ACIT, New Delhi v. Shri Amit Jain, New Delhi

ITA 1961/DEL/2010 | 2006-2007
Pronouncement Date: 09-07-2010 | Result: Dismissed

Appeal Details

RSA Number 196120114 RSA 2010
Bench Delhi
Appeal Number ITA 1961/DEL/2010
Duration Of Justice 2 month(s) 9 day(s)
Appellant ACIT, New Delhi
Respondent Shri Amit Jain, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 09-07-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 09-07-2010
Date Of Final Hearing 06-07-2010
Next Hearing Date 06-07-2010
Assessment Year 2006-2007
Appeal Filed On 30-04-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A DELHI BEFORE SHRI RAJPAL YADAV AND SHRI K.G. BANSAL ITA NO.1961(DEL)/2010 ASSESSMENT YEAR: 2006-07 ASSTT. COMMISSIONER OF INCOME SH. AMIT JAIN PROP. TAX CIRCLE 27(1) NEW DELHI. VS. ANS H ELECTRONICS RZ - 1/2 JAIN CHOWK PALAM NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AMRENDRA KUMAR SR. DR RESPONDENT BY: N ONE ORDER PER K.G. BANSAL : AM THIS APPEAL OF THE REVENUE EMANATES FROM THE ORDER OF CIT(APPEALS-XXIV NEW DELHI PASSED ON 17.02.2010 IN APPEAL NO. 367/08-09 AND IT PERTAINS TO ASSESSMENT YEAR 2006-07. THE ONLY GROUND TAKEN BY THE REVENUE IN THIS APPEAL IS THA T ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(APPEALS) ERRED IN ALLOWING DEDUCTION U/S 80IC ON DISALLOWANCE OF EXPENSES MADE BY THE AO U/S 43B AMOUNTING TO RS. 40 70 914/-. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSE E HAD FILED NIL RETURN ON 31.10.2006. ASSESSMENT U/S 143(3) WAS COMPLETED ON 15.12.2008 ITA NO. 1961(DEL)/2010 2 DETERMINING THE INCOME AT RS. 40 70 910/-. WHIL E DOING SO DEDUCTION WAS NOT ALLOWED TO THE ASSESSEE U/S 80IC IN RE SPECT OF INTEREST PAYABLE TO THE BANK. THE DISALLOWANCE WAS MADE IN VIEW OF T HE PROVISION CONTAINED IN SECTION 43B UNDER WHICH SUCH INTEREST IS T O BE ALLOWED ONLY ON ACTUAL PAYMENT AND NOT ON THE BASIS OF THE PROVIS ION IRRESPECTIVE OF THE SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE. THE LD. CIT(APPEALS) ALLOWED THE DEDUCTION BY STATING THAT -(I) IT CANNOT BE STATED THAT THIS PORTION OF THE INCOME HAS NOT BEEN DERIVED FROM THE INDUSTRIAL UNDERTAKING AND (II) THE INTENTION OF THE LEGIS LATURE IS TO ENCOURAGE INDUSTRIALIZATION IN THE SPECIFIED AREAS. 3. BEFORE US THE LD. DR SUBMITTED THAT THE QU ESTION HERE IS WHETHER A LEGAL DISALLOWANCE COULD BECOME PART OF THE I NCOME DERIVED FROM THE INDUSTRIAL UNDERTAKING? IN THIS CONNECTION HE RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. STERLING FOODS (1999) 237 ITR 579 IN WHICH IT WAS HELD THAT THE SO URCE OF INCENTIVE WAS EXPORT PROMOTION SCHEME AND NOT THE INDUSTRIAL UN DERTAKING AND THEREFORE SUCH INCENTIVE CANNOT BE SAID TO BE THE INCOME DE RIVED FROM THE INDUSTRIAL UNDERTAKING. FURTHER RELIANCE WAS PLACED ON T HE DECISION OF HONBLE SUPREME COURT IN THE CASE OF PANDIAN CHEMICALS LT D. VS. CIT (2003) 262 ITA NO. 1961(DEL)/2010 3 ITR 278 IN WHICH IT WAS HELD THAT INTEREST EAR NED ON THE DEPOSIT MADE WITH THE ELECTRICITY BOARD FOR SUPPLY OF ELECTRIC ITY MAY HAVE CONNECTION WITH THE INCOME OF THE INDUSTRIAL UNDERTAKING BUT IT IS NOT INCOME DERIVED FROM THE BUSINESS OF THE UNDERTAKING. THE DECISION IN BOTH THE CASES IS THAT FOR AN INCOME TO QUALIFY FOR DEDUC TION U/S 80HH IT MUST HAVE PROXIMATE CONNECTION WITH THE BUSINESS OF THE UNDERTAKING AND IF SUCH CONNECTION IS ONE OR MORE STEPS REMOVED FR OM THE BUSINESS IT CANNOT BE SAID TO BE THE INCOME DERIVED FROM TH E ELIGIBLE UNDERTAKING. NONE ATTENDED ON BEHALF OF THE ASSESSEE. 4. SECTION 80IC PROVIDES FOR THE DEDUCTION OF PR OFITS AND GAINS DERIVED BY AN INDUSTRIAL UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB-SECTION (2) FROM THE GROSS TOTAL INC OME. THEREFORE IN THE FIRST PLACE THE GROSS TOTAL INCOME OF THE UNDERTAKING HAS TO BE COMPUTED. FROM THIS GROSS TOTAL INCOME ANY INCOME WHICH IS NOT DERIVED FROM THE UNDERTAKING HAS TO BE EXCLUDED. THE NET SUM HAS TO BE CONSIDERED FOR THE PURPOSE OF THE DEDUCTION. THE PROFIT AND LOSS ACCO UNT OF THE UNDERTAKING SHOWED PROFIT OF RS. 97 57 531/-. THE ASSESSEE ADDED A SUM OF RS. 40 70 914/- TO THIS INCOME ON ACCOUNT OF INTERES T PAYABLE TO THE BANK BUT NOT ACTUALLY PAID AND A FURTHER SUM OF RS. 25 726/- IN RESPECT OF ITA NO. 1961(DEL)/2010 4 PROVISION FOR LEAVE ENCASHMENT. THUS THE GROSS TOTAL INCOME WAS COMPUTED AT RS. 1 38 54 171/-. THE WHOLE OF THI S AMOUNT WAS CLAIMED TO BE DEDUCTIBLE U/S 80IC LEADING TO NIL TOTAL IN COME. THE ASSESSEE HAS NOT INCLUDED ANY INTEREST IN THE GROSS TOTAL INCOME . THEREFORE THE RATIO OF THE CASE OF STERLING FOODS AND PANDIAN CHEMICALS LTD. (SUPRA) IS NOT APPLICABLE. ON THE CONTRARY IT HAS NOT CLAIMED THE INTEREST WHICH HAD BECOME PAYABLE TO THE BANK BUT NOT PAID IN VIEW OF THE SPECIFIC PROVISION CONTAINED IN SECTION 43B. THIS LED TO ENHANCEME NT OF THE GROSS TOTAL INCOME BY THE SAME AMOUNT. THE GROSS TOTAL I NCOME COMPUTED BY THE ASSESSEE CONSTITUTED THE PROFITS AND GAINS DERIVE D FROM THE ELIGIBLE UNDERTAKING. THEREFORE THE FACTS OF THE CASE ARE QUITE DISTINGUISHABLE FROM THE FACTS OF THOSE CASES. IT IS NOT SHOWN TO US THAT ANY PART OF THE GROSS TOTAL INCOME OF RS. 1 38 54 171/- WAS NO T DERIVED FROM THE BUSINESS OF ELIGIBLE UNDERTAKING. 4.1 WE MAY ALSO LOOK AT THE SITUATION FROM ANO THER ANGLE. THE ASSESSEE IS CLAIMING HIGHER DEDUCTION FOR THIS YEA R BECAUSE OF APPLICABILITY OF SECTION 43B. HOWEVER AS AND WHEN THE INTE REST IS PAID FOR THIS YEAR THE DEDUCTION WILL BE AVAILABLE IN THE YEAR OF PA YMENT WHICH WILL DEPRESS ITA NO. 1961(DEL)/2010 5 THE GROSS TOTAL INCOME OF THAT YEAR BY THE AMOUN T OF PAYMENT LEADING TO LOWER CLAIM IN THAT YEAR. 4.2 THUS WE DO NOT FIND THAT THERE IS ANY ERROR I N THE ORDER OF THE LD. CIT(APPEALS) WHICH REQUIRES CORRECTION FROM OUR SIDE. 5. IN THE RESULT THE APPEAL IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 9 JULY 2010. SD/- SD/- (RAJPAL YADAV) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 9TH JULY 2010. SP SATIA COPY OF THE ORDER FORWARDED TO:- SHRI AMIT JAIN PROP. ANSH ELECTRONICS NEW DELHI. ASSTT. CIT CIRCLE 27(1) NEW DELHI. CIT(A) CIT THE DR ITAT NEW DELHI. ASSISTANT REGISTRAR.