITTEN BACK/WRITTEN OFF THIS YEAR AND DISALLOWED GROSS AMOUNT OF S. 90 486/ - OF SUNDRY BALANCE WRITTEN OFF FOR CLAIM FOR CLAIM OF DEDUCTION U/S. 80IB OF THE A CT. 6. LD. CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING ACTION OF A.O IN DISALLOWING RS. 1 500/- OF PROVISION WRITTEN BACK BEING AMOUNT NOT ELIGIBLE FOR THE DEDUCTION U/S. 80IB OF THE ACT. 7. WITHOUT PREJUDICE TO THE ABOVE GROUNDS LD. CIT(A) ERRED IN LAW AND ON FACTS NOT ALLOWING NETTING OF VARIOUS EXPENSES INCURRED FOR T HE PURPOSE OF RUNNING THE INDUSTRIAL UNDERTAKING AND ELIGIBLE FOR THE DEDUCTI ON U/S. 80IB OF THE ACT. 8. BEFORE US LD. A.R. SUBMITTED THAT HE DID NOT WISH TO PRESS GROUND NO. 1 2 6 & 7 AND THEREFORE THE SAME ARE DISMISSED AS N OT PRESSED. 9. BEFORE US LD. A.R. SUBMITTED THAT GROUND NO. 3 4 & 5 OF THE PRESENT APPEAL ARE SIMILAR TO THE GROUNDS RAISED IN ITA NO. 3374/AHD/2010 FOR A.Y. 2004-05 EXCEPT FOR THE AMOUNT AND THE SUBM ISSIONS MADE BY HIM WHILE ARGUING THE APPEAL FOR A.Y. 2004-05 WOULD BE APPLICABLE TO THE PRESENT GROUNDS. LD. D.R. DID NOT OBJECT TO THE AFORESAID SUBMISSIONS OF LD. A.R. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN VIEW OF THE CONTENTIONS OF BOTH THE PART IES THAT THE FACTS OF THE CASE WITH RESPECT TO THE GROUNDS RAISED ARE IDE NTICAL AND SIMILAR TO THE GROUNDS RAISED IN ITA NO. 3374/AHD/2011 FOR A.Y . 2004-2005 AND IN VIEW OF THE AFORESAID FACTS AND FOR THE RE ASONS GIVEN WHILE DISPOSING THE APPEAL FOR A.Y. 2004-2005 AND FOR SIM ILAR REASONS AND ITA NOS. 337 4 3375/A/10 1239 & 2728 /AHD/2011 & C.O. NO. 129/AHD/2011 . A.YS. 2004- 05 TO 2007-08 13 SIMILAR DIRECTIONS WE ALLOW THE AFORESAID GROUNDS FOR STATISTICAL PURPOSES. 11. IN THE RESULT THE APPEAL OF ASSESSEE IS PARTLY ALL OWED FOR STATISTICAL PURPOSES. C.O. NO. 129/AHD/2011 FOR A.Y. 2006-07 THE GROUNDS OF C.O. OF ASSESSEE READS AS UNDER:- 1. THE LEARNED CIT (A) HAS ERRED IN LAW AND IN FACTS I N CONFIRMING DISALLOWANCE OF DEDUCTION U/S 80IB OF THE ACT OF RS. 1 85 310/-. 2. THE LEARNED CIT (A) HAS ERRED IN LAW AND IN FACTS I N CONFIRMING DISALLOWANCE OF DEDUCTION U/S 80IB OF THE ACT ON SUNDRY BALANCES WR ITTEN OFF AMOUNTING TO RS. 6 60 211/-. 3. THE LEARNED CIT (A) HAS ERRED IN LAW AND IN FACTS I N CONFIRMING DISALLOWANCE OF DEDUCTION U/S 80IB OF THE ACT ON EXCISE DUTY REFUND OF RS. 5 00 000/-. 4. THE LEARNED CIT (A) HAS ERRED IN LAW AND IN FACTS I N CONFIRMING ACTION OF AO IN EXCLUDING INTEREST INCOME FROM INCOME ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. ALTERNATIVELY INTEREST EXPENSE SHOULD BE PERMITTED TO BE DEDUCTED FROM INTEREST INCOME OF THE ASSESSEE. GROUND NO. 1 IS GENERAL AND NOT PRESSED AND THEREFO RE DISMISSED AS NOT PRESSED. 13. BEFORE US LD. A.R. SUBMITTED THAT GROUND NO. 2 & 3 OF THE PRESENT APPEAL ARE SIMILAR TO THE GROUNDS RAISED IN ITA NO. 3374/AHD/2 010 FOR A.Y. 2004-05 EXCEPT FOR THE AMOUNT AND THE SUBMISSIONS MADE BY H IM WHILE ARGUING THE APPEAL FOR A.Y. 2004-05 WOULD BE APPLICABLE TO THE PRESENT GROUNDS. LD. D.R. DID NOT OBJECT TO THE AFORESAID SUBMISSIONS OF LD. A.R. ITA NOS. 337 4 3375/A/10 1239 & 2728 /AHD/2011 & C.O. NO. 129/AHD/2011 . A.YS. 2004- 05 TO 2007-08 14 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN VIEW OF THE CONTENTIONS OF BOTH THE PARTIES THAT TH E FACTS OF THE CASE WITH RESPECT TO THE GROUNDS RAISED ARE IDENTICAL AND SIM ILAR TO THE GROUNDS RAISED IN ITA NO. 3374/AHD/2011 FOR A.Y. 2004-2005 AND IN VIEW OF THE AFORESAID FACTS AND FOR THE REASONS GIVEN WHILE DI SPOSING THE APPEAL FOR A.Y. 2004-2005 AND FOR SIMILAR REASONS AND SIMILAR DIREC TIONS WE ALLOW THE AFORESAID GROUNDS RAISED FOR STATISTICAL PURPOSES. 15. IN THE RESULT C.O OF ASSESSEE IS ALLOWED FOR STATI STICAL PURPOSES. ITA NO. 1239/AHD/2011 REVENUES APPEAL FOR A.Y. 200 6-07 16. THE GROUNDS RAISED BY REVENUE READS AS UNDER:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE DISALLOWANCE INTEREST U/S. 40A(2)(B) OF RS. 12 24 675/-. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 3. IT IS THEREFORE PRAYED THAT THE ORDER OF THE LD. CIT(A) MAY BE SET-ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. THE ONLY EFFECTIVE GROUND IS WITH RESPECT TO DISALL OWANCE OF U/S. 40A(2)(B). 17. DURING THE COURSE OF ASSESSMENT PROCEEDING A.O NOT ICED THAT ASSESSEE HAD MADE PAYMENT OF INTEREST TO SEVERAL PARTIES TO WHOM THE PROVISIONS OF SECTION 40A(2)(B) WERE APPLICABLE. HE ALSO NOTICED THAT THE INTEREST PAID TO THE PARTIES VARIED FROM 8% TO 15% WHEREAS TO THE B ANK FROM WHOM THE ASSESSEE HAD BORROWED FUNDS THE PAYMENT OF INTEREST WAS AT 12.25%. HE ALSO NOTICED THAT INTEREST PAID TO PREM MACHINERY A ND BHARAT ALUMINIZING WAS @ 15% & 13% RESPECTIVELY AS AGAINST THE INTERES T OF 8% PAID TO SMT. ITA NOS. 337 4 3375/A/10 1239 & 2728 /AHD/2011 & C.O. NO. 129/AHD/2011 . A.YS. 2004- 05 TO 2007-08 15 SHAILA DEVI AND P.G. HUF. A.O WAS OF THE VIEW OF TH AT ASSESSEE HAS PAID EXCESS INTEREST OF 7% TO PREM MACHINERY AND OF 5% T O BHARAT ALUMINIZING QUA SHAILA DEVI AND P.G. HUF. HE ACCORDINGLY WORKED OUT THE EXCESSIVE INTEREST RS. 6 96 220/- IN THE CASE OF PREM MACHINE RY AND RS. 5 28 455/- IN CASE OF BHARAT ALUMINIZING AND DISALLOWED THE AGGRE GATE AMOUNT OF RS. 12 24 675/- BY INVOKING THE PROVISIONS OF SECTION 4 0A(2)(B) OF THE ACT. 18. AGGRIEVED BY THE ORDER OF A.O ASSESSEE CARRIED THE MATTER BEFORE CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE DELETED THE ADDITION BY HOLDING AS UNDER:- 4.1. I HAVE CAREFULLY CONSIDERED THE WRITTEN SUBMISSIONS FILED BY THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT. IT IS SEEN THAT TH E LOANS RECEIVED BY THE APPELLANT ARE ADMITTEDLY FOR BUSINESS PURPOSES WHICH THE ASS ESSING OFFICER HAS NOT DOUBTED. INTEREST PAID @ 13% AND 15% IS REASONABLE COMPARED TO MARKET RATE. A.O. HAS NOT MADE OUT ANY CASE THAT THE INTEREST PAID WAS EXCESS IVE OR UNREASONABLE IN TERMS OF SEC. 40A(2)(A). AS SEEN FROM PARA-4 OF THE ASSESSME NT ORDER A.O. FAILED TO CONTROVERT THE EXPLANATION OFFERED TO HIM BY THE AP PELLANT. THE CONTENTIONS OF THE APPELLANT ARE TENABLE AND HAVE FORCE. THEREFORE CO NSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED ABOVE AND IN THE LIGHT OF THE DECISIONS RELIED ON BY THE A. R. OF THE APPELLANT I AM INCLINED TO ACCEPT THE ARGUMENTS ADVANCED BY THE AUTHORIZED REPRESENTATIVE. HENCE THE A. O. IS DIRECTED TO DELETE THE DISALLOWANCE MADE BY HIM AT RS. 12 24 675/-. THUS THIS GROUND OF APPEAL STANDS ALLOWED. 19. AGGRIEVED BY THE ORDER OF LD. CIT(A) REVENUE IS NO W IN APPEAL BEFORE US. ITA NOS. 337 4 3375/A/10 1239 & 2728 /AHD/2011 & C.O. NO. 129/AHD/2011 . A.YS. 2004- 05 TO 2007-08 16 20. BEFORE US LD. D.R. SUPPORTED THE ORDER OF A.O. ON THE OTHER HAND LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE A.O AND LD. CIT(A) AND SUPPORTED THE ORDER OF LD. CIT(A). 21. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) AFTER CONSIDERING THE SUBMISSI ONS OF THE ASSESSEE HAS NOTED THAT THE LOANS RECEIVED BY THE ASSESSEE WERE FOR BUSINESS PURPOSES AND THE INTEREST PAID ON THEM WAS COMPARABLE TO THE MAR KET RATE AND FURTHER A.O HAS NOT MADE ANY CASE OF THE EXCESSIVE OR UNREASONA BLE INTEREST IN TERMS OF SECTION 40A(2)(B). BEFORE US REVENUE HAS NOT BROUG HT ANY MATERIAL ON RECORD TO THE CONTROVERT THE FINDINGS OF LD. CIT(A) WE THEREFORE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) AN D THUS THIS GROUND OF REVENUE IS DISMISSED. 22. IN THE RESULT THE APPEAL OF REVENUE IS DISMISSED. ITA NO. 2782/AHD/2011 ASSESSEES APPEAL FOR A.Y. 20 07-08 23. THE GROUNDS RAISED BY ASSESSEE READS AS UNDER:- 1. THE LD. CIT(A)-XI AHMEDABAD ERRED IN LAW AND OF FA CTS IN PARTLY ALLOWING THE APPEAL FILED BY THE APPELLANT FOR THE A.Y. 2007-08 WITHOU T ANY NOTE OF THE WRITTEN SUBMISSIONS AND THE PAPER BOOK FILED BEFORE HIM BY THE A.R. OF THE APPELLANT ON 17.01.2011 AND PERSONALLY ARGUED THE MATTER BEFORE HIS PREDECESSOR IN OFFICE. 2. THE LD. CIT(APPEALS) HAS MENTIONED VARIOUS OTHER DA TES OF HEARING AND THE FACT THAT THE A.R. OF THE APPELLANT HAD SOUGHT ADJOURNMENTS F OR ONE REASON OR THE OTHER BUT HE HAS FAILED TO TAKE INTO CONSIDERATION THE FACT THA T SHRI. M. P. DEODHAR A.R. OF THE APPELLANT HAD APPEARED BEFORE THE THEN LD. CLT (A) ON 17-01-2011. AND HAD FILED WRITTEN SUBMISSIONS AND ALSO A COPY OF THE PAPER B OOK IN- SUPPORT OF THOSE SUBMISSIONS. 3. THE APPELLANT HAS THEREFORE PREFERRED A MISCELLAN EOUS APPLICATION IN THIS BEHALF AND THE OUTCOME OF THE SAME IS AWAITED. HOWEVER SI NCE THE TIME FOR FILING THE APPEAL ITA NOS. 337 4 3375/A/10 1239 & 2728 /AHD/2011 & C.O. NO. 129/AHD/2011 . A.YS. 2004- 05 TO 2007-08 17 BEFORE THE HON'BLE 1TAT IS LIKELY TO EXPIRE THIS A PPEAL IS BEING FILED AS A MEASURE OF ABUNDANT PRECAUTION BECAUSE THE APPELLANT IS CONFID ENT ABOUT' THE MERITS OF IT'S CASE. 4. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DISMISS ING THE CLAIM MADE U/S 80IB TO THE EXTENT OF RS. 636 307/- IN RESPECT OF INTEREST INC OME WHICH WAS ACTUALLY IN THE NATURE OF BUSINESS INCOME OF THE COMPANY IF THE CORRECT FA CTS ARE TAKEN INTO CONSIDERATION. 5. THE LD. CIT(A) FURTHER ERRED .IN LAW AND ON 'FACTS IN CONFIRMING ANOTHER ADDITION OF 'RS. 2 30 710/- MADE BY THE ASSESSING OFFICER IN RE SPECT OF THE DISALLOWANCE MADE BY HIM U/S 40A(2)(A) OF THE ACT THOUGH WRONGLY MENTIO NED AS SECTION 40A(2)(B) OF THE ACT IN THE APPELLATE ORDER . 24. BEFORE US AT THE OUTSET LD. A.R SUBMITTED THAT THE ISSUE INVOLVED IN THE PRESENT CASE ARE IDENTICAL TO THAT OF 2004-05 AND T HEREFORE THE SAME MAY BE DECIDED ACCORDINGLY LD. A.R IN THE ALTERNATIVE SUBM ITTED THAT LD. CIT(A) HAS PASSED AN EX PARTE ORDER AND HAS NOT CONSIDERED THE WRITTEN SUBMISSIONS FILED BEFORE LD. CIT(A). HE THEREFORE SUBMITTED THAT IN T HE INTEREST OF JUSTICE THE ASSESSEE BE ALLOWED ONE MORE OPPORTUNITY TO PRESENT ITS CASE BEFORE LD. CIT(A). LD. D.R. ON THE OTHER HAND SUPPORTED THE OR DER OF A.O AND LD. CIT(A). 25. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) HAS PASSED AN EX PARTE ORDER. WE THEREFORE ARE OF THE VIEW THAT IN THE INTEREST OF JUSTICE ONE MORE OPPOR TUNITY BE GRANTED TO THE ASSESSEE TO PRESENT ITS CASE. WE THEREFORE SET ASID E THE ISSUE TO THE FILE OF LD. CIT(A) FOR HIM TO DECIDE THE ISSUE AFRESH AND IN AC CORDANCE WITH LAW. NEEDLESS TO STATE THAT LD. CIT(A) SHALL GRANT ADEQU ATE OPPORTUNITY OF HEARING TO BOTH THE PARTIES. THE ASSESSEE IS ALSO DIRECTED TO CO-OPERATE BY FURNISHING ALL THE REQUIRED DETAILS CALLED FOR BY THE REVENUE AUTHORITIES. IN THE RESULT THE GROUNDS RAISED BY THE ASSESSEE WITHOUT CONSIDE RING THE SAME ON MERITS ARE ALLOWED FOR STATISTICAL PURPOSES. 26. IN THE RESULT THE APPEAL OF ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSES. ITA NOS. 337 4 3375/A/10 1239 & 2728 /AHD/2011 & C.O. NO. 129/AHD/2011 . A.YS. 2004- 05 TO 2007-08 18 27. IN THE RESULT ASSESSEES APPEAL IN ITA NO. 3374 & 3375/AHD/2010 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES ITA NO. 278 2/AHD/2011 FOR A.Y. 2007-08 & C.O. NO. 129/AHD/2011 ARE ALLOWED FOR STA TISTICAL PURPOSES & REVENUES APPEAL IN ITA NO. 1239/AHD/2011 IS DISM ISSED. ORDER PRONOUNCED IN OPEN COURT ON 30 - 04 - 2015. SD/- SD/- (SHAILENDRA KR. YADAV) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR. ITAT AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT A HMEDABAD