Ritu Shipping, Ahmedabad v. The Dy.CIT.,Circle-10,, Ahmedabad

ITA 2392/AHD/2008 | 2004-2005
Pronouncement Date: 15-10-2010 | Result: Allowed

Appeal Details

RSA Number 239220514 RSA 2008
Bench Ahmedabad
Appeal Number ITA 2392/AHD/2008
Duration Of Justice 2 year(s) 3 month(s) 21 day(s)
Appellant Ritu Shipping, Ahmedabad
Respondent The Dy.CIT.,Circle-10,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 15-10-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 15-10-2010
Date Of Final Hearing 21-09-2010
Next Hearing Date 21-09-2010
Assessment Year 2004-2005
Appeal Filed On 24-06-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD B BENCH (BEFORE S/SHRI G.D. AGARWAL VICE-PRESIDENT AND T.K. SHARMA JUDICIAL MEMBER) ITA.NO.2392/AHD/2008 [ASSTT. YEAR : 2004-2005] M/S.RITU SHIPPING 61 6 TH FLOOR SHANKAR CHAMBERS ASHRAM ROAD AHMEDABAD. VS. DCIT CIR.10 AHMEDABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI KEDAR LODHA REVENUE BY : SHRI K. MADHUSUDAN O R D E R G.D. AGARWAL VICE-PRESIDENT : THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-X VI AHMEDABAD DATED 15.05.2008 ARISING OUT OF THE ORDER OF THE ASSESSIN G OFFICER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961. 2. IN THIS APPEAL THE FOLLOWING GROUNDS ARE RAISED : 1. THE LD.CIT(A) HAS ERRED IN LAW AND FACT BY CONS IDERING ASSESSMENT ORDER AND MADE DISALLOWANCE OF RS.3 07 6 96/- U/S.80I(B) OF THE ACT. 2. THE AO HAS ERRED IN LAW AND FACT FOR NOT CONSIDE RING THE SHIP BREAKING ACTIVITY AS INDUSTRIAL/MANUFACTURING ACTIV ITY. 3. THE LD.CIT(A) HAS ERRED IN LAW AND FACT BY CONSIDER ING ASSESSMENT ORDER AND MADE DISALLOWANCE U/S.80I(B) D UE TO CONSIDERING FOLLOWING INCOME/PROFIT FROM NON-INDUSTRIAL ACTIVIT Y (1) RS.18 29 670/- IN RESPECT OF LAND CHARGES (2) RS.4 59 862/- IN RE SPECT OF FDR INTEREST (3) RS.2 35 356/- IN RESPECT OF INTEREST INCOME AND (4) RS.82 35 680/- IN RESPECT OF FOREIGN EXCHANGE RATE DIFFERENCE INCOME. ITA.NO.2392/AHD/2008 -2- 4. THE ASSESSING OFFICER HAS ERRED IN INTERPRETATIO N UNDERSTANDING AND INTENTION OF LAW U/S.80I(B) OF THE INCOME TAX A CT. 3. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. THOUGH SO M ANY GROUNDS ARE RAISED HOWEVER THE ISSUES RAISED BY THE ASSESSEE ARE ONLY TWO VIZ. (I) WHETHER THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 80I B AND (II) IF THE ASSESSEE IS ENTITLED THEN COMPUTATION THEREOF. 4. THE AO DENIED THE DEDUCTION UNDER SECTION 80IB O N THE GROUND THAT THE SHIP BREAKING DOES NOT AMOUNT TO MANUFACTURING OR P RODUCTION OF AN ARTICLE OR THING. HOWEVER WE FIND THAT THIS ISSUE IS NOW COV ERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF VIJAY SHIP BREAKING 175 TAXMAN 877. RESPECTFULLY FOLLOWING T HE SAME WE HOLD THAT THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 80I B. 5. COMING TO THE COMPUTATION UNDER SECTION 80IB WE FIND THAT THE AO OBSERVED THAT THE ASSESSEE IS NOT ENTITLED TO DEDUC TION UNDER SECTION 80IB IN RESPECT OF INTEREST INCOME ETC. IT WAS POINTED OUT BY THE LEARNED COUNSEL THAT THE IDENTICAL ISSUE WAS CONSIDERED BY THE ITAT IN T HE CASE OF SHRI LAXMI SHIPBREAKERS VS. ACIT ITA NO.2651/AHD/2009 DATED 0 2-12-2009 WHEREIN THE ITAT SET ASIDE THE MATTER BACK TO THE FILE OF THE A O FOR RE-COMPUTATION OF DEDUCTION UNDER SECTION 80IB. HE STATED THAT IN TH E CASE OF THE ASSESSEE ALSO MATTER MAY BE SENT BACK TO THE FILE OF THE AO FOR C OMPUTATION OF DEDUCTION U/S.80IB AS PER DIRECTION OF THE ITAT IN THE CASE OF SHRI LAXMI SHIP BREAKERS (SUPRA). THE LEARNED DR HAS NO OBJECTION TO THE AB OVE SUBMISSION OF THE LEARNED COUNSEL. WE FIND THAT THE ITAT IN THE CASE OF LAXMI SHIPBREAKERS (SUPRA) CONSIDERED THE ISSUE AT LENGTH AND HELD AS UNDER: 5. WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENT ATIVE AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE THE ASSESSEE HAS RECE IVED INTEREST OF RS.5 95 522/- FROM FDR KEPT WITH BANK. THE ASSESSEE CLAIMED THAT THE FDR WITH THE BANK WAS MADE FOR OPENING LETTER OF CR EDITS FOR PURCHASE OF ITA.NO.2392/AHD/2008 -3- SHIP. THUS THE FDRS WERE PART OF ASSETS OF SHIP BREAKING BUSINESS OF THE ASSESSEE. FURTHER THE ASSESSEE CONTENDED THAT INTE REST PAYMENT WAS MORE THAN THE INTEREST RECEIPTS AND THEREFORE THERE WAS NO REAL INCOME FROM INTEREST IN THE HANDS OF THE ASSESSEE. ON THE ABOV E SUBMISSION THE ASSESSEE CLAIMED THAT RECEIPT OF INTEREST QUALIFIES FOR DEDU CTION UNDER SECTION 80IB AND IN ANY VIEW OF THE MATTER THERE BEING NO REAL I NCOME FROM INTEREST NOTHING CAN BE EXCLUDED FOR COMPUTING THE DEDUCTION ALLOWABLE UNDER SECTION 80IB. THE ABOVE CLAIM OF THE ASSESSEE WAS N EGATED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) FOLLOWING THE D ECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF PANDIAN CHEMIC ALS LTD VS. CIT 262 ITR 278 (SC) AND THE DECISION OF THE HON'BLE SUPREM E COURT IN THE CASE OF CIT VS. DR. V.P. GOPINATHAN 248 ITR 449 (SC). WE F IND THAT AS PER PROVISIONS OF SECTION 80IB OF THE ACT ONLY INCOME WHICH ARE DERIVED FROM THE ELIGIBLE BUSINESS OF THE INDUSTRIAL UNDERTAKING IS ALLOWABLE FOR DEDUCTION. IN OUR CONSIDERED OPINION INCOME DERIVE D FROM THE ACTIVITIES UNDERTAKEN TO CONDUCT THE ACTUAL BUSINESS OF THE IN DUSTRIAL UNDERTAKING CAN ONLY BE CATEGORIZED AS INCOME DERIVED FROM THE INDU STRIAL UNDERTAKING AND THE INCOME WHICH ARE DERIVED FROM THE INCIDENTAL A CTIVITIES TAKEN BY THE ASSESSEE DURING THE COURSE OF THE BUSINESS ARE MERE LY INCIDENTAL INCOME AND THEY MAY BE INCOME ATTRIBUTABLE TO THE BUSINESS OF THE INDUSTRIAL UNDERTAKING BUT THEY ARE NOT INCOME DERIVED FROM TH E INDUSTRIAL UNDERTAKING. IN THE INSTANT CASE THE ELIGIBLE BUSIN ESS OF THE ASSESSEES INDUSTRIAL UNDERTAKING WAS BREAKING OF SHIP. TO MAK E FDR IRRESPECTIVE OF THE PURPOSE FOR WHICH IT WAS MADE IT IS AN ACTIVIT Y UNDERTAKING BY THE ASSESSEE WHICH IS A STEP REMOVED FROM THE ACTUAL CO NDUCT OF THE BUSINESS OF THE SHIP BREAKING. THEREFORE THE INCOME DERIVED FR OM SUCH ACTIVITY WHICH WAS A STEP REMOVED FROM THE ACTUAL CONDUCT OF THE M AIN BUSINESS OF THE INDUSTRIAL UNDERTAKING CANNOT BE CATEGORIZED AS INC OME DERIVED FROM ELIGIBLE BUSINESS OF THE INDUSTRIAL UNDERTAKING. IN VIEW OF THE ABOVE IN OUR CONSIDERED OPINION LEARNED COMMISSIONER OF INCOME TAX(APPEALS) WAS JUSTIFIED IN HOLDING THAT INCOME DERIVED FROM INTER EST ON FDR IN THE INSTANT CASE WILL NOT QUALIFY FOR DEDUCTION UNDER SECTION 8 0IB OF THE ACT. HOWEVER WE FIND FORCE IN THE CONTENTION OF THE ASSESSEE THA T THE GROSS RECEIPT OF INTEREST ON FDRS CANNOT BE TAKEN AS INCOME DERIVED FROM INTEREST WHEN THE FDRS WERE MADE OUT OF BORROWED FUNDS ON WHICH INTEREST WAS ALSO PAID BY THE ASSESSEE. IN SUCH CASE ONLY THE NET IN TEREST INCOME COULD ONLY BE TAKEN AS INCOME FROM INTEREST WHICH ALONE CAN B E EXCLUDED FOR THE PURPOSE OF COMPUTING DEDUCTION ALLOWABLE UNDER SECT ION 80IB OF THE ACT. THE ABOVE VIEW FINDS SUPPORTS FROM THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. SHRI RAM HONDA POWER E QUIP. & OTHERS (2007) 289 ITR 475 (DEL) AND SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF LALSONS ENTERPRISE VS. DCIT (2004) 89 ITD 25 (DELHI ) (SB). THE CLAIM OF THE ASSESSEE IS THAT FDRS ARE MADE OUT OF BORROWED FUNDS I.E. BY WITHDRAWING MONEY FROM THE CASH CREDIT ACCOUNT MAIN TAINED WITH THE BANK. IN THE ABOVE CIRCUMSTANCES THE DECISION OF THE HON 'BLE SUPREME COURT IN THE CASE OF DR. V. P. GOPINATHAN 248 ITR 449 (SC) IS NOT APPLICABLE BECAUSE IN THAT CASE IT WAS NOT THE FACT THAT INVES TMENT IN FDR WAS MADE ITA.NO.2392/AHD/2008 -4- OUT OF THE BORROWED CAPITAL. ON THE OTHER HAND IN T HAT CASE THE FACTS WERE THAT THE ASSESSEE HAS OBTAINED A LOAN ON THE SECURI TY OF FDRS WHICH WERE MADE OUT OF OWN FUNDS. THEREFORE IN OUR CONSIDERED VIEW THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) WAS NOT JUSTIFI ED IN REJECTING THE CONTENTION OF THE ASSESSEE ON THE BASIS OF THE SAI D DECISION OF THE HON'BLE SUPREME COURT. FURTHER AS THE FULL FACTS OF THE CA SE REQUIRED TO ADJUDICATE THE ISSUE THAT WHAT WAS THE INCOME OF THE ASSESSEE FROM RECEIPT OF INTEREST OF RS.5 95 522/- IS NOT AVAILABLE ON RECORD IN OUR CONSIDERED OPINION IT SHALL BE JUST AND FAIR TO RESTORE THIS PART OF THE ISSUE BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER. THE LEARNED ASSESSING OF FICER IS DIRECTED TO VERIFY THE SOURCE OF INVESTMENT IN FDR BY THE ASSES SEE AND IF THE SAME IS BORROWED FUNDS THEN THE AMOUNT OF INTEREST PAID BY THE ASSESSEE IN RESPECT OF THAT BORROWED FUND SHOULD BE DEDUCTED FROM THE R ECEIPT OF INTEREST TO ARRIVE AT THE NET INCOME FROM THE INTEREST ON FDR WHICH IS TO BE EXCLUDED FOR COMPUTING DEDUCTION ALLOWABLE UNDER SECTION 80I B OF THE ACT. THE LEARNED ASSESSING OFFICER SHALL ALLOW REASONABLE OP PORTUNITY OF HEARING TO THE ASSESSEE BEFORE ADJUDICATING THE ABOVE ISSUE AF RESH AS PER LAW. THUS THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AS IND ICATED ABOVE. AS SUBMITTED BY BOTH THE PARTIES WE SET ASIDE THE MATTER BACK TO THE FILE OF THE AO AND DIRECT HIM TO COMPUTE THE DEDUCTION UNDER SE CTION 80IB KEEPING IN VIEW THE ABOVE DECISION OF THE ITAT AHMEDABAD BENC HES. 6. IN RESULT THE ASSSESSEES APPEAL IS ALLOWED AS ABOVE. ORDER PRONOUNCED IN OPEN COURT ON 15 TH OCTOBER 2010. SD/- SD/- (T.K. SHARMA) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 15-10-2010 COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR ITAT. BY ORDER DR/AR ITAT AHMEDABAD