DCIT, New Delhi v. M/s Sahdev Jewellers,, New Delhi

ITA 2963/DEL/2010 | 2002-2003
Pronouncement Date: 27-08-2010 | Result: Allowed

Appeal Details

RSA Number 296320114 RSA 2010
Bench Delhi
Appeal Number ITA 2963/DEL/2010
Duration Of Justice 2 month(s) 13 day(s)
Appellant DCIT, New Delhi
Respondent M/s Sahdev Jewellers,, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 27-08-2010
Appeal Filed By Department
Order Result Allowed
Bench Allotted G
Tribunal Order Date 27-08-2010
Assessment Year 2002-2003
Appeal Filed On 14-06-2010
Judgment Text
ITA NOS. 2963 2969 2968 & 2967/DEL/2010 A.YRS. : 2002-03 2004-05 2005-06 & 2007-08 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI I.P. BANSAL JUDICIAL MEMBER AND SHRI B.C. MEENA ACCOUNTANT MEMBER I.T.A. NOS. 2963 2969 2968 & 2967/DEL/2010 A.YRS. : 2002-03 2004-05 2005-06 & 2007-08 DY. COMMISSIONER OF INCOME TAX CIRCLE-33(1) NEW DELHI VS. M/S SAHDEV JEWELLERS 2481/9 2 ND FLOOR GURUDWARA ROAD KAROL BAGH NEW DELHI (PAN: AALFS-0015-Q) (APPELLANT ) (RESPONDENT ) ASSEESSEE BY : SH. ANIL SHARMA ADVOCATE DEPARTMENT BY : SH. A.K. MONGA SR. D.R. PER I.P. BANSAL : JM THESE ARE THE APPEALS FILED BY THE REVENUE. THEY ARE DIRECTED AGAINST THE SEPARATE ORDERS OF EVEN DATED 30.3.2010 PASSED BY T HE LD. COMMISSIONER OF INCOME TAX (APPEALS) FOR THE ASSESSMENT YEAR 2002-0 3 2004-05 2005-06 & 2007-08 RESPECTIVELY. 2. THE GROUNDS IN ALL THE AFORESAID APPEALS ARE IDE NTICAL AND READ AS UNDER:- WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CAS E LD. C.I.T.(A) WAS RIGHT IN ALLOWING THE BENEFIT OF NETTING OF INT EREST PAID BY THE ASSESSEE FOR THE PURPOSE OF BORROWING FOR INVESTME NT IN FDRS FOR BUSINESS PURPOSES AGAINST THE INTEREST INCOME ON S UCH FDRS WHICH FALL UNDER THE HEAD INCOME FROM OTHER SOURCES. ITA NOS. 2963 2969 2968 & 2967/DEL/2010 A.YRS. : 2002-03 2004-05 2005-06 & 2007-08 2 3. THE ASSESSEE IN THE PRESENT CASE IS 100% EXPORT ORIENTED UNIT AND IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORT OF GOLD JEWELLERY IN NOIDA SPECIAL ECONOMIC ZONE (SEZ). THE ASSESSEE IS ENTIT LED FOR EXEMPTION U/S 10A FOR THE YEARS UNDER CONSIDERATION. 3.1 SINCE THE ISSUE INVOLVED IN ALL THESE APPEALS ARE IDENTICAL AND THE BASIS OF MAKING ADDITION IS ALSO IDENTICAL THEREFORE WE WI LL DISCUSS THE FACTS RELATED TO ASSESSMENT YEAR 2002-03 AND THE DECISION TAKEN THER EON WILL BE APPLICABLE IN ALL THE OTHER APPEALS. 3.2 THE ORIGINAL RETURN WAS FILED DECLARING NIL I NCOME AFTER CLAIMING DEDUCTION U/S 10A @ 100% OF THE BUSINESS PROFITS BE ING RS. 59 00 324/-. NOTICE U/S 148 DATED 13.3.2006 WAS ISSUED IN RESPONSE TO WHICH ANOTHER RETURN OF INCOME WAS FILED DECLARING NIL INCOME AFTER CLAIMIN G DEDUCTION U/S 10A @100% OF THE REVISED BUSINESS PROFITS OF RS. 6 94 22 784/ -. THE SAME WAS ASSESSED VIDE ASSESSMENT ORDER U/S 147 READ WITH SECTION 143(3) D ATED 22.12.2006. THE REASSESSMENT PROCEEDINGS WERE AGAIN INITIATED BY IS SUE OF NOTICE DATED 27.3.2009 AFTER RECORDING THE REASONS WHICH HAVE BEEN REPRODU CED IN THE ASSESSMENT ORDER. IN THE REASON IT HAS BEEN RECORDED THAT THE ASSESS EE HAS GIVEN MARGIN MONEY IN THE FORM OF FIXED DEPOSITS TO GET CREDIT FACILITY F ROM THE BANK. THE FIXED DEPOSITS WERE BEING MADE WITH THE BANK ON ACCOUNT OF MARGIN MONEY. THE ASSESSEE RECEIVED INTEREST ON FDR AND PAID INTEREST ON LOANS RECEIVED AND THE INTEREST INCOME SO EARNED BY THE ASSESSEE WAS TREATED AS BUS INESS INCOME ON WHICH EXEMPTION U/S 10A WAS CLAIMED. IT WAS CLAIMED BY TH E ASSESSEE THAT INTEREST PAID TO BANK HAD A NEXUS WITH THE INTEREST RECEIVED ON FDRS AND THEREFORE NETTING OF ITA NOS. 2963 2969 2968 & 2967/DEL/2010 A.YRS. : 2002-03 2004-05 2005-06 & 2007-08 3 WAS REQUIRED TO BE MADE. THE SAME WAS DENIED TO THE ASSESSEE IN ASSESSMENT YEAR 2006-07 WHEREBY INTEREST INCOME WAS ASSESSED AS INCOME FROM OTHER SOURCES AS THE SAME WAS NOT DERIVED FROM EXPORTS I N THE LIGHT OF THE VARIOUS JUDICIAL PRONOUNCEMENTS. IT WAS FURTHER NOTICED TH AT TOTAL EXPENDITURE ON BANK INTEREST INCURRED BY THE ASSESSEE DURING THE YEAR W AS RS. 28 35 257/- WHEREAS ONLY A SUM OF RS. 18 95 966/- WAS DEBITED TO THE PR OFIT AND LOSS ACCOUNT AND THUS ASSESSEE AFTER NETTING OF HAS ARRIVED AT INTEREST R ECEIVED FROM FDRS AMOUNTING TO RS. 9 39 771/- AND THE SAID INCOME WAS CONSIDERED TO HAVE ESCAPED ASSESSMENT AND FOR THAT REASON THE ASSESSMENT WAS REOPENED. IN THIS MANNER A SUM OF RS. 8 79 179/- BEING INTEREST EARNED ON FDRS HAS BEEN EXCLUDED FROM THE INCOME FORM BUSINESS OR PROFESSION AND HAS BEEN ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. THUS INCOME HAS BEEN ASSESSED AT A SUM OF RS. 8 79 179/- AGAINST THE NIL INCOME. 4. AGGRIEVED ASSESSEE FILED AN APPEAL BEFORE THE L D. COMMISSIONER OF INCOME TAX (APPEALS) AND LD. COMMISSIONER OF INCOME TAX (A PPEALS) HAS UPHELD THE ACTION OF THE ASSESSING OFFICER REGARDING CHARACTE R OF THE INCOME EARNED BY WAY OF INTEREST ON FDRS BEING ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. HOWEVER REFERRING TO THE ORDER OF THE IT AT FOR A.Y. 2003-04 HE HAS HELD THAT BENEFIT OF NETTING HAS TO BE ALLOWED TO THE ASSESSEE. IT IS AGAINST SUCH FINDINGS OF LD. COMMISSIONER OF INCOME TAX (APPEALS ) THE ASSESSEE IS AGGRIEVED HENCE IN APPEAL BEFORE US. ITA NOS. 2963 2969 2968 & 2967/DEL/2010 A.YRS. : 2002-03 2004-05 2005-06 & 2007-08 4 5. FOR THE SAKE OF CONVENIENCE AND FOR THE SAKE OF CLARITY THE RELEVANT PORTION OF THE ORDER OF LD. COMMISSIONER OF INCOME TAX (AP PEALS) AS CONTAINED IN PARA 5 TO 5.2 IS REPRODUCED BELOW:- I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE IN THE LIGHT OF THE RELEVANT JUDICIAL PRONOUNCEMENTS AS ALSO THE DECISION OF THE ITAT NEW DELHI IN THE CASE OF THE APPELLANT ON IDENTICAL FACTS FOR THE AS SESSMENT YEAR 2003-04. I FIND THAT THE HONBLE ITAT NEW DELHI HAD WHILE DE CIDING THE ISSUE OF ALLOWING THE BENEFIT OF NETTING OF INTEREST PAID ON BORROWING MADE FOR THE PURPOSE OF MAKING INVESTMENT IN FDRS AGAINST THE IN TEREST INCOME DERIVED ON SUCH FDRS HAD HELD AS UNDER:- WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT IS NO TICED THAT THE GROUND AS RAISED BY THE REVENUE DOES NOT ARISE OU T OF THE ORDER OF THE LD. C.I.T.(A) AS THE LD. C.I.T.(A) HAS NOT HELD THAT THE INTEREST ON THE FDRS WAS TO BE ASSESSED AS INCOME FROM BUSINES S. IN FACT THE LD. C.I.T.(A) HAS HELD THAT THERE WAS A CLOSE NEXU S BETWEEN THE LOANS TAKEN FOR THE PURPOSE OF GIVING OUT BANK GUARANTE ES AND THE LOANS FORM THE BANKS WERE ON THE BASIS OF FIXED DEPOSITS GIVEN AS MARGIN MONEY. CONSEQUENTLY THE INTEREST PAID TO THE BANK S SHOULD BE ALLOWED TO BE NETTED AGAINST THE INTEREST RECEIVED FROM THE BANKS. IT IS NOTICED THAT THE FINDING OF THE LD. C.I.T.(A) IS IN LINE WITH THE DECISION OF THE HONOURABLE JURISDICTIONAL HIGH COU RT REFERRED TO SUPRA AND CONSEQUENTLY THE FINDINGS OF THE LD. C.I .T.(A) ON THIS ISSUE STANDS UPHELD. IN VIEW OF THE ABOVE SINCE THE BENEFIT OF DECISION OF THE JURISDICTIONAL ITAT ON THE IDENTICAL FACTS IN THE CASE OF THE APPE LLANT IS ALREADY AVAILABLE I HOLD THAT THE LD. A.O. WAS JUSTIFIED IN TREATING THE INTEREST INCOME OF THE APPELLANT FIRM ORDER ON FDRS AS INCOME FROM OTHER SOURCES. FURTHER SINCE THERE IS A DIRECT AND CLOSE NEXUS BETWEEN THE INTEREST PAID ON FDRS ITA NOS. 2963 2969 2968 & 2967/DEL/2010 A.YRS. : 2002-03 2004-05 2005-06 & 2007-08 5 AND THE INTEREST EARNED ON THE FDRS RESPECTFULLY T HE DECISION OF THE HONOURABLE ITAT IN THE CASE OF THE APPELLANT FOR A WHILE 2003-04 I ALLOW THE BENEFIT OF NEETING OF INTEREST PAID BY THE APPE LLANT FIRM FOR THE PURPOSE OF BORROWING FOR MAKING INVESTMENT IN FDRS AGAINST INCOME EARNED ON SUCH FDRS. HELD ACCORDINGLY. 6. AFTER NARRATING THE FACTS IT WAS VEHEMENTLY SUB MITTED BY THE LD. DEPARTMENTAL REPRESENTATIVE THAT ASSESSABILITY OF T HE INTEREST EARNED ON FDR HAS BEEN HELD TO BE UNDER THE HEAD INCOME FROM OTHER S OURCES AND TO THAT EXTENT THE ASSESSEE HAS NO GRIEVANCE AS HE DID NOT FILE A NY APPEAL AGAINST THAT ORDER. LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT IF IT IS SO THEN THE EXPENDITURE WHICH CAN BE ALLOWED OUT OF SUCH INCOME IS AND SHOU LD BE IN ACCORDANCE WITH SECTION 57 WHICH REGULATES THE DEDUCTIONS WHICH ARE PERMISSIBLE OUT OF INCOME CHARGEABLE UNDER THE HEAD INCOME FROM OTHER SOURCE S. HE SUBMITTED THAT IN THE CASE OF ASSESSEE CLAUSE (III) OF SECTION 57 WIL L GOVERN THE CASE WHICH READS AS UNDER:- ANY OTHER EXPENDITURE (NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE) LAID OUT OR EXPENDED WHOLLY OR EXCLUSIVELY FOR THE PUR POSE OF MAKING OR EARNING SUCH INCOME. 6.1 HE CONTENDED THAT NO DOUBT NETTING OF WILL BE P ERMISSIBLE TO THE ASSESSEE ONLY TO THE EXTENT OF EXPENDITURE WHICH HAS BEEN LA ID OUT OR EXPENDED WHOLLY OR EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNING S UCH INCOME. HE SUBMITTED THAT THOUGH LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS HELD THAT CHARACTER OF INCOME EARNED BY THE ASSESSEE FROM FDR IS OF INCOM E FORM OTHER SOURCES BUT HE HAS NOT GIVEN ANY FINDING THAT THE INTEREST WHICH H AS BEEN SOUGHT TO BE NETTED OF BY THE ASSESSEE HAS BEEN LAID OUT OR EXPENDED BY TH E ASSESSEE WHOLLY OR ITA NOS. 2963 2969 2968 & 2967/DEL/2010 A.YRS. : 2002-03 2004-05 2005-06 & 2007-08 6 EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNING TH AT INCOME. HE CONTENDED THAT NO DOUBT THE TRIBUNAL IN ASSESSEES OWN CASE FOR A. Y. 2003-04 HAS HELD THAT SUCH NETTING IS PERMISSIBLE BUT THE AMOUNT WHICH HAS TO BE NETTED OF HAS TO BE QUANTIFIED AND WHICH EXERCISE HAS NOT BEEN DONE BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). THEREFORE HE SUBMITTED THAT ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) TO THAT EXTENT SHOULD BE SET ASIDE AND ASSESSING OFFICER MAY BE DIRECTED TO QUANTIFY THE AMOUNT DEDUCTIBLE U/S 57(III) OUT OF SUCH INCOME. 6.2 ON THE OTHER HAND LD. AUTHORISED REPRESENTATIV E RELYING ON THE ORDER OF THE TRIBUNAL THE RELEVANT PORTION WHEREOF HAS BEEN REPRODUCED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IN HIS ORDER SUBMITTED THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GIVEN THE RELIEF TO THE ASSESSEE BY FOLLOWING THE ORDER OF THE ITAT IN ASSESSEES OWN C ASE AND THEREFORE HIS ORDER SHOULD BE UPHELD. 7. WE HAVE CAREFULLY GONE THROUGH THE RIVAL SUBMISS IONS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. THE EARLIER ORDER OF T HE TRIBUNAL AS A MATTER OF PRECEDENT IS BINDING UPON THIS BENCH. THE TRIBU NAL IN ASSESSEES OWN CASE HAS CONFIRMED THAT THE INTEREST INCOME EARNED BY THE AS SESSEE FROM FDR IS TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES . IF IT IS SO THEN WHAT CAN BE ALLOWED AS A DEDUCTION OUT OF SUCH INCOME HAS TO BE SEEN IN THE LIGHT OF SECTION 57. THE RELEVANT PORTION OF SECTION 57 HA S ALREADY BEEN REPRODUCED. THE ASSESSEE CANNOT BE ALLOWED TO HAVE BENEFIT IN E XCESS OF STATUTORY PROVISIONS GOVERNING A PARTICULAR HEAD OF INCOME. ITA NOS. 2963 2969 2968 & 2967/DEL/2010 A.YRS. : 2002-03 2004-05 2005-06 & 2007-08 7 7.1 THEREFORE WE FOUND FORCE IN THE CONTENTION OF THE LD. DEPARTMENTAL REPRESENTATIVE THAT THE AMOUNT WHICH IS REQUIRED T O BE DEDUCTED AS PER SECTION 57(III) HAS TO BE DETERMINED. THOUGH LD. COMMISSI ONER OF INCOME TAX (APPEALS) HAS HELD THAT NETTING OF HAS TO BE GRANTED BUT HE HAS NOT QUANTIFIED THE AMOUNT WHICH CAN BE ALLOWED AS DEDUCTION AS PER THE PROVI SION OF SECTION 57(III). 7.2 THEREFORE WE CONSIDER IT JUST AND PROPER TO RES TORE THE ISSUE TO THE FILES OF THE ASSESSING OFFICER FOR A LIMITED PURPOSE OF D ETERMINING THE ALLOWABLE DEDUCTION STRICTLY IN THE MANNER PROVIDED IN SECTIO N 57(III) OF THE ACT. THE ASSESSING OFFICER AFTER GIVING ASSESSEE A REASONA BLE OPPORTUNITY OF HEARING WILL DETERMINE SUCH DEDUCTIBLE AMOUNT IN RESPECT OF AL L THE ASSESSMENT YEARS UNDER APPEAL AND AFTER DETERMINING THE SAME HE WILL ALLO W THE DEDUCTION THEREOF. WE DIRECT ACCORDINGLY. 8. IN THE RESULT ALL THE APPEALS FILED BY THE RE VENUE ARE ALLOWED FOR STATISTICAL PURPOSES IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON 27/08/2010. SD/- SD/- [B.C. MEENA] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 27/08/2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT DELHI BENCHES