Spring Merchandisers Private Ltd., Mathura v. ITO, Mathura

ITA 470/AGR/2009 | 2005-2006
Pronouncement Date: 25-02-2011 | Result: Dismissed

Appeal Details

RSA Number 47020314 RSA 2009
Assessee PAN AAACS5240D
Bench Agra
Appeal Number ITA 470/AGR/2009
Duration Of Justice 1 year(s) 2 month(s) 11 day(s)
Appellant Spring Merchandisers Private Ltd., Mathura
Respondent ITO, Mathura
Appeal Type Income Tax Appeal
Pronouncement Date 25-02-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 25-02-2011
Date Of Final Hearing 03-02-2011
Next Hearing Date 03-02-2011
Assessment Year 2005-2006
Appeal Filed On 14-12-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH AGRA BEFORE SHRI P.K. BANSAL ACCOUNTANT MEMBER AND SHRI H.S. SIDHU JUDICIAL MEMBER ITA NO.470/AGR/2009 ASST. YEAR: 2005-06 SPRING MERCHANDISERS PVT. LTD. VS. INCOME TAX OFF ICER 3(4) 64/71 DAMPIER NAGAR MATHURA. MATHURA (PAN : AAACS 5240 D) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M.M. AGARWAL C.A. RESPONDENT BY : SHRI A.K. SHARMA JR. D.R. ORDER PER H.S. SIDHU J.M. : THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST T HE ORDER DATED 25.08.2009 PASSED BY THE LD. CIT(A). 2. THE BRIEF FACTS RELATING TO THE ISSUE IN DISPUTE ARE THAT THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON ` 54 39 226/- ON 30.10.2005 ACCOMPANIED BY THE AUDI TORS REPORT UNDER SECTION 44AB AND SECTION 80IB OF THE INCOME-TAX ACT 1961 (THE ACT HEREINAFTER) ALONG WITH AUDITED BALANCE SHEET AND PROFIT & LOSS ACCOUNT. THE ASSESSING OFF ICER PROCESSED THE SAME ON 14.11.2006. THEREAFTER NOTICES UNDER SECTION 143(2) AND SECTIO N 142(1) OF THE ACT WERE ISSUED ON 30.09.2006. IN RESPONSE TO THE SAME THE LD. A.R. OF THE ASSESSEE ATTENDED THE ASSESSMENT PROCEEDINGS FILED THE REQUIRED DETAILS AND PRODUCE D BOOKS OF ACCOUNTS STOCK REGISTERS AND VOUCHERS AND DISCUSSED THE CASE WITH THE ASSESSING OFFICER. AFTER EXAMINING THE SAME THE ASSESSING OFFICER REVEALS THAT THE ASSESSEE HAS CRE DITED A SUM OF ` 5 00 944/- AS INTEREST IN FDR 2 AND ` 36 000/- AS HIRE CHARGES IN THE BOOKS OF MANUFACTUR ING UNIT ON WHICH THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 80IB OF THE ACT. T HE ASSESSING OFFICER WAS OF THE OPINION THAT THE INTEREST ON FDRS AND HIRE CHARGES INCOME ARE NO T INCOME DERIVED FROM MANUFACTURING ACTIVITIES AND SUCH INCOME IS NOT ELIGIBLE FOR DEDU CTION UNDER SECTION 80IB OF THE ACT. HE SUPPORTED THIS VIEW BY VARIOUS DECISIONS RENDERED B Y THE HONBLE HIGH COURTS MENTIONED IN THE ASSESSMENT ORDER IN DISPUTE AND FINALLY COMPLETED T HE SAME VIDE DISALLOWING THE VARIOUS DEDUCTIONS INCLUDING THE ADDITION IN DISPUTE ON 17 .12.2007. 3. AGGRIEVED BY THE SAME THE ASSESSEE FILED APPEAL BEFORE THE LD. FIRST APPELLATE AUTHORITY. THE LD. FIRST APPELLATE AUTHORITY VIDE ITS IMPUGNED ORDER DATED 25.08.2009 UPHELD THE ORDER OF THE ASSESSING OFFICER ON THE ISSUE IN DISPUTE. NOW THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE IMPUGNED ORDER DATED 25.08.2009. 4. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSEE STATED THAT INTEREST ON FDRS. CREDITED TO THE PROFIT & LOSS ACCOUNT WAS LIABLE TO BE TREATED INCOME FROM BUSINESS BUT THE REVENUE AUTHORITIES HAS WRONGLY DISALLOWED THE SAME BY HOLDING IT AS INCOME FROM OTHER SOURCES. HE FURTHER STATED THAT THE LD. FIRST APPE LLATE AUTHORITY HAS NOT CONSIDERED THE WRITTEN SUBMISSIONS FILED BY HIM IN WHICH HE HAS STATED THA T THE FDRS. WERE NOT MADE AS INVESTMENT OF SURPLUS FUNDS BUT WERE MADE OUT OF BANK OVERDRAFT F OR PROCURING LETTER OF CREDIT FROM BANK FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE COMPANY. T HEREFORE THE SAME IS INCOME FROM BUSINESS AND ALSO ENTITLED FOR DEDUCTION UNDER SECTION 80IB OF THE ACT. IN SUPPORT OF HIS CONTENTION HE HAS FILED VARIOUS DECISIONS IN THE SHAPE OF ONE COM PILATION CONTAINING PAGE NOS.1 TO 36 AND 3 ATTACHED THE FOLLOWING ORDERS AND LASTLY STATED THA T KEEPING IN VIEW THE DECISIONS CITED BY HIM THE APPEAL OF THE ASSESSEE MAY BE ALLOWED :- I) ORDER PASSED BY MUMBAI F BENCH OF ITAT IN THE CASE OF SANCHITA MARINE PRODUCTS (P) LTD. VS. DCIT REPORTED IN (2007 ) 15 SOT 280 (MUMBAI) II) ORDER PASSED BY DELHI I BENCH OF ITAT IN THE CASE OF DCIT VS. HIMACHAL EXICOM COMMUNICATION LTD. REPORTED IN (200 7) 15 SOT 715 (DELHI) III) ORDER PASSED BY BANGALORE A BENCH OF ITAT IN THE CASE OF EMMVEE SOLAR SYSTEMS (P) LTD. VS. ACIT REPORTED IN (2008) 5 DTR (BANG) (TRIB) 410. IV) ORDER PASSED BY DELHI I BENCH OF ITAT IN THE CASE OF DCIT VS. SUDHIR GENSET LTD. REPORTED IN (2009) 17 DTR (DEL) (TRIB) 496. V) ORDER PASSED BY DELHI A BENCH OF ITAT IN THE C ASE OF AROMA CHEMICALS VS. ACIT REPORTED IN 2009 (13) MTC 395 (TRIB). 5. THE LD. COUNSEL FOR THE ASSESSEE FURTHER STATED THAT IF THIS BENCH IS NOT AGREEING WITH THE AFORESAID SUBMISSIONS THEN THE BENEFIT OF NETTING OF INTEREST RECEIVED IN RESPECT OF FDRS. AGAINST THE INTEREST PAID TO THE BANK MAY BE ALLOWED. 6. ON THE CONTRARY THE LD. D.R. RELIED UPON THE OR DER PASSED BY THE LD. FIRST APPELLATE AUTHORITY AND STATED THAT THE ASSESSING OFFICER AS WELL AS THE LD. FIRST APPELLATE AUTHORITY HAS PASSED THE IMPUGNED ORDERS BY RESPECTFULLY FOLLOWIN G THE VARIOUS DECISION RENDERED BY THE HONBLE SUPREME COURT OF INDIA AS WELL AS THE HONB LE HIGH COURTS. THEREFORE THE APPEAL FILED BY THE ASSESSEE MAY BE DISMISSED. 4 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ELEVANT RECORDS AVAILABLE WITH US ESPECIALLY THE ORDERS PASSED BY THE REVENUE AUTHORI TIES. THE ONLY ISSUE INVOLVED IN THE PRESENT APPEAL IS WHETHER THE ASSESSEE IS ENTITLED FOR DEDU CTION OF INTEREST ON FDRS. MADE FROM THE BANK FOR PROCURING OVERDRAFT LETTER OF CREDIT FROM THE BANK UNDER SECTION 80IB OR NOT. AFTER PERUSING THE ORDERS PASSED BY THE REVENUE AUTHORITIES WE AR E OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER HAS RELIED UPON VARIOUS DECISION S RENDERED BY THE HONBLE SUPREME COURT OF INDIA AS WELL AS THE HONBLE HIGH COURTS IN WHICH T HE HONBLE HIGH COURT HAS CONSIDERED THE ISSUE IN DISPUTE AND DECIDED THE SAME AGAINST THE A SSESSEE BY HOLDING THAT THE INTEREST ON AMOUNT DEPOSITED IN THE BANK DOES NOT QUALIFY FOR SPECIAL DEDUCTION UNDER SECTION 80IB OF THE ACT BECAUSE IT HAS NOT DERIVED FROM THE INDUSTRIAL UNDE RTAKING. THE HONBLE HIGH COURT HAS ALSO HELD THAT THE TERM DERIVED FROM IS NARROW THAN TH E TERM ATTRIBUTED TO AND THAT THE AMOUNT WHICH DO NOT HAVE A DIRECT NEXUS WITH THE INDUSTRIA L UNDERTAKING CANNOT BE REGARDED AS HAVING BEEN DERIVED FROM THE INDUSTRIAL UNDERTAKING. THER EFORE THE INTEREST RECEIVED ON DEPOSITS CANNOT BE REGARDED AS INCOME DERIVED FROM INDUSTRIA L UNDERTAKING. THIS VIEW IS SUPPORTED BY THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CA SE OF CIT VS. N.S.C. SHOES 258 ITR 749 (MAD.). 8. THE ISSUE IN DISPUTE HAS ALREADY BEEN ADJUDICATE D BY THE HONBLE GAUHATI HIGH COURT IN THE CASE OF NORTH EAST GASES PVT. LTD. VS. CIT 220 ITR 372 (GAUHATI) IN WHICH THE HONBLE HIGH COURT HAS HELD THAT INTEREST INCOME DID NOT CO ME WITHIN THE SCOPE OF PROFIT AND GAIN OF BUSINESS BUT UNDER THE HEAD INCOME FROM OTHER SOU RCES. THEREFORE ANY INCOME EARNED FROM FIXED DEPOSITS AND INTEREST THEREON COULD NOT BE SA ID TO BE PROFIT AND GAINS DERIVED FROM AN INDUSTRIAL UNDERTAKING. 5 9. ON THE ISSUE IN DISPUTE A VERY IMPORTANT DECISI ON HAS BEEN RENDERED BY THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF PANDIAN CHEMI CALS LTD. VS. CIT REPORTED IN 262 ITR 278 (SC). THE HONBLE SUPREME COURT OF INDIA HAS ALSO ADJUDICATED AND DECIDED THE ISSUE IN DISPUTE AGAINST THE ASSESSEE. 10. APART FROM THE AFORESAID DECISIONS RENDERED BY THE HONBLE SUPREME COURT OF INDIA AS WELL AS HONBLE HIGH COURTS NOW LATEST DECISION RE NDERED BY THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF LIBERTY INDIA VS. CIT 317 ITR 218 (SC) HAS ALSO ADJUDICATED THE ISSUE IN DISPUTE AND DECIDED THE SAME AGAINST THE ASSESSEE. 11. IN VIEW OF THE AFORESAID DISCUSSIONS WE ARE OF THE CONSIDERED OPINION THAT THE ISSUE IN DISPUTE HAS ALREADY BEEN ADJUDICATED BY THE APEX CO URT AND DECIDED AGAINST THE ASSESSEE AND THE LD. FIRST APPELLATE AUTHORITY HAS ALSO DECIDED THE ISSUE IN DISPUTE AGAINST THE ASSESSEE BY RESPECTFULLY FOLLOWING THE SAME. THEREFORE NO INT ERFERENCE IS CALLED FOR ON THE ISSUE IN DISPUTE AND HENCE WE HOLD THAT INTEREST INCOME ON FDRS. FRO M BANK FOR PROCURING LETTER OF CREDIT BY THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTIO N 80IB OF THE ACT. THE CITATIONS CITED BY THE LD. COUNSEL FOR THE ASSESSEE ARE VERY OLD BUT KEEPING IN VIEW THE LATEST DECISION RENDERED BY THE HONBLE SUPREME COURT OF INDIA REPORTED IN 317 ITR 218 (SC) WE ARE UNABLE TO FOLLOW THE SAME. 12. AS REGARDS TO THE ALTERNATIVE REQUEST OF THE LD . COUNSEL FOR THE ASSESSEE REGARDING NETTING OF INTEREST RECEIVED IN RESPECT OF THE FDRS. AGAINS T THE INTEREST PAID TO THE BANK AFTER GOING THROUGH THE ORDERS PASSED BY THE REVENUE AUTHORITI ES WE ARE OF THE CONSIDERED OPINION THAT THE 6 ITA NO.470/AGR/2009 ASST. YEAR: 2005-06 ALTERNATIVE REQUEST OF THE ASSESSEE IS ALSO NOT ACC EPTABLE SINCE INTEREST ON FDRS. HAS BEEN TREATED AS INCOME FROM OTHER SOURCES WHEREAS INTEREST DEBI TED TO THE PROFIT & LOSS ACCOUNT CONSTITUTES BUSINESS EXPENDITURE UNDER SECTION 36(1) & (2) OF T HE ACT. NETTING OF THE INCOME UNDER ONE HEAD OF INCOME AGAINST EXPENDITURE UNDER THE DIFFERENT H EAD OF INCOME IS NOT POSSIBLE AS PER LAW. THEREFORE THE ALTERNATE REQUEST OF THE ASSESSEE IS ALSO REJECTED. 13. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 25.02.2011) . SD/- SD/- (P.K. BANSAL) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE: AGRA DATE: 25 TH FEBRUARY 2011 PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT BY ORDER 3. CIT CONCERNED 4. CIT (APPEALS) CONCERNED 5. DR ITAT AGRA BENCH AGRA 6. GUARD FILE ASSIST ANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL AGRA TRUE COPY