DCIT, New Delhi v. M/s. Primenet Global Ltd., New Delhi

ITA 1219/DEL/2011 | 2006-2007
Pronouncement Date: 16-09-2011 | Result: Allowed

Appeal Details

RSA Number 121920114 RSA 2011
Assessee PAN AAACP7080N
Bench Delhi
Appeal Number ITA 1219/DEL/2011
Duration Of Justice 6 month(s) 7 day(s)
Appellant DCIT, New Delhi
Respondent M/s. Primenet Global Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 16-09-2011
Appeal Filed By Department
Order Result Allowed
Bench Allotted C
Tribunal Order Date 16-09-2011
Date Of Final Hearing 13-09-2011
Next Hearing Date 13-09-2011
Assessment Year 2006-2007
Appeal Filed On 09-03-2011
Judgment Text
ITA NO. 1219/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI I.P. BANSAL JUDICIAL MEMBER AND SHRI SHAMIM YAHYA ACCOUNTANT MEMBER I.T.A. NO. 1219/DEL/2011 A.Y. : 2007-08 DCIT CC - 12 ROOM NO. 330 ARA CENTRE JHANDEWALAN EXTN.N NEW DELHI VS. M/S PRIMENET GLOBAL LTD. 25/2 BUSINESS PARK SHIVAJI MARG NEW DELHI (PAN/GIR NO. : AAACP7080N) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSEESSEE BY : NONE DEPARTMENT BY : SH. SALIL MISHRA SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: PER SHAMIM YAHYA: PER SHAMIM YAHYA: PER SHAMIM YAHYA: AM AMAM AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 07.12. 2010 PERTAINING TO ASSESSMENT YEAR 2007-08. 2. THE ISSUE RAISED IS THAT LD. COMMISSIONER OF INCO ME TAX (APPEALS) ERRED IN HOLDING INTEREST OF ` 1284879/- ON FDRS AS ELIGIBLE TO BE CONSIDERED FOR COMPUTATION OF INCOME DEDUCTIBLE U NDER SECTION 80-IA OF INCOME TAX ACT 1961. 3. IN THIS CASE THE ASSESSING OFFICER NOTED THAT C OMPANY HAS CLAIMED PROFIT FROM INTERNET SERVICES AT ` 1 50 09 54 5/-. THE INCOME ITA NO. 1219/DEL/2011 2 FROM PROFIT FROM INTERNET SERVICES INCLUDES INTEREST FROM FDR AT ` 12 84 879/-. ASSESSING OFFICER HELD THAT THE INT EREST FROM FDR CLAIMED IS NOT ELIGIBLE FOR DEDUCTION U/S. 80-IA AND HENCE THE ABOVE SUM IS BEING DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS CONSIDERED THE ISSUE AND HELD THAT AS SESSEE CANNOT BE DENIED BENEFIT U/S. 80-IA ON THE INTEREST INCOME OF THE FDR. 5. AGAINST THIS ORDER THE REVENUE IS IN APPEAL BEFO RE US. 6. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIV E. NONE APPEARED ON BEHALF OF THE ASSESSEE. UPON CAREFUL C ONSIDERATION WE ARE OF THE VIEW THAT THE MATTER CAN BE DISPOSED OF A FTER HEARING THE LD. DEPARTMENTAL REPRESENTATIVE AND PERUSING THE RECORDS . WE CAN GAINFULLY REFER HERE THE PROVISION OF SECTION 80-IA :- DEDUCTIONS IN RESPECT OF PROFITS AND GAINS FROM IND USTRIAL UNDERTAKINGS OR ENTERPRISES ENGAGED IN INFRASTRUCTURE DEVELOPMENT ETC. 80-IA. [(1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE IN CLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FR OM ANY BUSINESS REFERRED TO IN SUB-SECTION (4) (SUCH BUSINESS BEING HEREINAFTER RE FERRED TO AS THE ELIGIBLE BUSINESS) THERE SHALL IN ACCORDANCE WITH AND SUBJ ECT TO THE PROVISIONS OF THIS SECTION BE ALLOWED IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE A DEDUCTION OF AN AMOUNT EQUAL TO HUNDRED PER CENT OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TEN CONSECUTIVE ASSESSMENT YEARS.] ITA NO. 1219/DEL/2011 3 (2) THE DEDUCTION SPECIFIED IN SUB-SECTION (1) MAY AT THE OPTION OF THE ASSESSEE BE CLAIMED BY HIM FOR ANY TEN CONSECUTIVE ASSESSMEN T YEARS OUT OF FIFTEEN YEARS BEGINNING FROM THE YEAR IN WHICH THE UNDERTAKING OR THE ENTERPRISE DEVELOPS AND BEGINS TO OPERATE ANY INFRASTRUCTURE FACILITY OR ST ARTS PROVIDING TELECOMMUNICATION SERVICE OR DEVELOPS AN INDUSTRIAL PARK [OR DEVELOPS A SPECIAL ECONOMIC ZONE REFERRED TO IN CLAUSE (III) OF SUB-SE CTION (4)] OR GENERATES POWER OR COMMENCES TRANSMISSION OR DISTRIBUTION OF POWER [OR UNDERTAKES SUBSTANTIAL RENOVATION AND MODERNISATION OF THE EXISTING TRANSM ISSION OR DISTRIBUTION LINES] 7. WE FIND THAT SECTION 80-IA PROVIDES FOR DEDUCTIO N IN RESPECT OF PROFIT AND GAINS DERIVED FROM ELIGIBLE BUSINESS. T HE HONBLE APEX COURT IN THE CASE OF LIBERTY INDIA VS. C.I.T. [317 ITR 218] (SC) HAS EXPOUNDED THAT SECTION 80IA AND SECTION 80IB ARE A CODE BY THEMSELVES AS THEY CONTAIN BOTH SUBSTANTIVE AS WELL AS PROCEDURAL PROVISIONS. SECTION 80IB PROVIDES FOR THE ALLOWING OF DEDUCTION IN RESPECT OF PROFITS AND GAINS DERIVED FROM THE ELIGIB LE BUSINESS. THE CONNOTATION OF THE WORDS DERIVED FROM IS NARROWER AS COMPARED TO THAT OF THE WORDS ATTRIBUTABLE TO. BY USING THE EXPRESSION DERIVED FROM PARLIAMENT INTENDED TO COVER SOURCES NOT BEYO ND THE FIRST DEGREE. INTEREST OF FDR CANNOT BE CONSIDERED INCOME DERIVED FROM ELIGIBLE BUSINESS. 8. WE FURTHER FIND THAT THE HONBLE APEX COURT IN T HE CASE OF PANDIYAN CHEMICALS LTD. 262 ITR 278 HAS HELD THAT THE WORD DERIVED FROM IN SECTION 80HH MUST BE UNDERSTOOD AS SOMETHIN G WHICH HAS DIRECT OR IMMEDIATE NEXUS WITH AN INDUSTRIAL UNDERTA KING. IN THAT ITA NO. 1219/DEL/2011 4 CASE IT WAS HELD THAT ALTHOUGH ELECTRICITY MAY BE R EQUIRED FOR THE PURPOSE OF INDUSTRIAL UNDERTAKING THE DEPOSITS REQ UIRED FOR ITS SUPPLY IS A SUBJECT REMOVED FROM THE BUSINESS OF THE INDUSTRIA L UNDERTAKING. THE DERIVATION OF PROFITS ON THE DEPOSITS MADE WITH ELECTRICITY BOARD CANNOT BE SAID INFLOW DIRECTLY FROM THE INDUSTRIAL UNDERTAKING ITSELF. 9. IN THIS REGARD WE FURTHER REFER THE HONBLE MAD RAS HIGH COURT DECISION IN CIT VS. MENON IMPEX P. LTD. 259 ITR 403. I N THIS CASE ASSESSEE WAS REQUIRED TO OPEN LETTERS OF CREDIT WIT H BANKS FOR WHICH THE DEPOSITS WERE MADE INTEREST EARNED ON DEPOSITS WAS CLAIMED TO BE EXEMPT ON THE GROUND THAT IT WAS DERIVED FROM UNDER TAKING. IT WAS HELD THAT DEPOSITS MADE FOR THE PURPOSE OF OBTAININ G LETTERS OF CREDIT WHICH WERE IN TURN USED FOR THE PURPOSE OF BUSINESS OF INDUSTRIAL UNDERTAKING DID NOT ESTABLISH THE DIRECT NEXUS BETW EEN THE INTEREST AND THE INDUSTRIAL UNDERTAKING. 10. MOREOVER SPECIAL BENCH OF THE ITAT IN THE CASE OF DCIT VS. ALLIED CONSTRUCTION 291 ITR AT 16 HAS HELD THAT INTEREST I NCOME ON BANK DEPOSITS HAS TO BE TAKEN AS INCOME FROM OTHER SOURCE S. UNLESS THE ASSESSEE IS CARRYING ON MONEY LENDING BUSINESS OR S OME VERY SPECIAL CIRCUMSTANCES EXIST TO HOLD INTEREST INCOME TO BE BU SINESS INCOME. AS SUCH WE DO NOT FIND MERIT IN THE ASSESSEES CONTEN TION THAT INTEREST ON FDRS WILL QUALIFY FOR DEDUCTION UNDER SECTION 80-IA I N THE CASE OF THE ASSESSEE. 11. RESPECTFULLY FOLLOWING THE ABOVE PRECEDENTS W E HOLD THAT THE INTEREST INCOME EARNED BY THE ASSESSEE IS NOT ELIGI BLE FOR DEDUCTION U/S 80IA AND THE SAME CANNOT BE SAID TO HAVE BEEN DERIVE D FROM THE ELIGIBLE BUSINESS. HENCE WE SET ASIDE THE ORDER OF THE LD. ITA NO. 1219/DEL/2011 5 COMMISSIONER OF INCOME TAX (APPEALS) AND RESTORED T HAT OF ASSESSING OFFICER. 12. IN THE RESULT THE APPEAL FILED BY THE REVENUE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16/9/2011. SD/- SD/- [I.P. BANSAL] [I.P. BANSAL] [I.P. BANSAL] [I.P. BANSAL] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 16/9/2011 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT DELHI BENCHES