ACIT, JODHPUR v. M/s.Ercon Composites, JODHPUR

ITA 426/JODH/2012 | 2009-2010
Pronouncement Date: 21-10-2013 | Result: Dismissed

Appeal Details

RSA Number 42623314 RSA 2012
Assessee PAN AABFE6551F
Bench Jodhpur
Appeal Number ITA 426/JODH/2012
Duration Of Justice 10 month(s) 7 day(s)
Appellant ACIT, JODHPUR
Respondent M/s.Ercon Composites, JODHPUR
Appeal Type Income Tax Appeal
Pronouncement Date 21-10-2013
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 21-10-2013
Date Of Final Hearing 18-10-2013
Next Hearing Date 18-10-2013
Assessment Year 2009-2010
Appeal Filed On 14-12-2012
Judgment Text
IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENC H : JODHPUR BEFORE SHRI HARI OM MARATHA JUDICIAL MEMBER AND SHRI N.K. SAINI ACCOUNTANT MEMBER. ITA NO.426/JODH/2012 (A.Y. 2009-10) ACIT CIRCLE-1 VS. M/S. ERCON COMPOSITES JODHPUR. F-123 MIA 2 ND PHASE BASNI JODHPUR. PAN NO. AABFE 6551 F (APPELLANT) (RESPONDENT) ITA NO.418/JODH/2012 (A.Y. 2009-10) ERCON COMPOSITES VS. ACIT CIRCLE-1 C/O SHRI U.C. JAIN ADVOCATE JODHPUR. SHATRUNJAY HARI SINGH NAGAR PALI ROAD JODHPUR. PAN NO. AABFE 6551 F (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI U.C. JAIN & SHRI RAJENDRA JAIN DEPARTMENT BY : SHRI N.A. JOSHI- D.R. DATE OF HEARING : 18/10/2013. DATE OF PRONOUNCEMENT : 21/10/2013. O R D E R PER N.K.SAINI A.M 2 THESE CROSS APPEALS BY THE DEPARTMENT AND THE ASSE SSEE ARE DIRECTED AGAINST THE ORDER DATED 04/10/2012 OF LD. CIT (A) JODHPUR. FIRST WE WILL DEAL WITH THE DEPARTMENTAL APPEAL IN ITA NO. 426/JODH/2012. THE FOLLOWING GROUNDS HAVE BEEN RAI SED IN THIS APPEAL:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT (A) HAS ERRED IN DELETING THE ADDITION:- 1. IGNORING THE FACT THAT THE AO HAD REJECTED BOOK RESULTS U/S 145(3) THOUGH IT HAS NOT BEEN MENTIONED IN THE ASSESSMENT ORDER AND MERE NON-MENTIONING OF PROVISIONS IN THE ASSESSMENT ORDE R IN NOT FATAL TO THE ASSESSMENT ORDER ITSELF. 2. IGNORING THE DEFECTS IN THE BOOKS OF ACCOUNT OF UNIT-I AS POINTED OUT BY THE AO ON PAGE 2 OF THE ASSESSMENT ORDER. 3. BY NOT TAKING INTO ACCOUNT FACTS AND FIGURE FAVO URABLE TO THE AOS FINDING SUBMITTED BY THE ASSESSEE VIDE ASSESSEES S UBMISSION DATED 23/07/2012. 4. WRONGLY APPRECIATING FACTS IN PARA 3.4 OF HIS OR DER AS THE AO HAD COMPARED RESULT OF UNIT-I WITH LAST YEAR AND ADDITI ON IS ALSO MADE BY APPLYING G.P. @ 35.54% OF UNIT-I LAST YEAR. 5. WRONGLY APPRECIATING FACTS IN PARA NO. 3.4.1 OF HIS ORDER IN REGARD TO AMOUNT OF RS. 248/- PER KG. FOR EOU AND RS. 221/- F OR NON-EOU BEING COST OF MATERIAL. THE APPELLANT CRAVES LEAVE TO ADD AMEND OR ALTER A NY OR ALL THE GROUND OF APPEAL ON OR BEFORE THE DATE THE APPEAL IS FINALLY HEARD FOR DISPOSAL. 2. FROM THE ABOVE GROUNDS IT WOULD BE CLEAR THAT ONL Y GRIEVANCE OF THE DEPARTMENT RELATES TO THE DELETION OF TRADING A DDITION MADE BY THE ASSESSING OFFICER. 3. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 28/09/2009 DECLARING NIL INCOME . THE ASSESSEE WAS 3 ENGAGED IN MANUFACTURING OF FRP/GRP SECTION CABLE TRAYS FIBER PRODUCTION ETC. BY RUNNING TWO UNITS AND THE UNIT-I I WAS AN EXPORT ORIENTED UNITS (EOU). THE ASSESSEE WAS ALSO ENGAGE D IN WIND POWER GENERATION. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD SHOWN LESS GP RATE AS C OMPARED TO LAST YEAR FOR ITS NON-EOU UNIT-I WHEREAS IT HAD SHOWN BETTER GP RATE FOR ITS EOU UNIT. THE ASSESSEE EXPLAINED BEFORE THE ASSESSING OFFICER THAT THE GP RATE FOR THE EOU UNIT WAS HIGHER AS IT WAS EXEMPTED FROM VAT CST EXCISE DUTY AND CUSTOMS DUTY. HOWEVER THE ASSESSI NG OFFICER WAS NOT SATISFIED AND CONCLUDED THAT THE ASSESSEE WAS DEBIT ING MAXIMUM PURCHASES AND MANUFACTURING EXPENSES TO EOU UNIT S O AS TO REDUCE THE PROFIT OF OTHER UNIT. CONSIDERING ALL THOSE FACTS THE ASSESSING OFFICER APPLIED THE GP RATE OF 35.54% FOR UNIT-I WHICH RES ULTED IN ADDITION OF RS. 40 77 246/-. 4. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LEARNED CIT(A) AND SUBMITTED THAT THE UNIT-I PURCHASED THE RAW-MATERIAL DOMESTIC AS WELL AS IMPORTED AND PAID EXCISE DUTY VAT IMPORT DUTY ON SUCH PURCHASES AND MANUFACTURED THE FINISHED GOODS FROM THOSE RAW- MATERIALS WHICH WAS MAINLY FIBER GLASS RESIN AND CHEMICALS WHICH ALMOST COMPRISED OF 80% OF THE TOTAL CONSUMPTION OF THE R AW-MATERIALS. 4 WHEREAS THE UNIT-II (EOU) PURCHASED ITS RAW-MATERIA L ON WHICH EXCISE DUTY VAT CUSTOM DUTY WERE EXEMPTED AS THOSE WERE USED IN THE MANUFACTURING OF GOODS EXPORTED OUT OF INDIA. IT W AS EXPLAINED THAT THE ASSESSEE MAINTAINED SEPARATE BOOKS OF ACCOUNTS SUCH AS PURCHASE BOOK SALES BOOK STOCK REGISTER CASH BOOK LEDGER EXCI SE REGISTER ETC. FOR BOTH THE CONCERNS THERE WAS NO CHANGE IN THE METHOD OF ACCOUNTING AND TRADING RESULTS FOR ALL THE EARLIER YEARS HAD BEEN ACCEPTED UNDER SECTION 143(3) OF THE I.T. ACT 1961 (HEREINAFTER REFERRED TO AS ACT IN SHORT). IT WAS CONTENDED THAT THE ASSESSING OFFICER MUST HA VE EXPRESSED THE DISSATISFACTION ABOUT THE CORRECTNESS OR COMPLETENE SS OF THE ACCOUNT AND MUST HAVE NOTED THAT SUCH SYSTEM WAS NOT REGULARLY FOLLOWED BY THE ASSESSEE BUT THE ASSESSING OFFICER HAD NOT POINTED OUT ANY DEFECT IN THE SALES OR PURCHASES. IT WAS FURTHER CONTENDED THAT T HE ASSESSEE MAINTAINED QUANTITATIVE DETAILS STOCK REGISTER AND THAT DURIN G THE YEAR UNDER CONSIDERATION THE INCREASE IN THE COST OF RAW-MATE RIAL ADVERSELY AFFECTED THE GP RATE. IT WAS STATED THAT THE SALES MARGINS IN THE EXPORT MARKET WERE COMPARATIVELY HIGHER THAN IN THE DOMESTIC MARK ET. THE ASSESSEE SUBMITTED TO THE LEARNED CIT(A) THAT MAIN RAW-MATER IAL WAS PURCHASED AND CONSUMED IN TERMS OF KGS WHEREAS THE FINISHED P RODUCTS WAS SOLD IN TERMS OF NUMBER OF UNITS & METERS AND THAT THE SELL ING PRICE WAS 5 DETERMINED ON THE BASIS OF RAW-MATERIAL CONSUMED AN D ITS MANUFACTURING SPECIFICATIONS. THE ASSESSEE HAD FURNISHED COMPARA TIVE CHART OF SALES PURCHASES AND EXPENSES INCURRED FOR BOTH THE UNITS WHICH REVEALED THAT THE SALE VALUE OF UNIT-II (EOU) WAS ONLY RS. 2 70 9 5 286/- AS AGAINST SALES VALUE OF UNIT-I (NON- EOU) AT RS. 6 55 64 739/-. T HUS THERE WAS A WIDE DIFFERENCE BETWEEN THE TWO SALES WHICH WAS DUE TO L ARGE VARIATION IN THE CAPACITY UTILIZATION OF THE TWO UNITS THEREFORE R ESULTS OF THE TWO UNITS WERE NOT COMPARABLE. IT WAS FURTHER STATED THAT DU E TO HIGHER MARGINS IN THE EXPORT SALES THE REALIZATION PER KG OF THE RAW -MATERIAL CONSUMED IN UNIT-II (EOU) HAD BEEN MORE THAN THE REALIZATION PE R KG OF RAW-MATERIAL CONSUMED FOR UNIT-I WHICH WAS APPARENT FROM THE IN FORMATION FURNISHED. IT WAS CLARIFIED THAT THE RAW-MATERIAL CONSUMED IN UNIT-I WAS ONLY RS. 248/- PER KG WHEREAS IN THE CASE OF EOU UNIT-II IT WAS RS. 221/- WHICH RESULTED INTO HIGHER GP RATE OF UNIT-II (EOU). IT WAS ALSO STATED THAT THE PURCHASE PRICE PER KG OF RAW-MATERIAL WAS LOWER IN CASE OF EOU UNIT DUE TO EXEMPTION FROM EXCISE DUTY VAT CUSTOMS DUTY ET C. IT WAS ALSO STATED THAT THE PURCHASE PRICE PER KG OF RAW-MATERI AL CONSUMED FOR NON- EOU UNIT WAS AT RS. 230.95 AND RS. 221.70 IN THE YE ARS 2009-10 I.E. THERE WAS A REDUCTION IN THE REALIZATION PER KG AS AGAINS T THIS THE PRICE OF RAW- MATERIAL PER KG HAD INCREASE FROM RS. 73.55 TO RS. 80.07 WHICH RESULTED 6 INTO LOWER GP RATE FOR THE A.Y. 2009-10 AS COMPARED TO THE A.Y. 2008-09. IT WAS FURTHER STATED THAT DEBITING MAXIMUM PURCHAS ES AND MANUFACTURING EXPENSES IN EOU UNIT WOULD NOT REDUCE THE PROFIT OF OTHER UNIT BUT INCREASE THE PROFIT OF OTHER UNITS. LEARN ED CIT(A) SENT THE WRITTEN SUBMISSION OF THE ASSESSEE TO THE ASSESSING OFFICER FOR HIS REMAND REPORT AND THE ASSESSING OFFICER STATED THAT REPLY OF THE ASSESSEE WAS GENERAL IN NATURE AND DID NOT GIVE ANY SPECIFIC REA SON FOR LOW GP. 5. LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSIONS O F THE ASSESSEE AND THE COMMENTS OF THE ASSESSING OFFICER DELETED THE ADDITION BY OBSERVING IN PARA 3.4 TO 3.4.2 OF THE IMPUGNED ORDE R WHICH ARE REPRODUCED VERBATIM AS UNDER:- 3.4. I HAVE CONSIDERED THE SUBMISSION OF THE APPELL ANT AND ORDER OF THE ASSESSING OFFICER AND I FIND THAT THE ASSESSING OFF ICER HAS NOT REJECTED THE BOOKS OF ACCOUNT NOR MENTIONED ANY SPECIFIC DEFECTS IN THE MAINTENANCE OF THE BOOKS OF ACCOUNT. THE ASSESSING OFFICER BEFORE APPLYING THE G.P. RATE OF PRECEDING YEAR OF UNIT - I COMPARED THE RESULTS OF BOTH THE CONCERNS. IN THIS REGARD IT IS TO BE NOTED THAT BOTH THE UNITS ARE D IFFERENT IN THE SENSE THAT ONE IS NON EXPORT ORIENTED AND OTHER EXPORT ORIENTE D. SO IT IS NOT GOOD IDEA TO COMPARE RESULTS OF BOTH THE CONCERNS. AS FAR AS TRADING RESULT IS CONCERNED I FIND THAT IN UNIT - I SALES HAS BEEN G ONE RS. 901.15 (AY 2008-09) LACS TO RS.727.53 LACS (AY 09-10) WHEREAS IN UNIT I I SALES WERE RS. 865.42 WHICH HAS BEEN DOWN TO RS. 271 .09 (AY 09-10). SO I N THAT SENSE THE ASSESSING OFFICER WAS NOT JUSTIFIED IN COMPARING TH E RESULTS OF BOTH THE CONCERNS. 3.4.1. FURTHER I FIND THAT IN THE ASSESSMENT ORDE R THE ASSESSING OFFICER NOWHERE DOUBTED THE PURCHASE AND SALES OF THE UNITS . THE APPELLANT IS MAINTAINING QUANTITY DETAILS AND STOCK REGISTER. FU RTHER IT IS NON DISPUTED 7 FACT THAT THE SALES MARGINS IN THE EXPORT MARKET AR E COMPARATIVELY HIGHER THAN THE DOMESTIC MARKET. FURTHER I FIND THAT IN TH E CASE OF EOU UNIT RAW MATERIAL USED AND CONSUMED WAS 248/- PER KG WHEREAS IN NON EOU IT WAS ONLY 221/-. SO THE PURCHASE PER KG OF RAW MATERIAL IS ALSO LOWER IN CASE OF EOU UNIT AS EXEMPTED FROM VARIOUS GOVT. TAXES. FURT HER I FIND THAT THE ASSESSING OFFICER HAS NOT GIVEN ANY INSTANCE OF DEB ITING THE EXPENSES / PURCHASES MORE OF ONE UNIT TO OTHER UNIT. 3.4.2. FURTHER I FIND THAT THE ASSESSING OFFICER H AS APPLIED THE G.P. RATE IN UNIT - I OF LAST PRECEDING YEAR. I FIND THAT THE G. P. RATE WAS 35.54% IN COMPARISON TO 29.94% DECLARED IN THE YEAR UNDER CON SIDERATION. IN THIS REGARD I FIND THAT THAT THE ASSESSING OFFICER HAS NOT POINTED OUT ANY SPECIFIC DEFECTS NOR REJECTED THE BOOKS OF ACCOUNT OF THE UN IT-L. THE ASSESSING OFFICER HAS NOT GIVEN ANY SIMILAR INSTANCE WHERE TH E G.P. RATE WAS DECLARED MORE THAN THAT OF DECLARED BY THE APPELLANT'S UNIT- I. IT IS SETTLED PROPOSITION OF LAW THAT FOR REJECTING THE BOOKS OF ACCOUNTS THE ASSESSING OFFICER MUST REFER TO THE INHERENT DEFECT IN THE SY STEM AND RECORD A CLEAR FINDING THAT THE SYSTEM OF ACCOUNTING FOLLOWED BY T HE ASSESSEE IS SUCH THAT CORRECT PROFITS CANNOT BE DEDUCED FROM THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE AS HAS BEEN HELD IN THE CASE OF CIT V S. MARGADARSI CHIT FUND (P) LTD. (155 ITR 442 AP.). IN THE INSTANT CASE TH ERE IS NO FINDING THAT THE BOOKS ARE SUCH THAT FROM WHICH CORRECT PROFIT CANNO T BE DEDUCED OR ASSESSEE DID NOT FOLLOW REGULAR METHOD OF ACCOUNTIN G. SO IN VIEW OF THE ABOVE DISCUSSION AND SUBMISSIO N OF THE APPELLANT I HOLD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED I N APPLYING THE G P. RATE OF PRECEDING YEAR I.E. 35.54% IN UNIT - L. THE ASSESSI NG OFFICER IS DIRECTED TO ACCEPT THE G.P. RATE SHOWN BY THE APPELLANT IN YEAR UNDER CONSIDERATION. THE GROUND OF APPEAL IS ALLOWED. NOW THE DEPARTMENT IS IN APPEAL. 6 . LEARNED D.R. STRONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND REITERATED THE OBSERVATIONS MADE IN THE ASSESSM ENT ORDER DATED 23/12/2011. 8 7. IN HIS RIVAL SUBMISSIONS LEARNED COUNSEL FOR THE ASSESSEE STRONGLY SUPPORTED THE IMPUGNED ORDER PASSED BY THE LEARNED CIT(A) AND REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORIT IES BELOW. IT WAS FURTHER STATED THAT THE ASSESSING OFFICER FAILED TO RECORD ANY SINGLE INSTANCE SUPPORTING HIS BASELESS PRESUMPTION THAT T HE ASSESSEE IS DEBITING MAXIMUM OF PURCHASES AND MANUFACTURING EXPENSES TO THE EOU UNIT. IT WAS STATED THAT THE ASSESSING OFFICER DID NOT POINT OUT ANY DEFECT IN THE RECORD MAINTAINED IN REGULAR COURSE OF BUSINESS TH EREFORE THE LEARNED CIT(A) RIGHTLY DELETED THE ADDITION MADE BY THE ASS ESSING OFFICER. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS:- 1. ITO VS. PRAKASH CHAND [100 TTJ (JD) 639] 2. GANESH FOUNDARY VS. ACIT [78 TTJ (JODHPUR) 736] 3. CIT VS. SMT. POONAM RANI [326 ITR 223 (DEL)] 4. ALUMINIUM INDUSTRIES (P) LTD. VS. CIT [80 TAXMA N 184 (GAU)] 5. KARNATAKA PLASTIC INDUSTRIES VS. ITO [13 TTJ (B ANG) 317] 6. ETCO ENGINEERING CO. VS. ITO [27 TTJ (HYD) 350] . 8. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PART IES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT CASE IT IS AN ADMITTED FACT THAT THE ASSESSING OFF ICER MADE THE ADDITION BY ESTIMATING THE GP RATE OF NON-EOU UNIT BY COMPAR ING THE SAME WITH 9 THE GP RATE OF EOU UNIT BUT IGNORED THIS VITAL FAC T THAT THE RAW-MATERIAL CONSUMED IN THE CASE OF EOU UNIT AND NON- EOU UNIT WAS NOT THE SAME. IN THE PRESENT CASE THE ASSESSING OFFICER PRESUMED THAT MAXIMUM OF PURCHASES AND MANUFACTURING EXPENSES WERE DEBITED T O THE EOU UNIT SO AS TO REDUCE THE PROFIT OF OTHER UNITS. IN OUR OPIN ION THE PRESUMPTION OF THE ASSESSING OFFICER IS WRONG BECAUSE HAD IT BEEN THE CASE THEN THE GP RATE OF THE OTHER UNITS WOULD HAVE BEEN ON HIGHER S IDE. IN THE INSTANT CASE IT IS AN ADMITTED FACT THAT THE ASSESSING OFF ICER HAD NOT INVOKED THE PROVISIONS OF SECTION 145(3) OF THE ACT AND THIS FA CT HAS BEEN ADMITTED EVEN IN G. NO.1 WHEREIN IT IS STATED THAT ASSESSIN G OFFICER HAD REJECTED THE BOOK RESULT UNDER SECTION 145(3) THOUGH IT HAS NOT BEEN MENTIONED IN THE ASSESSMENT ORDER. THEREFORE THE ADDITION ON E STIMATE BASIS WITHOUT REJECTING THE BOOKS OF ACCOUNTS WAS NOT JUSTIFIED. 9. FOR THE AFORESAID VIEW WE ARE ALSO FORTIFIED BY TH E JUDGMENT OF THE HON'BLE DELHI HIGH COURT RELIED BY THE LEARNED COU NSEL FOR THE ASSESSEE IN THE CASE OF CIT VS. SMT. POONAM RANI REPORTED IN (2010) 326 ITR 223 WHEREIN IT HAS BEEN HELD AS UNDER:- THE AO HAS NOT POINTED OUT ANY PARTICULAR DEFECT OR DISCREPANCY IN THE ACCOUNT BOOKS MAINTAINED BY THE ASSESSEE. THE CIT(A) WAS SATISFIED THAT THE ASSESSEE HAD FURNISHED COMPLETE DETAILS INCLUDING QUANTITATIVE DETAILS IN RESPECT OF PURCHASE OF RAW MATERIAL MANUFACTURE OF COPPER WIRE AND SALE OF THE FINISHED PRODUCTS. IN THESE CIRCUMSTANCES IT CANNOT BE APPRECIATED AS TO HOW THE ACCOUNTS 10 MAINTAINED BY THE ASSESSEE COULD HAVE BEEN SAID TO BE INCOMPLETE OR INACCURATE. IN FACT THE AO HAD NO MATERIAL BEFORE HIM TO TREAT THE ACCOUNTS OF THE ASSESSEE AS DEFECTIVE OR INCOMPLETE . 10. IN VIEW OF THE AFORESAID DISCUSSION WE DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT. 11. NOW WE WILL DEAL WITH THE APPEAL OF THE ASSESSEE I N ITA NO. 418/JODH/2012 . THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS A PPEAL:- 1. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN SUSTAINING DISALLOWANCE U/S 14A AMOUNTING TO RS. 15 05 443/-. 2. THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE T HE LD. CIT(A) ERRED IN TREATING THE GROUND OF APPEAL NO.3 RAISED BEFORE HI M AS PARTLY ALLOWED EVEN THOUGH AS PER DIRECTION GIVEN TO LD. AO IN THE LIGHT OF DECISION OF HON'BLE ITAT JODHPUR BENCH IN THE CASE OF M/S. SHRINATH GUN & CHEMICALS IN ITA NO. 527/JU/2009 THE ENTIRE CLAIM OF DEPRECIATION AMOUNTING TO RS. 27 24 662/- IS ALLOWA BLE AS SUCH THE GROUND OF APPEAL RAISED MAY KINDLY BE DIRECTED TO A LLOWED IN ENTIRETY. 3. THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE T HE LD. CIT(A) OUGHT TO HAVE DIRECTED TO ALLOW DEPRECATION ON THE AMOUNT WH ICH HAS BEEN DISALLOWED IN THE PRECEDING YEARS BY RECALCULATING THE DEPRECIATION ON WDV AND THUS ERRED IN DISMISSING THE GROUND OF APPE AL NO.4 RAISED BEFORE HIM. 4. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN UPHOLDING THE FINDING OF THE LD. AO THAT T HE INTEREST EARNED ON FDR BY THE ASSESSEE IS NOT A BUSINESS INCOME AND AS SUCH IS NOT ELIGIBLE FOR EXEMPTION U/S 10B AND THEREBY ERRED IN UPHOLDING THE ADDITION OF RS. 8 63 024/- 5. THAT THE PETITIONER MAY KINDLY BE PERMITTED TO R AISE ANY ADDITIONAL AND/OR ALTERNATIVE GROUND AT OR BEFORE THE HEARING OF THE APPEAL. 6. THE PETITIONER PRAYS FOR JUSTICE & RELIEF. 11 12. GROUND NO.2 WAS NOT PRESSED AS SUCH THE SAME IS DIS MISSED AS NOT PRESSED. WHILE GROUNDS NO. 5 & 6 ARE GENERAL IN N ATURE SO DO NOT REQUIRE ANY COMMENT ON OUR PART. 13. VIDE GROUND NO.1 THE GRIEVANCE OF THE ASSESSEE REL ATES TO THE SUSTENANCE OF DISALLOWANCE OF RS. 15 05 443/- MADE BY THE ASSESSING OFFICER UNDER SECTION 14A OF THE ACT. 14. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT T HE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICE D THAT THE ASSESSEE HAD INVESTED AROUND RS. 3 55 83 000/- IN MUTUAL FUN DS DURING THE YEAR AND THE INCOME FROM MUTUAL FUNDS DID NOT FORM PART OF TOTAL INCOME. HE ALSO OBSERVED THAT THE BALANCE OF THOSE INVESTMENTS IN THE YEAR WAS AT RS. 1 33 87 853/- FOR UNIT-I AND RS. 2 41 27 813/- FOR UNIT-II. THUS THE TOTAL INVESTMENT IN TAX FREE BONDS CAME TO RS. 3 75 15 666/-. THE ASSESSING OFFICER ALSO OBSERVED THAT THE ASSESSEE W AS PAYING HUGE INTEREST WHICH WAS DEBITED IN PROFIT & LOSS ACCOUN T THEREFORE THE PROVISIONS OF SECTION 14A OF THE ACT WERE APPLICABL E. THE ASSESSEE SUBMITTED TO THE ASSESSING OFFICER THAT THE PROVISI ONS OF SECTION 14A WERE NOT APPLICABLE BECAUSE NO PART OF INTEREST WAS PAID FOR INVESTMENT MADE. IT WAS FURTHER STATED THAT INTEREST PAID ON UNSECUR ED LOANS WAS GIVEN ON 12 THE OPENING BALANCE AND THE INTEREST TO THE PARTNER S WAS PAID AS PER THE PARTNERSHIP DEED WHICH WAS DEDUCTED FROM INCOME OF THE FIRM AND INCLUDED IN THE INCOME OF THE PARTNERS. THE ASSESS ING OFFICER HOWEVER DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESS EE AND MADE THE ADDITION OF RS. 15 05 443/- BY DISALLOWING THE INTE REST. 15. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LEARNED CIT(A) AND SUBMITTED THAT THE PURPOSE OF SECTION 14 A OF THE ACT WAS NOT TO ENHANCE THE TAX LIABILITY BUT TO CORRECT THE TA X LIABILITY AND IN THIS CASE DISALLOWANCE WAS MADE AT RS. 15 05 443/- AS A GAINST DIVIDEND INCOME OF RS. 4 84 180/-. IT WAS STATED THAT NO MO NEY HAD BEEN BORROWED BY THE ASSESSEE DIRECTLY OR INDIRECTLY FOR MAKING THE INVESTMENT IN THE MUTUAL FUNDS AND NO LOAN WAS RAISED DURING T HE YEAR UNDER CONSIDERATION WHEN THE INVESTMENT WERE MADE IN THE MUTUAL FUND. IT WAS FURTHER STATED THAT AS PER THE DEFINITION OF THE IN TEREST MENTIONED IN SECTION 2 (28A) OF THE ACT THE INTEREST PAYABLE IN ANY MANNER IN RESPECT OF ANY MONEY BORROWED OR DEBIT INCURRED (INCLUDING A DEPOSIT CLAIMED OR OTHER SIMILAR RIGHT OF OBLIGATION) AND INCLUDED ANY SERVICE FEE OR OTHER CHARGE IN RESPECT OF THE MONEYS BORROWED OR DEBIT I NCURRED OR IN RESPECT OF ANY CREDIT FACILITY WHICH HAD BEEN UTILIZED. IT WAS STATED THAT THE PARTNERS CAPITAL WAS NOT BORROWED OR DEBIT INCURRED FOR A FIRM HENCE 13 THE INTEREST ON PARTNERS CAPITAL WAS OUT OF THE PU RVIEW OF THE INTEREST. THEREFORE THE QUESTION OF DISALLOWANCE UNDER SECTI ON 14A OF THE ACT DID NOT ARISE. 16. LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE PROVISIONS OF SECTION 14A WERE AP PLICABLE WHERE THE CLAIM OF THE ASSESSEE WAS IN RESPECT OF THE EXPENDI TURE INCURRED FOR THE INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME. HE FURTHER OBSERVED THAT THE ASSESSEE HAD INVESTED RS. 3 55 83 000/- IN MUTUAL FUNDS INCOME OF WHICH DID NOT FORM PART OF TOTAL INCOME AND THA T THE ASSESSEE CLAIMED INTEREST PAID ON BORROWINGS IN THE PROFIT & LOSS AC COUNT FOR WHICH NO SATISFACTORY EXPLANATION HAD BEEN PROVIDED. LEARNE D CIT(A) AFFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. RELIAN CE WAS PLACED ON THE FOLLOWING CASE-LAWS:- 1. PRADEE KAR VS. ACIT 319 ITR 416 (KAR.) 2. CIT VS. SMT. RAMACHANDRAN 339 ITR 296 (KER.) NOW THE ASSESSEE IS IN APPEAL. 17. LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SU BMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT BEFORE INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT IT WAS RE QUIRED TO BE PROVED THAT 14 THE ASSESSEE HAD CLAIMED EXPENSES WHICH RELATED TO THE INCOME WHICH DID NOT FORM PART OF THE TOTAL INCOME AND THE ONUS WAS ON THE REVENUE TO ESTABLISH THAT ANY EXPENDITURE CLAIMED BY THE ASSES SEE WAS IN RELATION TO INCOME WHICH DID NOT FORM PART OF THE TOTAL INCOME . IT WAS STATED THAT IN THIS CASE BOTH THE ASSESSING OFFICER AND THE LE ARNED CIT(A) FAILED TO ESTABLISH THAT THE INTEREST EXPENDITURE WAS INCURRE D FOR EARNING THE EXEMPT INCOME WHICH DID NOT FORM PART OF THE TOTAL INCOME. IT WAS STATED THAT THE INTEREST PAYMENT TO THE THIRD PARTI ES WAS ONLY RS. 3 94 533/- AND THE BORROWING ON WHICH SUCH INTEREST WAS PAID WAS BORROWED AT THE TIME OF START OF BUSINESS SO IT C OULD NOT BE LEAD TO INFERENCE THAT SUCH INTEREST EXPENSES INCURRED FOR EARNING INCOME WHICH DID NOT FORM PART OF THE TOTAL INCOME. IT WAS FURT HER STATED THAT THE INTEREST PAID ON THE PARTNERS CAPITAL ACCOUNT COUL D NOT BE PRESUMED AS EXPENDITURE INCURRED FOR EARNING INCOME WHICH DID NOT FORM PART OF THE TOTAL INCOME BECAUSE AS PER THE PROVISIONS OF SECTI ON 40(B) OF THE ACT THE INTEREST UPTO 12% P.A. WAS ALLOWABLE AS BUSINES S EXPENDITURE AND SUCH ALLOWABLE EXPENSES OUGHT TO HAVE BEEN PRESUMED AS BUSINESS EXPENDITURE UNLESS PROVED TO BE CONTRARY BY THE REV ENUE. IT WAS STATED THAT NEITHER THE ASSESSING OFFICER NOR LEARNED CIT (A) RECORDED IN ANY REASON AS TO WHY AND HOW THE INTEREST EXPENDITURE C LAIMED BY THE 15 ASSESSEE WAS NOT BUSINESS EXPENDITURE AND WAS INCUR RED FOR THE EARNING OF DIVIDEND INCOME ON MUTUAL FUND INVESTMENT. IT W AS EMPHASIZED THAT THE ASSESSEE WAS PAYING INTEREST TO THE PARTNERS ON LY ON FIXED CAPITAL AND SHARE OF INCOME FROM YEAR TO YEAR WAS CREDITED TO C URRENT CAPITAL ACCOUNT WHICH WAS RS. 8 76 43 107/- AS ON 31/03/200 9 AND RS. 8 51 36 613/- AS ON 31/03/2008 AS COMPARED TO TOTAL INVESTMENT IN MUTUAL FUND FOR RS. 3 57 36 861/- AS ON 31/03/2009 AND RS. 3 13 64 086/- AS ON 31/03/2008 AS SUCH THERE WAS MO RE THAN SUFFICIENT NON-INTEREST BEARING FUND AVAILABLE WITH THE ASSESS EE THEREFORE IT COULD NOT BE PRESUMED THAT THE INTEREST BEARING FUND WAS DIVERTED FOR INVESTMENT IN MUTUAL FUND. RELIANCE WAS PLACED ON THE FOLLOWING CASE- LAWS:- 1. ACIT VS. ASHOK KUMAR CHHUGANI [104 TTJ (JD)134] 2. CHHOTULAL AJIT SINGH & CO. VS. ITO [94 TTJ (JD) 911] 3. CIT VS. GLENMARK PHARMACEUTICAL LTD. [85 DTR (B OM) 169] 4. CIT VS. RELIANCE UTILITIES & POWER LTD. [313 IT R 340 (BOM)] 5. CIT VS. BHARTI TELEVENTURE LTD. [331 ITR 502 (D ELETED)] 6. SUNIL GOEL VS. ACIT [118 TTJ (DELETED) 415] 7. DCIT VS. U.K. PAINTS (INDIA) LTD. [4 ITR (TRIB) 455 (DEL)] 8. CIT VS. SOUTH INDIA CORPORATION (AGENCIES) LTD. [290 ITR 217 (MAD)] 9. CIT VS. TIN BOX CO [260 ITR 637 (DEL)] 10. SHRI BHAGWAN KUMAR TAPARIAY VS. ACIT [ITA NO. 188/JODH/2012 DATED 29/08/2013] 18. IT WAS ALSO STATED THAT ON SIMILAR FACTS NO DISAL LOWANCE UNDER SECTION 14A HAD BEEN MADE IN THE EARLIER ASSESSMENT YEARS I.E. A.YS. 16 2007-08 & 2008-09 COPIES OF WHICH ARE PLACED AT PA GE 147 TO 151 & 90-92 OF THE ASSESSEES PAPER BOOK RESPECTIVELY. 19. IN HIS RIVAL SUBMISSIONS LEARNED D.R. STRONGLY SUP PORTED THE ORDERS OF THE AUTHORITIES BELOW AND REITERATED THE OBSERVA TIONS MADE THEREIN. 20. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PART IES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON TH E RECORD. IN THE PRESENT CASE IT IS AN ADMITTED FACT THAT THE ASSES SEE MADE AN INVESTMENT IN TAX FREE BONDS AND UNITS TO THE EXTENT OF RS. 3 75 15 666/- AND EARNED TAX FREE DIVIDEND INCOME OF RS. 4 84 180/-. AS PER THE PROVISIONS OF SECTION 14A (1) OF THE ACT NO DEDUCTION SHALL BE A LLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. I N THE PRESENT CASE THE ASSESSING OFFICER CONSIDERED THAT THE INTEREST PAID BY THE ASSESSEE WAS TO BE DISALLOWED ON PROPORTIONATE BASIS UNDER SECTION 14A OF THE ACT BUT NOTHING IS BROUGHT ON RECORD TO PROVE THE NEXUS BET WEEN THE INTEREST BEARING FUNDS AND THE INVESTMENT IN BONDS AND MUTUA L FUNDS ON WHICH EXEMPTED DIVIDEND INCOME WAS EARNED BY THE ASSESSEE . IN THE INSTANT CASE THE ASSESSEE INCURRED INTEREST EXPENSES OF RS . 44 25 073/- OUT OF WHICH RS. 40 30 540/- WAS RELATED TO THE INTEREST T O THE PARTNERS FIXED 17 CAPITAL AND REMAINING INTEREST OF RS. 3 94 533/- WA S CONCERNED WITH THE INTEREST TO THE PARTIES. AS REGARD TO THE INTEREST PAID TO THE PARTNERS IT IS NOT IN DISPUTE THAT THE SAID INTEREST WAS PAID U NDER SECTION 40(B) OF THE ACT AS PER THE TERMS OF PARTNERSHIP DEED AND THE PA RTNERS CAPITAL WAS FIXED. NOTHING IS BROUGHT ON RECORD THAT THE FIXED CAPITAL OF THE PARTNERS WAS UTILIZED TO MAKE THE INVESTMENT IN THE UNITS AN D BONDS. ON THE CONTRARY THE ASSESSEE STATED THAT THERE WAS CURREN T CAPITAL ACCOUNT OF THE PARTNERS AND THE BALANCE WAS AT RS. 8 76 43 107 /- AS ON 31/03/2009 AND RS. 8 51 36 613/- AS ON 31/03/2008 WHICH WAS U TILIZED IN MAKING THE INVESTMENT IN MUTUAL FUND FOR RS. 3 57 36 861/- AS ON 31/03/2009 AND RS. 3 13 64 086/- AS ON 31/03/2008 THEREFORE THE PART NERS CURRENT CAPITAL ACCOUNT APPEARS TO BE MORE THAN SUFFICIENT FOR MAKI NG THE INVESTMENT IN MUTUAL FUNDS. MOREOVER THE CONTENTION OF THE LEAR NED COUNSEL FOR THE ASSESSEE THAT THE SAID PARTNERS CURRENT CAPITAL WAS NON-INTEREST BEARING AND USED FOR INVESTMENT IN MUTUAL FUND WAS NOT CON TROVERTED AT ANY STAGE. WE THEREFORE ARE OF THE VIEW THAT THE DISAL LOWANCE MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LEARNED CIT( A) WAS NOT JUSTIFIED PARTICULARLY WHEN IN THE PRECEDING YEARS UNDER SIMI LAR CIRCUMSTANCES NO DISALLOWANCE HAS BEEN MADE WHILE FRAMING THE ASSESS MENT UNDER SECTION 143(3) OF THE ACT ON 12/12/2010 FOR THE A.Y. 2008-0 9 AND ON 27/03/2009 18 FOR THE A.Y. 2007-08 COPIES OF WHICH ARE PLACED AT PAGE NOS. 90-92 AND 147-151 RESPECTIVELY OF THE ASSESSEES PAPER BOOK A ND THE FACTS FOR THE YEAR UNDER CONSIDERATION ARE IDENTICAL TO THE FACTS INVOLVED IN THE EARLIER YEARS. WE THEREFORE CONSIDERING THE TOTALITY OF TH E FACTS ARE OF THE VIEW THAT THE IMPUGNED DISALLOWANCE MADE BY THE ASSESSIN G OFFICER AND SUSTAINED BY THE LEARNED CIT(A) WAS NOT JUSTIFIED. ACCORDINGLY THE SAME IS DELETED. 21. THE NEXT ISSUE VIDE GROUND NO.3 RELATES TO THE DEPR ECIATION ON WEG INSTALLED IN THE A.Y. 2008-09. AS REGARD TO THIS I SSUE THE LEARNED COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET STATED THAT THIS ISSUE IS COVERED VIDE ORDER DATED 23/01/2013 IN I.T.A.NO. 37 5/JODH/2011 FOR THE A.Y. 2008-09 IN ASSESSEES OWN CASE COPY OF THE SA ID ORDER WAS FURNISHED WHICH IS PLACED ON RECORD. LEARNED D.R. IN HIS RIVAL SUBMISSIONS COULD NOT CONTROVERT THE AFORESAID CON TENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE. 22. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PARTI ERS AND THE MATERIAL ON RECORD IT IS NOTICED THAT IN THE PRECE DING YEAR DEPRECIATION WAS NOT ALLOWED BY THE ASSESSING OFFICER AND WHEN T HE MATTER TRAVELLED UP TO THE TRIBUNAL IT WAS DIRECTED TO ALLOW THE DEP RECIATION BY HOLDING 19 THAT THE ASSESSEE WAS ELIGIBLE FOR DEPRECIATION UND ER SECTION 32 OF THE ACT QUA THE WIND MILLS. IN VIEW OF THAT WE DIRECT THE ASSESSING OFFICER TO ALLOW THE DEPRECIATION ON THE RETURN DOWN VALUE WH ICH IS WORKED OUT AFTER GIVING EFFECT TO THE AFORESAID REFERRED TO OR DER DATED 23/01/2013 IN I.T.A.NO. 375/JODH/2011 FOR THE A.Y. 2008-09 IN ASS ESSEES OWN CASE. ACCORDINGLY THIS GROUND OF THE ASSESSEES APPEAL I S ALLOWED FOR STATISTICAL PURPOSE ONLY. 23. THE LAST ISSUE AGITATED BY THE ASSESSEE VIDE GROUN D NO.4 RELATES TO THE ADDITION OF RS. 8 63 024/- ON ACCOUNT OF INTERE ST EARNED ON FDR. 24. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT T HE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICE D THAT WHILE CALCULATING THE DEDUCTION UNDER SECTION 10B OF THE ACT THE INTEREST INCOME FROM FDR AMOUNTING TO RS. 8 64 792/- WAS NOT DEDUCTED AS IT WAS NOT INCOME EARNED ON EXPORT. ACCORDINGLY HE DID N OT ALLOW THE EXEMPTION UNDER SECTION 10B OF THE ACT ON THE SAID AMOUNT AND MADE THE ADDITION OF RS. 8 63 024/-. 25. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LEARNED CIT(A) AND SUBMITTED THAT THE INCOME EARNED ON FIXE D DEPOSIT WITH THE BANK WAS THE BUSINESS INCOME AS THE FDR HAD BEEN MA DE OUT OF THE 20 BUSINESS INCOME SURPLUS AND SOME OF THE FDR HAD BE EN MADE FOR THE BUSINESS PURPOSE AGAINST THE BANK GUARANTEE/EXCISE BOND FOR THE PURPOSE OF EXPORT BUSINESS. 26. L EARNED CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE ASSESSEE FAILED TO ESTABLISH THAT FDR WAS OUT OF ITS BUSINESS INCOME OR WAS IN RELATION TO THE INCOME AN D THAT THE INTEREST INCOME WAS FROM PROFIT OF EXPORT BUSINESS. HE THER EFORE CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. RELIAN CE WAS PLACED ON THE FOLLOWING CASE-LAWS:- 1. ACIT VS. SOUGHT INDIA PRODUCE COMPANY REPORTED IN 262 ITR 20 (KER) 2. PROCON SYSTEMS PVTG. LTD. VS. ITO REPORTED IN 2 96 ITR 636. 3. PANDIAN CHEMICALS LTD. VS. CIT REPORTED IN 262 ITR 278 (SC) BEING AGGRIEVED ASSESSEE IS IN APPEAL. 27. LEARNED COUNSEL FOR THE ASSES REITERATED THE SUBMIS SIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE FDRS WERE PLEDGED AS SECURITY FOR EOU UNDERTAKING AS SUCH THE INTEREST ON SUCH FDR WAS BUSINESS INCOME ELIGIBLE FOR DEDUCTION UNDER SE CTION 10B OF THE ACT. RELIANCE WAS PLACED ON THE DECISION OF HON'BLE BOMB AY HIGH COURT IN THE CASE OF CIT VS. JAGDISH PRASAD M. JOSHI REPORTED IN 318 ITR 420 AND THE ORDER DATED 12/09/2013 OF THE ITAT JODHPUR BENCH J ODHPUR IN THE CASE 21 OF ACIT CIRCLE-1 UDAIPUR VS. M/S. DEVGANGA ENTERP RISES UDAIPUR (COPY IS PLACED ON RECORD). 28. IN HIS RIVAL SUBMISSIONS LEARNED D.R. SUPPORTED TH E ORDERS OF THE AUTHORITIES BELOW. 29. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PART IES AND PERUSED THE MATERIAL VAIABLE ON THE RECORD. IN THE PRESENT CASE IT SEEMS THAT THE ASSESSEE PLEDGED THE FDR AS SECURITY FOR EXPORT ORI ENTED UNITS (EOU) AND EARNED THE INTEREST ON THOSE FDRS. IN THE INSTANT CASE THE FDRS WERE PLEDGED FOR COMMERCIAL EXPEDIENCY OF THE ASSESSEE THEREFORE AS PER THE RATIO LAID DOWN BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. JAGDISH PRASAD M. JOSHI ((SUPRA)) IT IS TO BE CONS IDERED AS BUSINESS INCOME AND ELIGIBLE FOR DEDUCTION UNDER SECTION 10B OF THE ACT. ON A SIMILAR ISSUE THIS BENCH OF THE ITAT IN THE CASE O F ACIT UDIAPUR VS. M/S. DEVGANGA ENTERPRISES (SUPRA) HELD IN PARA 3 AS UNDE R:- 3. WE HAVE HEARD RIVAL SUBMISSIONS. BOTH PARTIES H AVE REITERATED THEIR EARLIER STAND. APART FROM THE ABOVE LD. A.R. HAS PL ACED RELIANCE ON THE DECISION OF THE HONBLE HIGH COURT OF PATNA RENDERE D IN THE CASE OF SHYAM BIHARI VS CIT & ANOTHERS REPORTED IN (2012) 3 45 ITR 283 (PAT). THE LD. D.R. HAS RELIED ON THE DECISION OF SPECIAL BENCH DELHI IN THE CASE OF DCIT VS ALLIED CONSTRUCTION (2007) 106 TTJ (DEL (SB) 595 DATED 30/11/2006. HE HAS TRIED TO DISTINGUISH THE FACTS O F THE JAIPUR BENCH A DECISION IN THE CASE OF M/S. S.P. EQUIPMENT AND SECURITIES VS ACIT IN ITA NO. 464/JP/2007 ON WHICH DECISION LD. CIT(A) HAS RELIED. AFTER CONSIDERING RIVAL SUBMISSIONS WE HAVE FOUND THAT TH E HONBLE HIGH 22 COURT OF PATNA IN THE ABOVE NOTED CASE HAS CLEARLY HELD THAT IN THE CASE OF A CIVIL CONTRACTOR WHO DERIVED HIS INCOME F ROM CONTRACT WORK OBTAINED FROM THE GOVERNMENT DEPARTMENTS AND FOR OB TAINING WHICH DEPOSIT OF MONEY IN FDRS AND NSCS WAS A PRE REQUISI TE CONDITION IT HAS BEEN HELD THAT INTEREST EARNED BY THE ASSESSEE ON THE INVESTMENT OF AMOUNT IN FIXED DEPOSITS WHICH WAS ONLY TO PROVI DE A BANK GUARANTEE TO THE CONTRACTEE IN ORDER TO ACQUIRE THE CONTRACT WORK COULD NOT BE TREATED AS INCOME FROM OTHER SOURCES A ND HAS TO BE TREATED AS BUSINESS INCOME ONLY. THE HONBLE HIGH C OURT HAS RELIED ON THE DECISION OF KARNATAKA HIGH COURT IN THE CASE OF CIT VS CHINNA NACHIMUTHU CONSTRUCTION 297 ITR 70 (KAR). ACCORDING LY BY RESPECTFULLY FOLLOWING THE ABOVE JUDGMENTS WE CANNO T ALLOW THIS APPEAL OF THE REVENUE. WE ALSO DRAW SUPPORT FOR THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF CIT VS. GOVINDA C HOUDHARY & SONS (1993) 203 ITR 881 (SC). SO BY RESPECTFULLY FOLLOWING THE AFORESAID ORDER THIS GROUND OF THE ASSESSEES APPEAL IS ALLOWED. 30. IN THE RESULT APPEAL OF THE DEPARTMENT IS DISMISSE D AND THAT OF ASSESSEE IS PARTLY ALLOWED AND PARTLY ALLOWED FOR S TATISTICAL PURPOSES. (ORDER PRONOUNCED IN THE COURT ON 21 ST OCTOBER 2013). SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 21 ST OCTOBER 2013. VR/- COPY TO: 1. THE APPELLANT 23 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R ASSISTANT REGISTRAR ITAT JODHPUR.