M/S. MANJU SHARMA, MUMBAI v. THE ACIT(A)-XX, MUMBAI

ITA 2728/MUM/2008 | 2003-2004
Pronouncement Date: 09-09-2010 | Result: Partly Allowed

Appeal Details

RSA Number 272819914 RSA 2008
Assessee PAN AAQPS1852G
Bench Mumbai
Appeal Number ITA 2728/MUM/2008
Duration Of Justice 2 year(s) 4 month(s) 18 day(s)
Appellant M/S. MANJU SHARMA, MUMBAI
Respondent THE ACIT(A)-XX, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 09-09-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 09-09-2010
Date Of Final Hearing 03-05-2010
Next Hearing Date 03-05-2010
Assessment Year 2003-2004
Appeal Filed On 21-04-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B : MUMBAI BEFORE SHRI D.K. AGARWAL (JM) AND SHRI R.K. PAND A (AM) ITA NO.2728/MUM/2008 ASSESSMENT YEAR : 2003-04 MRS. MANJU SHARMA 13-14/B MAROL NAKA ANDHERI-KURLA ROAD ANDHERI (E) MUMBAI-400 059. ..( APPELLANT ) P.A. NO. (AAQPS 1852 G) VS. ASSTT. COMMISSIONER OF INCOME TAX -20(2) MUMBAI. ..( RESPONDENT ) APPELLANT BY : SHRI K.M. KAPADIA RESPONDENT BY : SHRI HA RI GOVIND SINGH O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 25.01.2008 PASSED BY THE LD. CIT(A) FOR THE ASSESSMENT YEAR 2003-04. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE AN INDIVIDUAL IS DERIVING INCOME FROM EXPORT OF MARBLES AND STONES. SHE FILED RETURN SHOWING AN INCOME OF RS.37 70 472/- . HOWEVER THE ASSESSMENT WAS COMPLETED AT AN INCOME OF RS.50 76 500/- VIDE ORDER DATED 21.2.2006 PASSED U/S.143(3) OF THE INCOME TAX ACT 1961(THE ACT). ON APPEAL THE LD. CIT(A) DISMISSED THE ASSESSEE'S APPEAL. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE ASSESSEE IS IN APPEAL BEFORE US. ITA NO.2728/M/08 A.Y:03-04 2 4. GROUND NO.I IS AGAINST THE SUSTENANCE OF DISALLO WANCE OF CONSULTANCY AND SERVICE CHARGES RS.1 63 000/-. 5. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT DURI NG THE COURSE OF ASSESSMENT PROCEEDING THE ASSESSEE WAS ASKED TO GI VE DETAILS OF SERVICES RENDERED BY SHRI SHIVDUTTA R. SHARMA SUNIL BHEDA A ND MS. MAMTA DHUPIA TO WHOM CONSULTANCY FEES HAS BEEN GIVEN ALON G WITH CONFIRMATIONS. HOWEVER THE ASSESSEE HAS FILED CONF IRMATION FROM SHRI SHIVDUTTA R. SHARMA ONLY. IN THE ABSENCE OF CONFIRM ATION FROM SUNIL BHEDA AND MS. MAMTA DHUPIA REGARDING SERVICES REND ERED BY THEM THE ASSESSING OFFICER DISALLOWED RS.1 63 000/- BEING S ERVICE CHARGES PAID AND ADDED TO THE INCOME OF THE ASSESSEE . ON APPEAL BEFORE THE LD. CIT(A) THE ASSESSEE FILED CONFIRMATIONS FROM THE SA ID TWO PERSONS. HOWEVER THE LD. CIT(A) WAS OF THE VIEW THAT IN THE ABSENCE OF CIRCUMSTANCES LISTED IN RULE 46A OF THE I.T. RULES 1962 THERE IS NO JUSTIFICATION TO ADMIT THE ADDITIONAL EVIDENCE FILE D BY THE ASSESSEE AT THIS STAGE. FURTHER THE ASSESSEE WAS NOT ABLE TO GIVE ANY DETAILS OF THE SERVICES RENDERED AND HENCE HE UPHELD THE DISALLOW ANCE MADE BY THE ASSESSING OFFICER. 6. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE SUBMITS THAT DUE TO SOME CONFUSION BETWEEN THE AUTHORISED REPRES ENTATIVE OF THE ASSESSEE AND THE ASSESSING OFFICER THE CONFIRMATION FROM THE SAID TWO PARTIES WHICH WERE KEPT READY AT THE TIME OF ASSESS MENT PROCEEDING COULD NOT BE PRODUCED BEFORE THE ASSESSING OFFICER. HOWEV ER THE SAME WERE PRODUCED BEFORE THE LD. CIT(A) COPY OF WHICH ARE A PPEARING AT PAGE 1 AND 2 OF ASSESSEE'S PAPER BOOK. HE THEREFORE SUBMI TS THAT THE SAME MAY KINDLY BE ADMITTED AND RELIEF MAY BE ALLOWED. 7. ON THE OTHER HAND THE LD. DR SUBMITS THAT INSPIT E OF THE OPPORTUNITY PROVIDED TO THE ASSESSEE THE ASSESSEE HAS FAILED TO FILE THE ITA NO.2728/M/08 A.Y:03-04 3 CONFIRMATION HENCE THE DISALLOWANCE MADE BY THE A SSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) BE UPHELD. 8. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE RIV AL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE FIND T HAT ASSESSEE'S STAND THAT THERE WAS SOME CONFUSION BETWEEN THE LD. AR OF THE ASSESSEE AND THE ASSESSING OFFICER REGARDING THE FILING OF THE C ONFIRMATIONS OF THE ABOVE TWO PARTIES WAS NOT DOUBTED OR REJECTED BY THE LD. CIT(A). THIS BEING SO AND KEEPING IN VIEW THAT THE ASSESSEE HAS FILED THE CONFIRMATION BEFORE THE LD. CIT(A) WE ARE OF THE VIEW THAT IN THE INTE REST OF JUSTICE THE MATTER SHOULD GO BACK TO THE FILE OF THE ASSESSING OFFICER AND ACCORDINGLY WE SET ASIDE THE ORDER PASSED BY THE REVENUE AUTHORITIES O N THIS ACCOUNT AND SEND BACK THE MATTER TO FILE OF THE ASSESSING OFFIC ER WHO SHALL DECIDE THE SAME AFRESH AND ACCORDING TO LAW AFTER PROVIDING RE ASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . THE GROUND TAKEN BY THE ASSESSEE IS THEREFORE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 9. GROUND NO.II IS AGAINST THE SUSTENANCE OF DISALL OWANCE OF TRAVELLING EXPENSES OF RS.4 55 155/-. 10. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT DUR ING THE COURSE OF ASSESSMENT PROCEEDING IT WAS FOUND THAT THE ASSESSE E HAS DEBITED RS.18 36 439/- UNDER THE HEAD TRAVELLING EXPENSES. THE ASSESSEE WAS ASKED TO FILE COMPLETE DETAILS OF THE EXPENSES ON F OREIGN TRAVEL INCLUDING THE NAMES OF THE PLACES VISITED THE PERSONS WHO TR AVELLED AND THE NATURE OF BUSINESS DONE ALONG WITH THE BILLS AND OTHER EVI DENCES. IN RESPONSE IT WAS SUBMITTED THAT IN MOST OF THE CASES MR. SHIVDU TTA SHARMA HAD TRAVELLED ABROAD ON BUSINESS TOURS. FROM THE DETAI LS SUBMITTED. THE ASSESSING OFFICER ALSO FOUND THAT OUT OF THE TOTAL EXPENSES OF RS.18 36 439/- RS.15 17 185/- HAS BEEN INCURRED ON FOREIGN TRAVEL. IN THIS CONTEXT NO PROPER DETAILS VIZ. THE PERSONS WH O HAVE TRAVELED THE PLACES VISITED AND THE NATURE OF BUSINESS DONE WERE FILED. ONLY CERTAIN ITA NO.2728/M/08 A.Y:03-04 4 BILLS WERE FILED. IN THE ABSENCE OF COMPLETE DETAI LS THE ASSESSING OFFICER DISALLOWED 30% OF FOREIGN TRAVEL EXPENSES AS BEING FOR NON-BUSINESS PURPOSES. ON APPEAL THE LD. CIT(A) IN THE ABSENCE OF DETAILS WHILE AGREEING WITH THE VIEW OF THE ASSESSING OFFICER CON FIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER . 11. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT IN THE ASSESSMENT ORDER THE NAMES OF MS. FAZLULAH M UMTAZ MR. FARAZ MOHD. AND MR. RAJIV SUHALKA HAVE BEEN MENTIONED. T HE FIRST TWO PERSONS ARE THE OWNERS OF AL FAHAD TILES & MOSAIC FACTORY ( THE CUSTOMER WHO ACCOUNTS FOR MORE THAN 65% OF THE TOTAL TURNOVER OF THE ASSESSEE ). THEY HAD COME DOWN TO SEE THE GOODS OF THE ASSESSEE AND TO FINALISE THE PURCHASE DEAL. THE ASSESSEE HAD TO BEAR THE COST OF THEIR TRAVEL DUE TO WHICH THE EXPENSES WERE INCURRED. IN VIEW OF THIS FACT IF THE ASSESSEE HAS TO INCUR SOME TRAVELING EXPENSES THEN THE SAME SHO ULD BE ALLOWED AS BUSINESS EXPENDITURE. IN CASE OF MR. RAJIV SUHALKA HE IS THE PARTNER OF EURO MARBLES WHO IS THE SUPPLIER OF THE GOODS TO T HE ASSESSEE. HE WAS REQUIRED TO TRAVEL ON BEHALF OF THE ASSESSEE TO INS PECT THE TYPE OF MATERIAL REQUIRED BY THE ASSESSEE. THE DETAILS CALLED UPON THE ASSESSMENT PROCEEDING WERE DULY SUBMITTED WITHIN THE STIPULATE D TIME. HOWEVER THE ASSESSING OFFICERS CONTENTION THAT THE PART OF THE FOREIGN TRAVEL EXPENDITURE IS INCURRED NOT FOR THE PURPOSE OF BUS INESS IS NOT JUSTIFIED. HE FURTHER SUBMITS THAT FOREIGN TRAVEL EXPENDITURE I NCURRED BY THE ASSESSEE WERE DISALLOWED MERELY ON THE BASIS OF ASS UMPTION IS AGAINST LAW OF NATURAL JUSTICE. THUS THE DISALLOWANCE OF RS. 4 55 155/- OF THE FOREIGN EXPENSES SUSTAINED BY THE LD. CIT(A) BE DEL ETED. 12. ON THE OTHER HAND THE LD. DR SUBMITS THAT IN TH E ABSENCE OF COMPLETE DETAILS OF TRAVELLING EXPENSES TO SHOW THA T THE SAME HAVE BEEN INCURRED FOR BUSINESS PURPOSES THE LD. CIT(A) WAS JUSTIFIED IN UPHOLDING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. ITA NO.2728/M/08 A.Y:03-04 5 13. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE F IND THAT THERE IS NO DISPUTE THAT THE ASSESSEE HAS FURNISHED DETAILS OF TRAVELLING EXPENSES AMOUNTING TO RS.18 36 439/- WHICH HAS BEEN REPRODUC ED BY THE ASSESSING OFFICER AT PAGE-3 OF THE ASSESSMENT ORDE R. HOWEVER IN THE ABSENCE OF COMPLETE DETAILS IN RESPECT OF FOREIGN T RAVEL EXPENSES AND DETAILS OF PERSONS TRAVELLED PLACE VISITED AND THE NATURE OF BUSINESS DONE THE ASSESSING OFFICER MADE ESTIMATED DISALLOWANCE O F RS.4 55 155/- BEING 30% RS.15 17 185/- AND THE LD. CIT(A) FOR THE SA ME REASONS UPHELD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER . THE C LAIM OF THE ASSESSEE IS THAT THE FOREIGN TRAVEL EXPENSES HAVE BEEN INCURRED ON THE PERSONS NAMELY MS. FAZLULAH MUMTAZ MR. FARAZ MOHD. AND M R. RAJIV SUHALKA TO WHOM THE ASSESSEE HAS SOLD THE GOODS MORE THAN 65 % OF THE TOTAL TURNOVER. HOWEVER THIS ASPECT OF THE MATTER DOES N OT BORNE OUT FROM THE ASSESSMENT ORDER OR FROM THE ORDER OF THE LD. CIT(A ). WE FURTHER FIND THAT AFTER FILING THE DETAILS OF TRAVELLING EXPENSE S THE ASSESSING OFFICER WITHOUT ASKING FOR FURTHER DETAILS OF PERSONS TRAVE LLED PLACE VISITED AND THE NATURE OF BUSINESS DONE HAS MADE THE ABOVE ESTI MATED DISALLOWANCE WHICH IN OUR VIEW IS A VIOLATION OF RULE OF NATURAL JUSTICE. THIS BEING SO AND KEEPING IN VIEW THAT THE DISALLOWANCE WAS MADE ON ESTIMATE BASIS THEREFORE IN THE INTEREST OF JUSTICE WE CONSIDER I T FAIR AND REASONABLE THAT THE MATTER SHOULD GO BACK TO THE FILE OF THE ASSESS ING OFFICER AND ACCORDINGLY WE SET ASIDE THE ORDERS PASSED BY THE R EVENUE AUTHORITIES ON THIS ACCOUNT AND SEND BACK THE MATTER TO THE FILE O F THE ASSESSING OFFICER WHO SHALL EXAMINE THE ISSUE AFRESH IN THE LIGHT OF OUR OBSERVATION HEREIN ABOVE AND ACCORDING TO LAW AFTER PROVIDING REASONAB LE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . THE GROUND TAKEN BY T HE ASSESSEE IS THEREFORE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 14. GROUND NO.III IS AGAINST THE SUSTENANCE OF DISA LLOWANCE OF MOTOR CAR EXPENSE OF RS.55 334/- INCLUDING DEPRECIATION O N CAR. ITA NO.2728/M/08 A.Y:03-04 6 15. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT THE ASSESSING OFFICER IN THE ABSENCE OF LOG BOOK OBSERVED THAT THE USE OF MO TOR CAR BY THE ASSESSEE FOR PERSONAL PURPOSES CANNOT BE RULED OUT AND ACCORDINGLY HE DISALLOWED 1/5 TH OF MOTOR CAR EXPENSES AND 1/5 TH OF MOTOR CAR DEPRECIATION RS.41 893/- AND RS.13 441/- RESPECTIVELY. ON APP EAL THE LD. CIT(A) FOR THE SAME REASONS UPHELD THE DISALLOWANCE MADE BY TH E ASSESSING OFFICER . 16. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE PERSONAL USER ELEMENT FOR THE USE OF MOTOR CAR HAS BEEN INCLUDED IN THE DRAWINGS OF THE ASSESSEE AND NO SUCH DISALLOWAN CE WAS MADE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR 2002-03 WHILE MAKING THE ASSESSMENT U/S. 143(3) WHICH WAS LATER ON CORRECTE D AS 143(1) THEREFORE THE DISALLOWANCE OF MOTOR CAR EXPENSES A ND DEPRECIATION MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. C IT(A) BE DELETED. 17. ON THE OTHER HAND THE LD. DR SUBMITS THAT IN TH E ABSENCE OF LOG BOOK TO SHOW THAT THE CAR WAS USED FOR BUSINESS PUR POSES THE LD. CIT(A) WAS FULLY JUSTIFIED IN SUSTAINING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND THE SAME BE UPHELD. 18. AFTER CAREFULLY HEARING THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE FIND T HAT THE ASSESSEE HAS NOT PLACED ANY MATERIAL TO SHOW THAT THE CAR WAS EX CLUSIVELY USED FOR BUSINESS PURPOSES. THE LD. COUNSEL FOR THE ASSESSE E HAS NOT SUBSTANTIATED THAT THE PERSONAL EXPENSES SHOWN BY T HE ASSESSEE INCLUDES CAR EXPENSES. THIS BEING SO AND KEEPING IN VIEW T HE FACTS AND CIRCUMSTANCES OF THE CASE AND THE CONSISTENT VIEW O F THE TRIBUNAL WE CONSIDER IT FAIR AND REASONABLE THAT 1/6 TH DISALLOWANCE OF CAR EXPENSES AND DEPRECIATION WOULD MEET THE ENDS OF JUSTICE. WE HO LD AND ORDER ACCORDINGLY. THE GROUND TAKEN BY THE ASSESSEE IS THEREFORE PARTLY ALLOWED. ITA NO.2728/M/08 A.Y:03-04 7 19. GROUND NO. IV IS AGAINST THE SUSTENANCE OF DISA LLOWANCE OF RS.30 000/- OUT OF TELEPHONE EXPENSES. 20. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT IT WAS OBSERVED BY THE ASSESSING OFFICER THAT OUT OF TOTAL EXPENSES OF RS. 3 66 008/- A SUM OF RS.32 407/- WAS IN RESPECT OF RESIDENTIAL TELEPHONE AND RS.64 665/- WAS IN RESPECT OF MOBILE TELEPHONE. THE ASSESSING OFFI CER RELYING ON THE DECISION IN THE CASE OF AMBIKA MILLS VS. CIT 235 ITR 264 (GUJ.) DISALLOWED RS.30 000/- ON ACCOUNT OF PERSONAL USE O F PHONES. ON APPEAL THE LD. CIT(A) WHILE AGREEING WITH THE REASONING OF THE ASSESSING OFFICER CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OF FICER. 21. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFOR E THE LD. CIT(A) FURTHER SUBMITS THAT SINCE THE ASSESSEE IS ENGAGED IN THE BUSINESS OF EXPORT THE TELEPHONE LINE AT THE RESIDENCE WAS ALS O USED FOR BUSINESS PURPOSES BECAUSE OF DIFFERENCE IN TIME ZONES OF DIF FERENT COUNTRIES THEREFORE THE EXPENSES INCURRED BY THE ASSESSEE ON TELEPHONES ARE FOR BUSINESS PURPOSES AND ARE ALLOWABLE. 22. ON THE OTHER HAND THE LD. DR SUBMITS THAT THE P ERSONAL USE OF RESIDENTIAL PHONE HAS NOT BEEN RULED OUT THEREFORE THE DISALLOWANCE SUSTAINED BY THE LD. CIT(A) BE UPHELD. 23. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE FIND T HAT THE ASSESSEE HAS NOT PLACED ANY MATERIAL TO SHOW THAT THE RESIDENTIA L TELEPHONES HAVE NOT BEEN USED FOR PERSONAL PURPOSES. HOWEVER KEEPING IN VIEW THAT THE ASSESSEE HAS USED THE RESIDENTIAL TELEPHONE FOR BUS INESS PURPOSES BECAUSE OF DIFFERENCE IN TIME ZONES OF DIFFERENT CO UNTRIES WHICH HAS NOT BEEN CONTROVERTED BY THE REVENUE WE ARE OF THE VIEW THAT THE DISALLOWANCE OF RS.30 000/- MADE BY THE ASSESSING O FFICER IS ON HIGHER SIDE AND ACCORDINGLY THE SAME IS REDUCED TO RS.20 0 00/- . THE ASSESSEE ITA NO.2728/M/08 A.Y:03-04 8 GETS A RELIEF OF RS.10 000/- ON THIS ACCOUNT. THE GROUND TAKEN BY THE ASSESSEE IS THEREFORE PARTLY ALLOWED. 24. IN GROUND NO.V THE ASSESSEE CONTENDED THAT THE BANK INTEREST RECEIVED SHOULD BE TREATED AS INCOME FROM BUSINESS AND THERE SHOULD BE NO REDUCTION OF EXPORT PROFITS TO CALCULATE DEDUCTI ON U/S.80 HHC. 25. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT IN THE COURSE OF THE ASSESSMENT PROCEEDINGS IT WAS FOUND BY THE ASSESSI NG OFFICER THAT THE ASSESSEE HAS CREDITED INTEREST OF RS.11 73 823/- TO THE PROFIT AND LOSS ACCOUNT ON WHICH DEDUCTION U/S.80HHC WAS CLAIMED. I N THIS RESPECT VERIFICATION OF THE TDS CERTIFICATES SHOWED THAT TH E ASSESSEE HAS RECEIVED BANK INTEREST TO THE EXTENT OF RS.20 47 120/- IN RE SPECT OF FDS IN BANKS AND ALSO INTEREST OF RS.73 500/- FROM M/S. YOGI ENT ERPRISES. THE ASSESSEE HAS NETTED THE INTEREST RECEIVED AGAINST INTEREST P AID FOR THE PURPOSE OF BUSINESS AND CREDITED THE INTEREST OF RS.11 73 823/ - TO THE P&L ACCOUNT AND CLAIMED DEDUCTION U/S.80HHC. IT WAS THE ASSESSEE 'S SUBMISSION THAT THE AMOUNT IS NET OFF OF INTEREST PAID ON BILL DISC OUNTING AND OVERDRAFT FACILITY AVAILED BY THE ASSESSEE WHICH WAS USED FOR THE EXPORT BUSINESS. THE ASSESSEE HAS RELIED ON THE VARIOUS DECISIONS AS MENTIONED AT PARA-5 OF THE ASSESSMENT ORDER. THE ASSESSEE'S CONTENTION WAS NOT ACCEPTED BY THE ASSESSING OFFICER IN VIEW OF PROVISIONS OF EXPL ANATION (BAA) TO SECTION 80 HHC INTRODUCED W.E.F. 1.4.1992. THE DECISIONS REL IED ON BY THE ASSESSEE WERE FOUND BY THE ASSESSING OFFICER AS RE LATING TO ASSESSMENT YEARS PRIOR TO THE ASSESSMENT YEAR 1992-93. IN THE LIGHT OF THIS IN TERMS OF EXPLANATION (BAA) TO SECTION 80 HHC THE ASSESSING OFFICER REDUCED 90% OF THE INTEREST IN THE COMPUTATION OF DEDUCTION U/S.80 HHC. BEFORE THE LD. CIT(A) IT WAS SUBMITTED BY THE ASSESSEE THA T THE FIXED DEPOSITS KEPT WITH THE NATIONALIZED BANKS ARE PURELY FOR THE PURPOSE OF OBTAINING BANKING FACILITIES. IT WAS ALSO SUBMITTED THAT THE ASSESSING OFFICER HAS CONSIDERED 90% OF THE TOTAL INTEREST OF RS. 21 20 620/- AND NOT THE NET AMOUNT OF RS.11 73 823/-. RELIANCE WAS ALSO PLACED IN (I) LEATHERAGE VS. ITO 86 ITD 482; 78 TTJ 937(LUCK.); (II) ITO VS. SHR EEJI EXPORTS 357 MUM ITA NO.2728/M/08 A.Y:03-04 9 2001; (III) LALSONS ENTERPRISES VS. DCIT 82 TTJ 104 8 (DEL.); AND CIT VS. BANGALORE CLOTHING CO. 127 TAXMANN 637 (BOM.). THE LD. CT(A) AFTER CONSIDERING THE ASSESSEE'S SUBMISSION OBSERVED THAT THE INTEREST INCOME IS NOT GERMANE TO ASSESSEE'S BUSINESS ACTIVITIES. THE GENESIS OF THE INTEREST INCOME LIES IN FIXED DEPOSITS WITH BANK A SSESSABLE IN TERMS OF SEC. 56 OF THE ACT AND FOR THIS PROPOSITION HE ALSO PLACED RELIANCE IN (I) TUTICORIN ALKALIES CHEMICALS & FERTILIZER LTD. 227 ITR 172(SC); (II) PANDIAN CHEMICALS LTD. VS. CIT 262 ITR 278 (SC); (III) CIT VS. DR. V.P. GOPINATHAN 248 ITR 449(SC); (IV) CIT VS. RAVIRATNA EXPORTS PVT . LTD. 246 ITR 443 (BOM.) AND (V) CIT VS. SHRI RAM HONDA POWER EQUIP 28 9 ITR 475(DEL.) AND ACCORDINGLY HE HELD THAT THE INTEREST INCOME I S LIABLE TO BE ASSESSED AS INCOME FROM OTHER SOURCES AND TAKEN OUT OF THE E QUATION OF DEDUCTION U/S.80HHC. WITH REGARD TO THE NETTING OFF OF INTERES T THE LD. CIT(A) IN VIEW OF THE DECISION IN LALSONS ENTERPRISES VS. DCI T 82 TTJ 1048(DEL.)(SB) OBSERVED THAT THE ASSESSEE HAS NOT B EEN ABLE TO ESTABLISH THE NEXUS AND FURTHER AS PER ACCOUNTING PRINCIPLES THERE CANNOT BE A PROFIT AND LOSS ACCOUNT WITHIN A PROFIT AND LOSS ACCOUNT A ND ACCORDINGLY CONFIRMED THE ASSESSING OFFICERS ACTION IN THIS RE GARD. 26. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFOR E THE LD. CIT(A) FURTHER SUBMITS THAT THE LD. CIT(A) WAS NOT JUSTIFI ED IN UPHOLDING THE VIEW OF THE ASSESSING OFFICER THAT THE INTEREST INCOME I S ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES AS THE SAME WAS EARN ED OUT OF EXPORT BUSINESS . HE FURTHER SUBMITS THAT NETTING OFF OF I NTEREST IS GENERALLY ACCEPTED ACCOUNTING PRINCIPLE THEREFORE THE LD. C IT(A) WAS NOT JUSTIFIED IN SUSTAINING THE REDUCTION OF CLAIM U/S. 80HHC AND T HE SAME BE DELETED. 27. ON THE OTHER HAND LD. DR WHILE RELYING ON THE O RDER OF THE ASSESSING OFFICER AND LD. CIT(A) ALSO RELIED ON THE RECENT DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN CIT VS. ASIAN ST AR CO. LTD. WHEREIN EVEN THE NETTING OFF OF INTEREST WAS NOT ALLOWED FO R THE PURPOSE OF DEDUCTION U/S.80 HHC OF THE ACT. ITA NO.2728/M/08 A.Y:03-04 10 28. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE F IND THAT THE FACTS ARE NOT IN DISPUTE. WE FURTHER FIND THAT THE INTEREST INCOME EARNED BY THE ASSESSEE OUT OF SURPLUS FUNDS WITH THE BANK IS BEYO ND THE FIRST DEGREE OF NEXUS OF THE PROFITS EARNED BY THE ASSESSEE FROM EX PORT BUSINESS. IN CIT VS. M/S. ASIAN STAR COMPANY IN INCOME TAX APPEAL N O.200 OF 2009 DATED 18/19.3.2010 RELIED ON BY THE LD. DR THEIR LORD SHIPS WHILE HOLDING IN PARA 21 OF THE JUDGMENT THAT THE VIEW TAKEN BY THE SPECIAL BENCH OF THE TRIBUNAL IN LALSONS ENTERPRISES (2004) 89 ITD 25(SB ) IS IMPERMISSIBLE HAS HELD AS UNDER :- 22. IN THE CIRCUMSTANCES WE ALLOW THE APPEAL BY HOLDING THAT THE TRIBUNAL WAS NOT JUSTIFIED IN COMI NG TO THE CONCLUSION THAT THE NET INTEREST ON FIXED DEPOSITS IN THE BANK RECEIVED BY THE ASSESSEE SHOULD BE CONSIDERED FOR THE PURPOSES OF WORKING OUT THE DEDUCTION UNDER SECTION 80HHC AND NOT THE GROSS INTEREST. THE QUESTION OF LAW WO ULD ACCORDINGLY STAND ANSWERED IN THE AFORESAID TERMS I N FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. THERE SHA LL BE NO ORDER AS TO COSTS. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGH T ON RECORD BY THE LD. COUNSEL FOR THE ASSESSEE WE RESPECTFULLY FOLLOWING THE RECENT JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT SUPRA UPHOLD THE ORDER PASSED BY THE LD. CIT(A) ON THIS ACCOUNT. THE GROUND TAKEN BY THE ASSESSEE IS THEREFORE REJECTED. 29. IN THE RESULT ASSESSEE'S APPEAL STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 9.9.2010. SD/- SD/- (R.K. PANDA) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 9.9.2010. JV. ITA NO.2728/M/08 A.Y:03-04 11 COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI.