M/s VBC Industries Ltd., Visakhapatnam v. The ACIT, Circle-4(1), Visakhapatnam

ITA 121/VIZ/2007 | misc
Pronouncement Date: 15-02-2010 | Result: Partly Allowed

Appeal Details

RSA Number 12125314 RSA 2007
Assessee PAN AAACV7352F
Bench Visakhapatnam
Appeal Number ITA 121/VIZ/2007
Duration Of Justice 2 year(s) 9 month(s) 22 day(s)
Appellant M/s VBC Industries Ltd., Visakhapatnam
Respondent The ACIT, Circle-4(1), Visakhapatnam
Appeal Type Income Tax Appeal
Pronouncement Date 15-02-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted Not Allotted
Tribunal Order Date 15-02-2010
Assessment Year misc
Appeal Filed On 23-04-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NOS.121&122/VIZAG/2007 ASSESSMENT YEARS : 2002-03 & 2004-05 RESPECTIVELY ITA NO.537/VIZAG/2008 ASSESSMENT YEAR : 2005-06 ITA NOS.390 391 & 392/VIZAG/2009 ASSESSMENT YEARS : 2001-02 2003-04 & 2006-07 RESPE CTIVELY ITA NO.549/VIZAG/2008 ASSESSMENT YEAR : 2005-06 ITA NOS.440 441 & 442/VIZAG/2009 ASSESSMENT YEAR : 2001-02 2003-04 & 2006-07 RESPEC TIVELY THE ACIT CIRCLE-4(1) VISAKHAPATNAM M/S. VBC INDUSTRIES LTD. VISAKHAPATNAM (APPELLANT) VS. (RESPONDENT) APPELLANT BY: SHRI G.V.N. HARI CA RESPONDENT BY: SHRI SUBRATA SARKAR DR M/S. VBC INDUSTRIES LTD. VISAKHAPATNAM ACIT CIRCLE - 4(1) VISAKHAPATNAM (APPELLANT) VS. (RESPONDENT) PAN NO.AAACV 7352F M/S. VBC INDUSTRIES LTD. VISAKHAPATNAM ADDL. CIT RANGE - 4 VISAKHAPATNAM (APPELLANT) VS. (RESPONDENT) M/S. VBC INDUSTRIES LTD. HYDERABAD ACIT CIRCLE - 4(1) VISAKHAPATNAM (APPELLANT) VS. (RESPONDENT) PAN NO.AAACV 7352F ADDL. CIT RANGE - 4 VISAKHAPATNAM M/S. VBC INDUSTRIES LTD. VISAKHAPATNAM (APPELLANT) VS. (RESPONDENT) 2 ORDER PER BENCH:- THESE APPEALS ARE PREFERRED BY THE ASSESSEE AS WE LL AS THE REVENUE AGAINST THE RESPECTIVE ORDER OF THE CIT(A) ON COMMO N GROUNDS. AS SUCH THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DIS POSED OFF THROUGH THIS CONSOLIDATED ORDER. 2. DURING THE COURSE OF HEARING IT WAS BROUGHT TO OUR NOTICE THAT ITA NO.121 OF 2007 WAS ORIGINALLY HEARD ALONG WITH ITA NO.502 OF 2005 AND WERE DISPOSED OFF VIDE ORDER DATED 24.6.2009. REALISING THAT ONE ISSUE RELATING TO THE DISALLOWANCE OF EXPENDITURE INCURRED IN RESPECT OF EARNING THE IMPUGNED INCOME WHICH WERE FINALLY CONSIDERED TO BE THE BUSI NESS INCOME OF THE ASSESSEES WAS NOT ADJUDICATED UPON BY THE TRIBUNAL THE ASSESSEE MOVED A MISCELLANEOUS APPLICATION WITH A REQUEST TO ADJUDIC ATE THE ISSUE AND THAT MISCELLANEOUS APPLICATION BEARING NO. MP 45 OF 2009 WAS DISPOSED OFF BY THE TRIBUNAL BY ITS ORDER DATED 16 TH OCTOBER 2009 AND DIRECTED THE REGISTRY TO FIX THIS APPEAL I.E. ITA NO.121 OF 2007 FOR HEARING ONL Y ON A LIMITED ISSUE I.E. WITH REGARD TO THE CLAIM OF EXPENDITURE RAISED THRO UGH GROUND NO.2(B) AND GROUND NO.5 IN THE APPEAL. ACCORDINGLY THIS APPEA L IS FIXED FOR HEARING ON A LIMITED ISSUE. SO FAR AS OTHER APPEALS ARE CONCERN ED THE LD. COUNSEL FOR THE ASSESSEE HAS FILED A CHART FURNISHING THE DETAILS O F VARIOUS GROUNDS RAISED IN ALL THESE APPEALS WITH THE SUBMISSIONS THAT EXCEPT THE GROUND RELATING TO LEASE RENT RECEIVED FROM THE COLD STORAGE ARE COVE RED BY THE ORDER OF THE TRIBUNAL PASSED IN ITA NO.502 OF 2005 AND ITA NO.12 1 OF 2007 VIDE ORDER DATED 24.6.2009. COPY OF THE ORDER IS PLACED ON RE CORD FOR OUR PERUSAL. 3. BEFORE PROCEEDING TO THE OTHER APPEALS WE PREFE R TO ADJUDICATE THE APPEAL NO.121 OF 2007 IN WHICH ONLY ONE ISSUE RELAT ING TO THE CLAIM OF EXPENDITURES INCURRED TOWARDS THE IMPUGNED INCOME W AS TO BE ADJUDICATED. WE HAVE HEARD THE RIVAL SUBMISSIONS ON THIS ISSUE A ND CAREFULLY PERUSED THE ORDERS OF AUTHORITIES BELOW AND DOCUMENTS PLACED ON RECORD AND WE FIND THAT ASSESSEE HAS CLAIMED AN EXPENDITURE OF RS.49 69 698 /- AS HAVING BEEN INCURRED DURING THE YEAR FOR THE BUSINESS PURPOSE. ON ANALYSING THE COMPONENTS OF THE SAID EXPENDITURE THE A.O. NOTICE D THAT ASSESSEE COMPANY 3 CLAIMED EXPENDITURES TOWARDS SALARY PAYMENTS TO EMP LOYEES OF RS.9 29 670/- DEPRECIATION OF RS.4 69 221/- AND UN DER THE HEAD OTHER EXPENSES CLAIMED AN AMOUNT OF RS.35 70 807/-. THE A.O. HAS DISALLOWED THE CLAIM OF THE ASSESSEES ON TWO GROUNDS: I) THAT NO NEXUS COULD BE ESTABLISHED BY THE ASSESSEE BETWEEN THE INCOME EARNED AND THE EXPENDITURE CLAIMED. II) THAT AS THE INCOME EARNED BY THE ASSESSEES IS HELD TO BE THE INCOME FROM OTHER SOURCES NO NEXUS COULD BE ESTABL ISHED BY THE ASSESSEE BETWEEN THE EXPENDITURE INCURRED AND T HE INCOME EARNED. SO FAR AS POINT OF DEPRECIATION WAS CONCERNED A.O . ALSO DISALLOWED THE SAME ON THE GROUND THAT NO BUSINESS ACTIVITIES WERE PERFORMED DURING THE IMPUGNED ASSESSMENT YEAR. 4. THE CIT(A) CONFIRMED THE DISALLOWANCES AFTER HOL DING THAT THERE IS NO NEXUS BETWEEN THE EXPENDITURE CLAIMED BY THE ASSESS EE AND THE INCOME EARNED. THEREFORE THE A.O. JUSTIFIED IN DISALLOWI NG THE SAID CLAIM. 5. NOW THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE US AND HAS PLACED THE HEAVY RELIANCE ON THE WRITTEN SUBMISSIONS FILED BEFORE THE CIT(A). THE NATURE OF RECEIPT OF INCOME HAS ALREADY BEEN ADJUDI CATED BY US IN ITA NO.502 OF 2005 AND 121 OF 2007 VIDE ORDER DATED 24.6.2009 AND WE HAVE CATEGORICALLY HELD THERE IN THAT THE NATURE OF INCO ME OF THE ASSESSEE IS PURELY A BUSINESS INCOME. ONCE IT IS HELD THAT INCOME OF THE ASSESSEE IS A BUSINESS INCOME THE EXPENDITURE IN EARNING THAT INCOME IS C ERTAINLY BE A BUSINESS EXPENDITURE AND DEDUCTIONS ARE TO BE ALLOWED AGAINS T THE BUSINESS INCOME. BUT FROM A CAREFUL PERUSAL OF THE DETAILS OF EXPEND ITURE WE FIND THAT RS.9 29 670/- WAS INCURRED TOWARDS THE SALARY PAYME NT TO THE EMPLOYEES AND RS.4 69 221/- TOWARDS THE DEPRECIATION. THE MAJOR PORTION OF THE EXPENSES I.E. RS.35 70 807/- WAS CLAIMED UNDER HEAD OTHER E XPENSES OF WHICH DETAILS ARE NOT PLACED BEFORE US AND THE REVENUE AUTHORITIE S HAVE DISALLOWED THIS CLAIM ON THE GROUND THAT NO NEXUS WAS ESTABLISHED B ETWEEN THE INCOME EARNED AND THE EXPENDITURE CLAIMED. IN THE ABSENCE OF RELEVANT MATERIAL TO DETERMINE THE NEXUS IT IS VERY DIFFICULT FOR US TO GIVE A SPECIFIC FINDING 4 WHETHER THE EXPENDITURE UNDER THE HEAD OTHER EXPEN SES ARE REALLY INCURRED TO EARN THE BUSINESS INCOME OF THE ASSESSEES. UNLE SS A NEXUS IS PROVED BETWEEN THE EXPENDITURE AND THE INCOME IT CANNOT B E ALLOWED AS A BUSINESS EXPENDITURE. WE THEREFORE OF THE VIEW THAT SINCE T HIS ISSUE WAS NOT PROPERLY EXAMINED BY THE LOWER AUTHORITIES ON THE POINT OF A NEXUS WE SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THE MATTER TO THE F ILE OF THE A.O. WITH A DIRECTION TO RE-ADJUDICATE THE ISSUES AFRESH AND TO EXAMINE THE NEXUS BETWEEN THE EXPENDITURES AND THE INCOME EARNED BY T HE ASSESSEES. IF THE EXPENDITURES ARE INCURRED TO EARN THE INCOME OF THE ASSESSEES WHICH IS ALREADY HELD TO BE THE BUSINESS INCOME THE SAME BE ALLOWED FOR DEDUCTIONS AS BUSINESS EXPENDITURE. ACCORDINGLY THE MATTER I S RESTORED TO THE FILE OF THE A.O. FOR ITS RE-ADJUDICATIONS IN TERMS INDICATED AB OVE. 6. NOW WE PROCEED TO ADJUDICATE THE OTHER REMAINING APPEALS. IN OTHER APPEALS ALSO THE ASSESSEE HAS CLAIMED THE EXPENDITU RE INCURRED TO EARN THE BUSINESS INCOME OF THE ASSESSEES AND THE SAME WAS D ISALLOWED FOR THE SAME REASONS AS DISCUSSED IN FOREGOING APPEALS. SINCE W E HAVE ALREADY HELD THAT THE INCOME OF THE ASSESSEES IS THE BUSINESS INCOME THE EXPENDITURES ARE TO BE ALLOWED SUBJECT TO PROOF OF ITS NEXUS WITH THE BUSINESS INCOME. ACCORDINGLY WE SET ASIDE THE ORDER OF THE CIT(A) I N ALL APPEALS AND RESTORE THE MATTER TO THE FILE OF THE A.O. WITH A DIRECTION TO RE-ADJUDICATE IT IN TERMS INDICATED ABOVE AFTER AFFORDING AN OPPORTUNITY OF B EING HEARD TO THE ASSESSEES. 7. NEXT ISSUE IN ALL APPEALS RELATE TO THE NATURE O F INCOME EARNED BY THE ASSESSEES ON VARIOUS DEPOSITS. IN THIS REGARD WE HAVE ADJUDICATED THE ISSUE IN DETAIL IN ITA NO.502 OF 2005 AND 121 OF 2007 AND HAS TAKEN A VIEW IN THE LIGHT OF MATERIAL AVAILABLE ON RECORD THAT INCOME E ARNED BY THE ASSESSEES IS A BUSINESS INCOME. THE RELEVANT OBSERVATION OF THE T RIBUNAL ARE EXTRACTED AS UNDER: WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY P ERUSED THE ORDERS OF THE AUTHORITIES BELOW AND DOCUMENTS P LACED ON RECORD. UNDISPUTEDLY THE ASSESSEE WAS ENGAGED IN THE BOTTLING AND MANUFACTURING OF CHEMICALS AND ITS BOTH THE DIV ISIONS WERE SOLD 5 AND THE SALE PROCEEDS WERE APPLIED EITHER CLEARING THE DEBTS OR INVESTMENT IN POWER SECTOR TERM DEPOSITS WITH BANK S. THE DISPUTE WAS RAISED BY THE DEPARTMENT/REVENUE WITH REGARD TO THE NATURE OF RECEIPTS OF THE INTEREST EARNED FROM BANKS AND OTHE RS. WE HAVE ALSO CAREFULLY EXAMINED THE MEMORANDUM OF ASSOCIATI ON OF THE COMPANY AND MINUTES OF THE EXTRA ORDINARY GENERAL B ODY MEETING OF THE MEMBERS HELD ON 11.12.1999 AND WE FIND THAT BEFORE INVESTING THE SALE PROCEEDS IN POWER SECTOR COMPANI ES AND IN FDRS A SPECIFIC RESOLUTION WAS PASSED. THE CERTIF IED TRUE COPIES OF THE RESOLUTION PASSED BY THE MEMBERS ARE AVAILABLE AT PAGE 63 TO 65 OF THE COMPILATION OF THE ASSESSEE. ACCORDINGLY NEW OBJECTS & CLAUSES OF MEMORANDUM OF ASSOCIATION WERE MODIFIED. NEW CLAUSES 69 AND 70 WERE INSERTED UNDER THE HEAD OTH ER OBJECTS AND ACCORDING TO THESE CLAUSES THE ASSESSEE COMPANY CAN CARRY ON AND UNDERTAKE THE BUSINESS OF FINANCE INVESTMENT A ND TO FINANCE LEASING OR HIRING OF ALL KINDS OF PLANT AND MACHINE RIES. ACCORDING TO CLAUSE 70 THE ASSESSEE IS ALSO AUTHORISED TO ACQUI RE AND HOLD SHARES STOCKS BONDS AND SECURITIES ISSUED OR CARR YING ON OF BUSINESS IN INDIA OR ELSEWHERE IN DEBENTURES/STOCKS AND SECURITIES. THE INTIMATION WITH REGARD TO AMENDMENT IN THE MEMO RANDUM OF ASSOCIATION OF THE COMPANY WAS ALSO GIVEN TO THE RE GISTRAR OF COMPANIES IN FORM 23 VIDE LETTER DATED 4.1.2000. T HIS LETTER AND FORM 23 IS AVAILABLE AT PAGE 60 AND 61 OF THE COMP ILATION OF THE ASSESSEE. AN EXPLANATORY STATEMENT PURSUANT TO THE SECTION 173 OF THE COMPANIES ACT WAS ALSO PREPARED BY THE COMPANY SECRETARY IN WHICH THE ENTIRE FACTS RELATING TO THE SALE OF THE COMPANYS DIVISION AND ITS INTENTION TO INVEST THE SALE PROCEEDS OF IT S CHEMICAL BUSINESS IN POWER PROJECTS OR TO CARRY ON BUSINESS IN POWER PROJECTS OR TO CARRY ON BUSINESS OF FINANCE INVESTMENT AND ACQUIRE SHARES STOCKS ETC. WERE NARRATED. PURSUANT TO THIS NOTE AN EXT RA ORDINARY GENERAL BODY MEETING WAS CALLED ON 11.12.99 AND PRO PER RESOLUTION TO THIS EFFECT WERE PASSED. COPY OF THE NOTE AND R ESOLUTION PASSED IN THE EXTRA ORDINARY GENERAL BODY MEETING ARE ALSO AVAILABLE AT PAGE 66 TO 70 OF THE COMPILATION OF THE ASSESSEE. FROM A CAREFUL PERUSAL OF ALL THESE DOCUMENTS IT HAS BECOME ABUNDANTLY CLEAR THAT THE SALE PROCEEDS OF THESE DI VISIONS OF THE ASSESSEE COMPANY WAS INVESTED EITHER IN POWER SECTO R COMPANY OR IN TERM DEPOSITS IN ACCORDANCE WITH THE CONSCIOUS D ECISION TAKEN IN THE GENERAL BODY MEETING AND BY THE BOARD OF DIREC TORS. SINCE THIS NATURE OF ACTIVITIES HAS BEEN INSERTED AS ONE OF TH E BUSINESS OBJECTS OF THE ASSESSEE THE INCOME GENERATED THERE FROM CA N ONLY BE THE BUSINESS INCOME OF THE ASSESSEE. OUR ATTENTION WAS ALSO INVITED TO THE VARIOUS JUDG EMENTS OF DIFFERENT HIGH COURTS IN WHICH IT HAS BEEN HELD THA T WHEN THE SURPLUS FUNDS AVAILABLE WITH THE ASSESSEE ARE NOT R EADILY REQUIRED AND IF INVESTED IN FDRS IN BANK INTEREST INCOME GE NERATED THEREON CAN ONLY BE TERMED TO BE THE BUSINESS INCOME AND NO T THE INCOME FROM OTHER SOURCES. 6 IN THE CASE OF CIT VS. LOK HOLDINGS 308 ITR 356 THEIR LORDSHIP MUMBAI HIGH COURT HAS HELD THAT INTEREST E ARNED BY THE ASSESSEE A PROPERTY DEVELOPER BY MAKING A TEMPORA RY DEPOSITS OF SURPLUS MONEY OUT OF ADVANCES RECEIVED BY IT FROM I NTENDING PURCHASERS IS A BUSINESS INCOME AND CANNOT BE TERME D AS INCOME FROM OTHER SOURCES. WHILE DEALING THE ISSUE THEIR LORDSHIPS OF THE MUMBAI HIGH COURT HAVE EXAMINED THE IMPACT OF THE S UPREME COURT JUDGEMENT IN THE CASE OF TUTICORIN ALKALI CHE MICALS & FERTILIZERS LTD VS. CIT 227 ITR 172 (SUPREME COURT) CIT VS. BOKARO STEEL LTD. 236 ITR 315 (SUPREME COURT). IN THE CASE OF CIT VS. RM MEENAKSHISUNDARAM 212 I TR 536 THEIR LORDSHIP OF MADRAS HIGH COURT HAVE EXPRE SSED THE SIMILAR VIEWS. THEIR LORDSHIP HAVE HELD THAT THE Q UESTION AS TO WHETHER THE PARTICULAR SOURCE OF INCOME IS BUSINESS INCOME OR NOT MUST BE DECIDED ACCORDING TO ORDINARY NOTION OF WHA T A BUSINESS IS. THE ACTIVITIES FROM WHICH THE INCOME IS DERIVED MUS T HAVE A SET PURPOSE. IN THE CASE OF CIT VS. EXCELLENT COMMERCIAL ENTERP RISES & INVESTS LTD. (SUPRA) THEIR LORDSHIP OF DELHI HIGH C OURT HAS HELD THAT THE INCOME FROM DIVIDEND WOULD BE RELATABLE TO BUSI NESS ACTIVITIES OF THE ASSESSEE AND WOULD NOT BE AN INCOME FROM OTH ER SOURCES. WHILE DEALING WITH THE ISSUES THEIR LORDSHIP HAVE ALSO EXAMINED THE JUDGEMENT IN THE CASE OF SNAM PROGETTI S.P.A. V S. ADDL. CIT & ORS 132 ITR 70 WHERE THE QUESTION WHETHER INTEREST INCOME WOULD BE TREATED AS BUSINESS INCOME WAS ANSWERED IN FAVOU R OF THE ASSESSEE AND THEIR LORDSHIP HAVE HELD THEREIN AS UN DER:- TO REPEAT WHAT WAS SAID EARLIER THE COMPANY HAS NOT COME FROM ITALY TO MAKE BANK DEPOSITS IN INDIA BUT HAS COME TO CARRY ON BUSINESS. IF AT ANY TIME IT HAS SPARE FUNDS IT PREFERS NOT TO KEEP THE SAME IDLE BUT MAKES DEPOSITS IN BANKS WHICH GIVE SOME INCOME. THIS ALSO IS THEREFORE BUSINESS INCOME AND FOR THE PURPOSE OF SET OFF HAS NOT TO B E TREATED AS SEPARATE FROM BUSINESS INCOME. IN THE CASE OF CIT VS. TAMILNADU DAIRY DEVELOPMENT CORPN. LTD. 216 ITR 535 THEIR LORDSHIP OF MADRAS HIGH CO URT HAVE HELD THAT THE TERM BUSINESS IS A WORD OF VERY VIDE CON NOTATION AS BY NO MEANS DETERMINATE IN ITS SCOPE AND HAS TO BE CON SIDERED WITH REFERENCE TO EACH PARTICULAR KIND OF ACTIVITY AND O CCUPATION OF THE PERSON CONCERNED. UPON THE PARTICULAR KIND OF ACTI VITY AND OCCUPATION OF THE PERSON CONCERNED. UPON THE PARTI CULAR FACTS OF THE CASE THE INTEREST ACCRUED ON SHORT TERM DEPOSI TS OF THE ASSESSEE COMPANY WHICH WERE MADE OUT OF THE BUSINES S FUNDS AVAILABLE WITH THE ASSESSEE COMPANY BEFORE THE SAME WERE UTILIZED FOR ACTUAL BUSINESS AND AS SUCH THE SAME IS INCID ENTAL TO THE BUSINESS ACTIVITY OF ASSESSEE COMPANY AND AS SUCH THE INTEREST ON SHORT TERM DEPOSITS SHOULD BE TREATED AS BUSINESS I NCOME. SIMILAR 7 VIEWS ARE ALSO EXPRESSED BY THE KOLKATA HIGH COURT IN THE CASE OF CIT VS. TIRUPATHI WOOLEN MILLS LTD. 193 ITR 252 BY HOLDING THAT WHERE THE ASSESSEE CARRYING ON BUSINESS INVESTS SU RPLUS CASH AVAILABLE IN BANK DEPOSITS THE INTEREST EARNED ON SUCH DEPOSITS IS OUT OF COMMERCIAL ASSETS OF HIS BUSINESS AND THEREF ORE IS ASSESSABLE AS BUSINESS INCOME AND NOT AS INCOME FRO M OTHER SOURCES. FROM A CAREFUL PERUSAL OF THE AFORESAID JUDGEMENTS OF DIFFERENT HIGH COURTS WE ARE OF THE VIEW THAT THE LEGAL POSITION IS VERY CLEAR EVEN IN THOSE CASES WHERE THE SURPLUS F UNDS WHICH ARE NOT READILY REQUIRED BY THE ASSESSEE FOR ITS BUSINE SS PURPOSE IF PLACED IN FDRS OR IN TERM DEPOSITS THE INTEREST GE NERATED THEREON IS CERTAINLY BUSINESS INCOME BEING INCOME OUT OF TH E COMMERCIAL ASSETS OF THE BUSINESS AND NOT AN INCOME FROM OTHER SOURCES. IF THE FACTS OF THE INSTANT CASE ARE VIEWED IN THE LIG HT OF LEGAL PREPOSITION LAID DOWN IN THE AFORESAID JUDGEMENTS WE WILL FIND THE CASE IN HAND IS ON STRONGER FOOTINGS. IN THE INSTA NT CASE THE ASSESSEE HAS MODIFIED ITS OBJECTS IN THE MEMORANDUM OF ASSOCIATION BY PASSING A PROPER RESOLUTION IN THE E XTRA ORDINARY GENERAL BODY MEETING. THE OBJECT OF THE COMPANY WA S MODIFIED IN ORDER TO MAKE THE INVESTMENT OF THE SALE PROCEEDS R ECEIVED BY THE ASSESSEE ON ITS SALE OF 2 DIVISIONS AND ACCORDINGLY INVESTMENT WAS MADE. HENCE IN THE LIGHT OF THESE FACTS WE ARE O F THE CONSIDERED OPINION THAT THE INCOME GENERATED OUT OF THE SHORT TERM DEPOSITS IS CERTAINLY A BUSINESS INCOME AND CANNOT BE TERMED AS INCOME FROM OTHER SOURCES. WE THEREFORE SET ASIDE THE ORDER O F THE CIT(A) IN THIS REGARD AND DIRECT THE AO TO TREAT THE AFORESAI D INTEREST INCOME AS A BUSINESS INCOME. 8. SINCE THE FACTS IN ALL APPEALS ARE SIMILAR TO TH AT OF APPEAL NO.502 OF 2005 WE FOLLOWING AFORESAID ORDER HOLD THAT THE INCOME EARNED BY THE ASSESSEE ON ITS DEPOSITS IS A BUSINESS INCOME. 9. NEXT COMMON ISSUE RELATES IN ALL THESE APPEALS IS WITH REGARD TO THE LEASE RENT RECEIVED BY THE ASSESSEES FROM ITS COLD STORAGE. IN THIS REGARD WE HAVE CAREFULLY PERUSED THE ORDER OF THE LOWER AUTHO RITIES AND WE FIND THAT THE COLD STORAGE PLANT WAS LEASED OUT FOR STORAGE PURPO SE AND THE ASSESSEE COMPANY HAS RECEIVED FIXED AMOUNT AS LEASED RENTALS FROM THE SAID PLANT. THE ASSESSEE CLAIMED A LEASE RENT AS AN INCOME FROM BUSINESS BUT THE ASSESSING OFFICER TREATED IT TO BE THE INCOME FROM HOUSE PROPERTY AND THE DEPRECIATION ON THE COLD STORAGE PLANT WAS DISALLOW ED. THE CIT(A) CONFIRMED THE ORDER OF THE A.O. HE HOWEVER ALLOWED THE DEDU CTION U/S 24(A) OF THE 8 I.T. ACT A SUM EQUAL TO 30% OF THE ANNUAL VALUE. NOW THE ASSESSEE IS BEFORE US WITH THE SUBMISSIONS THAT THE ASSESSEE HA S BEEN MAINTAINING THE COLD STORAGE PLANT AND THE REVENUE HAS NOT MADE OUT A CASE THAT ASSESSEE HAS LEASED OUT THE ENTIRE PLANT TO ONE PARTY AND IS EARNING A RENTAL INCOME. IN FACT HAS BEEN RUNNING A COLD STORAGE PLANT. THE LD. D.R. ON THE OTHER HAND HAS PLACED A RELIANCE UPON THE ORDER OF THE LO WER AUTHORITIES. 10. HAVING CAREFULLY EXAMINED THE ORDER OF THE LOWE R AUTHORITIES IN THE LIGHT OF RIVAL SUBMISSIONS WE FIND THAT REVENUE HA S MADE OUT A CASE THAT THE COLD STORAGE PLANT WAS LEASED OUT BY THE ASSESSEE. BUT THEY HAVE NOT SPELLED OUT TO WHOM IT WAS LEASED OUT AND WHO WAS REQUIRED TO DO THE MAINTENANCE WORK OF THE COLD STORAGE PLANT. THE COLD STORAGE P LANT IS ONLY USED TO STORE THE DIFFERENT TYPE OF MATERIAL FOR A CERTAIN PERIOD FOR WHICH THE RENT IS CHARGED AND COLD STORAGE PLANT IS GENERALLY MAINTAI NED BY THE OWNER AND NOT BY THE PERSON WHOSE MATERIAL WAS KEPT. IT IS NOT C LEAR FROM THE ORDERS OF THE LOWER AUTHORITIES WHETHER THE ENTIRE COLD STORAGE PLANT WAS LEASED OUT TO SINGLE PARTY AND WHO IS RESPONSIBLE FOR ITS MAINTE NANCE. WE THEREFORE OF THE VIEW THAT THIS ISSUE REQUIRES A FRESH ADJUDICATION BY THE ASSESSING OFFICER. RECENTLY THE SUPREME COURT HAS ALSO GIVEN A FINDIN G ON THIS ISSUE IN THE JUDGEMENT OF SAMBHU INVESTMENT PVT. LTD. VS. CIT 26 3 ITR 143. THE SAID JUDGEMENT WAS ALSO NOT CONSIDERED BY THE LOWER AUTH ORITIES. WE THEREFORE SET ASIDE THE ORDER OF THE CIT(A) IN THIS REGARD AN D RESTORE THE MATTER TO THE FILE OF THE A.O. WITH A DIRECTION TO RE-ADJUDICATE THE ISSUE AFRESH AFTER AFFORDING AN OPPORTUNITY OF BEING HEARD TO THE ASSE SSEES IN THE LIGHT OF JUDGEMENT OF THE APEX COURT IN THE CASE OF SAMBHU I NVESTMENT PVT. LTD. (SUPRA) AND IF THE ASSESSING OFFICER COMES TO THE C ONCLUSION THAT IT IS AN INCOME FROM BUSINESS DEPRECIATION BE ALLOWED ACCOR DINGLY. IF IT IS HELD TO BE INCOME FROM HOUSE PROPERTY THE ELIGIBLE DEDUCTIONS BE ALLOWED TO THE ASSESSEES. 11. IN ITA NO. 122 OF 2007 ONE MORE ISSUE IS RAISE D THROUGH GROUND NO.2(A) WITH REGARD TO THE NATURE OF RECEIPT OF RS. 87 23 221/- WHICH WAS CONSIDERED BY THE A.O. TO BE AN INCOME FROM OTHER S OURCES BUT WAS CLAIMED BY THE ASSESSEE TO BE AN INCOME UNDER THE HEAD PROF ITS FROM BUSINESS OR 9 PROFESSION ON THE GROUND THAT THE SAID RECEIPTS ARE IN RESPECT OF EXPENDITURE INCURRED WHILE CARRYING ON BUSINESS OPERATIONS IN E ARLIER ASSESSMENT YEARS WHICH HAD BEEN CREDITED BACK OR RECEIVED IN THE PRE VIOUS YEAR RELEVANT TO THE IMPUGNED ASSESSMENT YEAR AND ONLY BEING THE NATURE OF PROFITS CHARGEABLE UNDER THE PROVISIONS OF SECTION 41(1) OF THE ACT. IN THIS REGARD WE HAVE CAREFULLY EXAMINED THE ORDER OF THE LOWER AUTHORITI ES BUT WE DO NOT FIND ANY INDEPENDENT DISCUSSION ON THIS ISSUE EITHER IN THE ASSESSMENT ORDER OR IN THE ORDER OF CIT(A). WE THEREFORE OF THE VIEW THAT THI S GROUND DOES NOT ARISE OUT OF THE ORDER OF THE LOWER AUTHORITIES. HENCE WE D ECLINE TO ENTERTAIN THE SAME. SO FAR AS NATURE OF TOTAL RECEIPTS ARE CONCE RNED WE HAVE ALREADY GIVEN A SPECIFIC FINDING IN APPEAL NO.502 OF 2005 A ND 121 OF 2007. 10. SO FAR AS THE REVENUES APPEALS ARE CONCERNED THE REVENUE HAS CHALLENGED THE ORDER OF CIT(A) IN ALL ASSESSMENT YE ARS MAINLY ON TWO GROUNDS: 1) THE CIT(A) HAS ERRED IN ALLOWING SET OFF OF THE CAR RY FORWARD LOSSES AND 2) THE CIT(A) HAS ERRED IN ALLOWING THE SET OFF OF CAR RY FORWARD OF UNABSORBED DEPRECIATION. 11. WE HAVE CAREFULLY EXAMINED THE ORDER OF THE LOW ER AUTHORITIES AND WE FIND THAT THE CIT(A) HAS NOT ADJUDICATED SPECIFICAL LY WITH REGARD TO THE SET OFF OF CARRY FORWARD LOSSES. WE THEREFORE OF THE VIEW THAT THIS ISSUE DOES NOT ARISE OUT OF THE ORDER OF THE LOWER AUTHORITIES AND DECLINE TO ENTERTAIN THE SAME AND WE DISMISS THE SAME. WE HOWEVER EXAMINED THE ISSUE OF SET OFF OF UNABSORBED DEPRECIATION OF EARLIER YEARS AGAINST THE INCOME OF THE CURRENT YEAR. IN THIS REGARD WE FIND THAT CIT(A) HAS EXAM INED THE CLAIM OF THE ASSESSEES IN THE LIGHT OF AMENDED PROVISIONS OF SEC TION 32 OF THE I.T. ACT AND HAS FINALLY CONCLUDED THAT THE ASSESSEE COMPANY IS ENTITLED TO SET OFF OF CARRY FORWARD UNABSORBED DEPRECIATION OF EARLIER YEARS AG AINST THE INCOME COMPUTED FOR THE YEAR UNDER CONSIDERATION. WE HAVE ALREADY OBSERVED IN FOREGOING PARAS THAT THE INCOME OF THE ASSESSEES I S A BUSINESS INCOME AND IN THE LIGHT OF THESE FACTS WE FIND NO INFIRMITY IN T HE ORDER OF THE CIT(A) THROUGH WHICH HE HAS DIRECTED THE A.O. TO VERIFY THE RECORD S AND IF THE UNABSORBED 10 DEPRECIATION OF EARLIER YEARS ARE YET TO BE SET OFF THE SAME SHOULD BE GIVEN SET OFF AGAINST THE YEARS INCOME. ACCORDINGLY WE CONFIRM THE ORDER OF THE CIT(A). 12. IN THE RESULT THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED AND THE APPEALS OF THE REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 15.2.2010 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM DATED 15 TH FEBRUARY 2010 COPY TO 1 M/S. VBC INDUSTRIES LIMITED A-4 UNIT INDUSTRIAL ESTATE VISAKHAPATNAM- 530 007. 2 M/S. VBC INDUSTRIES LTD. 6-2-913/914 3 RD FLOOR PROGRESSIVE TOWERS KHAIRATABAD HYDERABAD-500 004. 3 THE ACIT CIRCLE-4(1) VISAKHAPATNAM 4 THE ADDL. CIT RANGE-4 VISAKHAPATNAM 5 THE CIT-2 VISAKHAPATNAM 6 THE CIT(A)-I VISAKHAPATNAM 7 THE CIT(A)-II VISAKHAPATNAM 8 THE DR ITAT VISAKHAPATNAM. 9 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM