M/S. EUROTEX IND. & EXPORTS LTD, MUMBAI v. THE ITO WD 3(1)3, MUMBAI

ITA 5322/MUM/2007 | 2004-2005
Pronouncement Date: 23-12-2010 | Result: Dismissed

Appeal Details

RSA Number 532219914 RSA 2007
Assessee PAN AAACE1569N
Bench Mumbai
Appeal Number ITA 5322/MUM/2007
Duration Of Justice 3 year(s) 4 month(s) 15 day(s)
Appellant M/S. EUROTEX IND. & EXPORTS LTD, MUMBAI
Respondent THE ITO WD 3(1)3, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 23-12-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted J
Tribunal Order Date 23-12-2010
Date Of Final Hearing 22-12-2010
Next Hearing Date 22-12-2010
Assessment Year 2004-2005
Appeal Filed On 08-08-2007
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH MUMBAI. [ CORAM D.K.AGARWAL JM AND PRAMOD KUMAR AM ] I.T.A NO.5819/ MUM/2007: ASSESSMENT YEAR: 2004-200 5 DY.COMMISSIONER OF INCOME TAX 3(1) .. APPELLANT AAYAKAR BHAVAN M.K. ROAD MUMBAI. VS EUROTEX INDUTRIES AND EXPORTS LTD. . RESPONDEN T RAHEJA CHAMBERS 12 TH FLOOR 213 NARIMAN POINT MUMBAI-21. PA NO.AAACE 1569 N I.T.A NO.5322/ MUM/2007: ASSESSMENT YEAR: 2004-2005 EUROTEX INDUTRIES AND EXPORTS LTD. . APPELLANT RAHEJA CHAMBERS 12 TH FLOOR 213 NARIMAN POINT MUMBAI-21. PA NO.AAACE 1569 N VS DY.COMMISSIONER OF INCOME TAX 3(1) .. RESPONDEN T AAYAKAR BHAVAN M.K. ROAD MUMBAI. ASSESSEE BY : SHRI S.L. JAIN REVENUE BY : SHRI SATBIR SINGH CIT DR O R D E R PER PRAMOD KUMAR: 1. THESE CROSS APPEALS ARE DIRECTED AGAINST THE O RDER DATED 22 ND JUNE 2007 PASSED BY THE CIT(A) IN THE MATTER OF AS SESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961 FOR THE ASSESSMENT YEAR 2004- 2 05. AS THESE APPEALS CALL INTO QUESTION SAME ORDER PASSED BY THE CIT(A) AND AS THESE APPEALS WERE HEARD TOGETHER WE DEEM I T FIT AND PROPER TO DISPOSE OF BOTH THE APPEALS BY WAY OF THIS CONSOLID ATED ORDER. WE WILL TAKE UP ASSESSEES APPEAL FIRST. ITA NO.5322/M/2007: ASSSEESSS APPEAL 2. GROUND NO.1 RELATES TO DISALLOWANCE OF DEPRECIAT ION OF RS. 18 651/- . 3. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THE AB OVE ISSUE IS COVERED IN FAVOUR OF THE ASSESSE BY TRIBUNALS DECI SION IN ASSESSEES OWN CASE FOR A.Y. 1998-99. WE FIND THAT VIDE ORDER DAT ED 10.7.2006 A CO- ORDINATE BENCH OF TRIBUNAL INTER ALIA OBSERVED AS FOLLOWS:- . WE FIND THAT THE CIT (A) HAS PASSED A DETAILED AND SPEAKING ORDER ON THE ISSUE. THE CIT (A) HAS OBSER VED THAT A PLAIN READING OF THE RELEVANT PROVISIONS OF THE ACT MAKES IT EVIDENT THAT WHAT IS TO BE REDUCED IS THE AMOUNT OF INCOME TO WHICH CHAPTER III OF THE I.T. ACT APPLIES IF SUCH AMOUNT IS FOUND CREDITED IN THE PROFIT AND LOSS ACCOUNT. THE RE IS NO DISPUTE THAT THE INCOME OF RS. 3.83 LAKHS AS CREDIT ED IN THE PROFIT AND LOSS ACCOUNT IS EXCLUSIVELY RELATED TO U NIT NO.2 OF THE ASSESSEE WHICH IS COVERED BY THE PROVISIONS OF THE CHAPTER III OF THE ACT. ON THESE UNDISPUTED FACTS THE SAID AMOUNT CREDITED TO PROFIT AND LOSS ACCOUNT OF THE A SSESSEE HAS TO BE REDUCED FROM THE NET PROFIT AS PER PROFIT AND LOSS ACCOUNT IN ORDER TO COMPUTE THE BOOK PROFITS U/S. 1 15JA. THE CIT(A) HAS OBSERVED THAT NOT DOING SO WILL AMOUNT T O IGNORING THE MANDATE OF ITEM (II)BELOW THE EXPLANAT ION OF SECTION 115JA OF THE ACT. THERE BEING NO MISTAKE I N THE ORDER OF THE CIT (A) ON THIS ISSUE THE SAME IS CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. RESPECTFULLY FOLLOWING THE SAME WE ALLOW THIS GROU ND OF APPEAL. 4. GROUND NO.2 RELATES TO DISALLOWANCE OF DEPRECIAT ION OF RS. 84 09 121/-. 5. HAVING HEARD BOTH THE SIDES WE FIND THAT THE IS SUE IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE CO-ORDI NATE BENCH IN 3 ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1998-99 IN ITA NO.1417/M/02 WHEREIN THE TRIBUNAL FOLLOWING THE D ECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF VAID P APER CONVERTERS V ITO 98 ITD 165(AHD)(SB) DECIDED THE ISSUE AGAINST THE A SSESSEE. THESE VIEW OF THE SPECIAL BENCH HAVE NOW BEEN CONFIRMED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PLASTIBEN D INDIA P.LTD. VS ACIT 318 ITR 532(BOM). RESPECTFULLY FOLLOWING THE ESTEE MED VIEW OF THE HONBLE JURISDICTIONAL HIGH COURT REFERRED SUPRA W E DISMISS THE GROUND TAKEN BY THE ASSESSEE. 6. GROUND NO.3 READS AS UNDER:- THE LD CIT (A) ERRED IN CONFIRMING REDUCTION OF BU SINESS INCOME UNDER EXPLANATION (BAA) FOR THE PURPOSE OF CALCULATION OF DEDUCTION U/S. 80 HHC BY ` . 1 70 51 451/- BEING THE AMOUNT CREDITED TO INCOME ON ACCOUNT OF A CCRUAL OF DEPB WITHOUT CONSIDERING THE FACT THAT ONLY PROFIT ON TRANSFER OF DEPB CAN BE EXCLUDED UNDER EXPLANATION (BAA). 7. HAVING HEARD BOTH THE SIDES WE FIND THAT THE IS SUE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. KALPATARU COLOURS AND CHEMICALS 192 TAXMAN 435(BOM ) WHEREIN IT HAS BEEN HELD THAT DEPB SALE PROCEEDS CANNOT BE BIFURCATED INTO PROFI TS AND FACE VALUE. THE ENTIRE AMOUNT IS PROFITS FOR S. 80HHC R.W.S. 28(IIID). IN THE PRESENT CASE THE DID NOT FULFILL THE CONDITIONS SET OUT IN THE THIRD PROVISO TO S. 80HH C (3) IT WAS NOT ENTITLED TO A DEDUCTION U/S 80HHC ON THE AMOUNT RECEIVED ON TRANSF ER OF DEPB. ACCORDINGLY WE REJECT THE GROUND TAKEN BY THE ASSESSEE. 8. GROUND NO.4 READS AS UNDER:- THE LD CIT (A) ERRED IN NOT HOLDING THAT DEDUCTION U/ S. 80 HHC WHILE COMPUTING BOOK PROFIT UNDER THE PROVISIONS OF SECTIO N 115JB BE CALCULATED BASED ON BOOK PROFIT IN PLACE OF INCOME AS COMPUTED IN THE ASSESSMENT. 9. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THE ISSU E IS COVERED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF AJANTA PHARMA LTD V CIT 327 ITR 305(SC) IN 4 FAVOUR OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE D ECISION OF THE HONBLE SUPREME COURT(SUPRA) WE ALLOW THIS GROUND. 10. IN THE RESULT APPEAL IS PARTLY ALLOWED. ITA NO.5819/M/07 11. THE ONLY ISSUE IN THE REVENUES APPEAL IS AGAINST DELETION OF DISALLOWANCE OF INTEREST TO THE EXTENT OF RS. 14 87 644/- MADE BY THE AO UNDER SECTION 14A OF THE ACT. 12. WE HAVE NOTED THAT THE TRIBUNAL HAS DECIDED THIS ISS UE IN FAVOUR OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1999-2000 2000-2001 2001-0 2 2002-03 AND THAT IN THOSE YEARS THE TOTAL INVESTMENTS IN SHARES WAS RS. 418.26 LAKHS WHEREAS IN THE CURRENT YEAR THE INVESTMENT HAS COME DOWN TO RS. 318.26 LAKHS. THE RE IS THUS NO INCREASE IN THE INVESTMENT VIS--VIS THE YEARS WHICH WERE IN APPEAL B EFORE THE TRIBUNAL AND IN WHICH MATTER HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. L EARNED COUNSEL CONTENDS THAT SINCE THE TRIBUNAL HAS GIVEN A CATEGORICAL FINDING TO THE EF FECT THAT NO PART OF THE INVESTMENT IN SHARES IN EARLIER YEARS WAS UTILISED OUT OF THE BO RROWED FUNDS AND SINCE IN THE PRESENT YEAR THE QUANTUM OF INVESTMENT HAS ONLY REDU CED NO DISALLOWANCE UNDER SECTION 14A CAN BE MADE IN THIS YEAR EITHER IN RESPEC T OF THE INTEREST ON BORROWINGS. LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAN D CONTENDS THAT THERE IS NO RES- JUDICATA IN THE INCOME TAX PROCEEDINGS AND EACH YEAR IS TO BE EXAMINED ON EACH FACTS. WE ARE THUS URGED TO REMIT THE MATTER BACK TO THE FIL E OF THE AO FOR FRESH ADJUDICATION ON THE QUESTION THAT THERE IS NO ELEMENT OF BORROWED FUND S ARE USED IN INVESTMENT OF SHARES. 13. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PERUSED THE MATERIAL ON RECORD AS ALSO BEARING IN MIND ENTIRETY OF THE QU ANTUM OF INVESTMENT IN SHARES REDUCED IN THE CURRENT YEAR VIS--VIS INVEST MENT IN THE PRECEDING YEAR IN RESPECT OF WHICH THE TRIBUNAL HAS GIVEN A C ATEGORICAL FINDING THAT NO BORROWED FUNDS WERE UTILIZED IN INVESTMENTS SHARES WE DEEM IT FIT AND PROPER TO UPHOLD THE GRIEVANCE OF THE ASSESSEE. ON CE WE COME TO THE CONCLUSION THAT NO BORROWED FUNDS HAVE BEEN USED IN MAKING INVESTMENTS IN QUESTION THERE CANNOT BE ANY GOOD REASONS TO DI SALLOW UNDER SECTION 5 14A INTEREST PAID ON BORROWINGS. THE CIT (A) THUS RIGHTLY DELETED THE DISALLOWANCE. 14. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED . . PRONOUNCED IN THE OPEN COURT ON 23 RD DECEMBER 2010 SD/- (D.K.AGARWAL ) (JUDICIAL MEMBER) SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) MUMBAI DATED 23 RD DECEMBER 2010 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS) XXVIII MUMBA I 4. COMMISSIONER OF INCOME TAX-3 MUMBAI 5. DEPARTMENTAL REPRESENTATIVE BENCH J MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR ITAT MUMBAI 6 7