M/s. UNITED RICELAND P. LTD., MUMBAI v. Jt. CIT (OSD) Rg. -1(3), MUMBAI

ITA 6982/MUM/2006 | 2003-2004
Pronouncement Date: 22-04-2010 | Result: Allowed

Appeal Details

RSA Number 698219914 RSA 2006
Assessee PAN AAACU0649N
Bench Mumbai
Appeal Number ITA 6982/MUM/2006
Duration Of Justice 3 year(s) 4 month(s)
Appellant M/s. UNITED RICELAND P. LTD., MUMBAI
Respondent Jt. CIT (OSD) Rg. -1(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 22-04-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted K
Tribunal Order Date 22-04-2010
Date Of Final Hearing 07-04-2010
Next Hearing Date 07-04-2010
Assessment Year 2003-2004
Appeal Filed On 22-12-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH K MUMBAI BEFORE SHRI SHRI A.L. GEHLOT A.M. & SMT. ASHA VIJ AYRAGHAVAN J.M. ITA NO. 6982/M/2006 ASSESSMENT YEAR: 2003-04 M/S UNITED RICELAND PVT. LTD. APPELLANT 411 JOLLY BHAVAN NO.2 7 NEW MARINE LINES MUMBAI 400 020. (PAN AAACU0649N) VS. JT. COMMISSIONER OF INCOME-TAX(OSD) RESPONDENT RANGE 1(3) MUMBAI. APPELLANT BY : MR. PRAVIN R. RAIYANI RESPONDENT BY : M/MR. T.T. JACOB/AMOL KAMAT/ S.S. RANA ORDER PER A.L. GEHLOT A.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF CIT(A)-XXI MUMBAI PASSED ON 24.11.2006 FOR THE AS SESSMENT YEAR 2003-04. 2. 1 ST EFFECTIVE GROUND RAISED IN THIS APPEAL IS IN RESPE CT OF CALCULATION OF DEDUCTION U/S 80IA & 80 HHC IN RESPE CT OF THE FOLLOWING ITEMS:- (I) INTEREST INCOME RS. 546 000 (II) COMMISSION INCOME RS. 1 431 000 (III) EXPORT INCENTIVES RS.93 681 000 (IV) CURRENCY EXCHANGE GAIN RS. 2 161 000 ITA NO. 6982/M/06 UNITED RICELAND PVT. LTD. 2 3. THE CASE OF THE REVENUE IS THAT THE ABOVE ITEMS ARE NOT PROFITS AND GAINS DERIVED FROM INDUSTRIAL UNDERTAKING AND THEREFORE THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S 80IA OF THE ACT. 4. THE LEARNED AR POINTED OUT THAT THE REVENUE AUTH ORITIES HAS FAILED TO APPRECIATE THAT THE CASE OF THE ASSESSEE IS COVERED BY OLD PROVISIONS OF SECTION 80IA WHICH IS APPLICABLE FOR THE PERIOD 01.04.91 TO 31.03.2000. IN THE SAID OLD PROVISIONS U/S 80 IA PROVIDED THAT GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROF ITS AND GAINS DERIVED FROM ANY BUSINESS OF INDUSTRIAL UNDERTAKING . THE LEARNED AR FURTHER SUBMITTED THAT REVENUE AUTHORITIES HAS WRON GLY APPLIED THE SECTION 80I APPLICABLE FOR THE PERIOD 01.04.81 TO 3 1.03.1991 AND 80IA/80IB NEW PROVISIONS WITH EFFECT FROM 01.04.200 0 TO TILL DATE. THE LEARNED AR SUBMITTED THAT SECTION 80IB WHICH I S APPLICABLE FROM 01.04.2000 WHEREIN IT IS PROVIDED THAT WHERE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED FRO M ANY BUSINESS REFERRED TO IN SUB-SECTION (3) TO (11)(11A) (11B) SUCH BUSINESS BEING HEREINAFTER REFERRED TO AS THE ELIGIBLE BUSINESS. T HE LEARNED AR SUBMITTED THAT CLAIM OF THE ASSESSEE HAS TO BE ALLO WED AS DEDUCTION U/S 80IA AND THE FIRST ASSESSMENT YEAR IN WHICH DED UCTION ALLOWED IS FOR AY 1995-96 THEREFORE THE PROVISIONS OF SECTIO N 80IA APPLICABLE FOR 01.04.91 TO 31.03.2000 AS APPLICABLE IN THE CAS E UNDER CONSIDERATION. THE LEARNED AR RELIED UPON THE FOLLO WING DECISIONS:- I) SUDITI INDUSTRIAL LTD. ITA NO. 3490/MUM/2000. II) CHAMANLAL & SONS 93 TTJ 132 (AMRITSAR) III) MAXCARE LABORATORIES LTD. 92 ITD 11 (CUTTACK ) 4.1 WHILE ARGUING ON MERIT THE LEARNED AR SUBMITTE D THAT INTEREST INCOME IS BUSINESS INCOME AS THE AMOUNT RECEIVED HA S DIRECT NEXUS WITH THE BUSINESS ACTIVITY OF THE ASSESSEE. THE LEA RNED AR FURTHER SUBMITTED THAT PURCHASE TAX DEMAND WAS CREATED BY T HE SALES TAX AUTHORITIES. THE ASSESSEE FILED APPEAL BEFORE THE H ONBLE SUPREME COURT AND THE APEX COURT WHILE CONSIDERING THE PETI TION FOR STAY OF ITA NO. 6982/M/06 UNITED RICELAND PVT. LTD. 3 RECOVERY OF DEMAND ORDERED PAYMENT @ 50% OF THE OUT STANDING DEMAND AND TO FURNISH BANK GUARANTEE @ 25% FOR GRAN T OF STAY DEMAND TO THE TAX AUTHORITY. ACCORDINGLY THE ASSES SEE MADE PAYMENT AND FURNISHED BANK GUARANTEE AND THE INTEREST WAS O N THAT ACCOUNT. THERE IS DIRECT NEXUS AND INEXTRICABLE LINK BETWEEN INTEREST INCOME AND CARRYING ON EXPORT BUSINESS BY THE ASSESSEE AS AN INDUSTRIAL UNDERTAKING. THE LEARNED AR IN SUPPORT OF HIS CONTE NTION RELIED UPON THE FOLLOWING DECISIONS:- I) MAXCARE LABORATORIES LTD. 92 ITD 11(CUTTACK) II) LALSONS ENTERPRISES 89 ITD 25 (SB)(DEL.) III) PRIYANKA GEMS 3 SOT 817 (AHM.) 4.2 AS REGARDS THE COMMISSION INCOME THE LEARNED A R SUBMITTED THAT THE COMMISSION EARNED BY THE ASSESSEE FROM THE SHIPPING COMPANIES THROUGH WHOM THE ASSESSEE HAD EXPORTED I TS OWN GOODS. THE AO HIMSELF ASSESSED THE COMMISSION INCOME AS BU SINESS INCOME. THE LEARNED AR IN SUPPORT OF THIS CONTENTION RELIED UPON THE FOLLOWING DECISIONS:- I) SUDITI INDUSTRIAL LTD. ITA NO. 3490/MUM/2000. II) CHAMANLAL & SONS 93 TTJ 132 (AMRITSAR) III) MAXCARE LABORATORIES LTD. 92 ITD 11 (CUTTACK ) 4.3 FOR THE PURPOSE OF ALLOWABILITY OF DEDUCTION U/ S 80IA IN RESPECT OF DEPB THE LEARNED AR RELIED UPON THE FOLLOWING D ECISIONS: I) SUDITI INDUSTRIAL LTD. ITA NO. 3490/MUM/2000. II) CHAMANLAL & SONS 93 TTJ 132 (AMRITSAR) III) MAXCARE LABORATORIES LTD. 92 ITD 11 (CUTTACK ) IV)P.G. ENTERPRISE 3942/DEL/2004. 4.4 IN RESPECT OF EXCHANGE FLUCTUATION GAIN THE LE ARNED AR SUBMITTED THAT THIS EXCHANGE FLUCTUATION GIVEN IS R ELATED TO EXPORT OF SALE BY THE ASSESSEE THEREFORE THE GAIN IS BUSINE SS INCOME FOR WHICH THE ASSESSEE RELIED UPON THE FOLLOWING DECISIONS:- ITA NO. 6982/M/06 UNITED RICELAND PVT. LTD. 4 I) SUDITI INDUSTRIAL LTD. ITA NO. 3490/MUM/2000. II) CHAMANLAL & SONS 93 TTJ 132 (AMRITSAR) III) MAXCARE LABORATORIES LTD. 92 ITD 11 (CUTTACK ) IV) PRIYANKA GEMS 3 SOT 817 5. THE LEARNED DR ON THE OTHER HAND RELIED UPON T HE ORDERS OF REVENUE AUTHORITIES AND SUBMITTED THAT THE ASSESSEE HIMSELF HAS UNABLE TO EXPLAIN WHICH PROVISIONS ARE APPLICABLE T O HIS CASE WHETHER 80IA OR 80IB. THEREFORE THE AO HAD DISALLOWED THE ASSESSEES DEDUCTION U/S 80IB OF THE ACT. AS REGARDS INTEREST INCOME THE LEARNED DR SUBMITTED THAT THE ASSESSEE IS NOT ENTITLED FOR NETTING OF INTEREST AS THE SAME IS COVERED AGAINST THE ASSESSEE BY THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. AS IAN STAR CO. LTD. VIDE INCOME TAX APPEAL NO. 2000 OF 2009 JUDGMENT DA TED 18/19 TH MARCH 2010. 6. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. WE FIND FORCE IN THE SUBMISSION OF THE LEARNED AR THAT THE RELEVANT PROVISIONS WHICH IS APPLICABLE T O THE CASE OF THE ASSESSEE IS SECTION 80IA APPLICABLE FOR THE PERIOD 01.04.91 TO 31.03.2000. SUB-SECTION (1) OF 80IA IS REPRODUCED BELOW: WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDE S ANY PROFITS AND GAINS DERIVED FROM ANY BUSINESS OF AN INDUSTRIA L UNDERTAKING.TO WHICH THIS SECTION APPLIES THERE SHALL. BE ALLOWED IN COMPUTING THE TOTAL INCOME OF THE ASSES SEE A DEDUCTION FROM SUCH PROFITS & GAINS.. 6.1 WE FIND THAT LANGUAGE IN OLD SECTION 80IA APPLI CABLE FOR THE PERIOD 01.04.81 TO 31.03.1991 IS DIFFERENT WHEREIN THE WORD DERIVED FROM AN INDUSTRIAL UNDERTAKING HAS BEEN USED. THE PROVISIONS OF SECTION 80IA/80IB ARE APPLICABLE WITH EFFECT FROM 0 1.04.2000 WHEREIN ALSO THE WORD DERIVED FROM ANY BUSINESS REFERRED TO. THE PROVISIONS APPLICABLE IN THE CASE UNDER CONSIDERATION WHERE TH E WORD USED DERIVED FROM ANY BUSINESS OF INDUSTRIAL UNDERTAKIN G . THEREFORE THE QUESTION TO BE EXAMINED BY US IS WHETHER THE IM PUGNED ITEMS ARE ITA NO. 6982/M/06 UNITED RICELAND PVT. LTD. 5 DERIVED FROM BUSINESS OF ASSESSEES UNDERTAKING. AS REGARDS THE INTEREST INCOME WE HAVE TO FIND WHETHER INTEREST INCOME IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCE S OR INCOME FROM BUSINESS THIS DEPEND UPON FACTS OF EACH CAS E. IN THE CASE UNDER CONSIDERATION THE INTEREST INCOME IS RECEIVE D IS HAVING NEXUS WITH THE BUSINESS OF THE ASSESSEE THEREFORE THE S AME IS ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS. SIMILAR IS T HE POSITION IN RESPECT OF COMMISSION INCOME FOREIGN EXCHANGE FLUC TUATION GAIN EXPORT INCENTIVES (DEPB) WHICH APPARENTLY ARE THE BUSINESS INCOME OF THE ASSESSEE. EXPORT INCENTIVES (DEPB) WERE PART OF THE PROFITS AND GAINS OF INDUSTRIAL UNDERTAKING IN VIEW OF THE PROV ISIONS OF SECTION 28(III) 28(IIIB) 28(IIIC) OF THE ACT. 6.2 AS THE SAID ITEMS ARE THE BUSINESS INCOME THER EFORE WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLED FOR DEDUCTIO N U/S 80IA APPLICABLE TO THE PERIOD. THE AO IS DIRECTED TO ALL OW THE CLAIM OF DEDUCTION OF THE ASSESSEE U/S 80IA ON THE ABOVE ITE MS. 7. 2 ND EFFECTIVE GROUND IS CALCULATION OF DEDUCTION U/S 8 0 HHC IN RESPECT OF THE ITEMS MENTIONED IN GROUND NO. 1. 8. AS HELD BY US WHILE DECIDING THE ISSUE RELATED T O 80IA IN GROUND NO. 1 INTEREST INCOME COMMISSION INCOME EXPORT I NCENTIVES (DEPB) AND FOREIGN EXCHANGE FLUCTUATION GAIN ARE BUSINESS INCOME THEREFORE CALCULATION OF DEDUCTION U/S 80 HHC IS ALSO REQUIRE D TO BE DONE IN THE LIGHT OF THAT THESE ARE THE BUSINESS INCOME. HOWEVE R DEDUCTION U/S 80 HHC IS REQUIRED TO BE CALCULATED IN ACCORDANCE W ITH SECTION 80 HHC. IN THIS REGARD A DETAILED GUIDELINES HAS GIVE N BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. KA NTILAL CHOTALAL 246 ITR 242 AND IN CIT VS. BANGALORE CLOTHING CO. 260 ITR 371 (BOM.)>IT MAY STATE THAT NETTING OF INCOME IF ANY M AY BE CONSIDERED IN THE LIGHT OF LATEST JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. ASIAN STAR CO. LTD. VIDE INCOME TAX APPEAL NO. 2000 OF 2009 ITA NO. 6982/M/06 UNITED RICELAND PVT. LTD. 6 JUDGMENT DATED 18/19 TH MARCH 2010.IN VIEW OF ABOVE WE REMIT THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION TO CALCULATE DEDUCTION U/S 80 HHC IN THE LIGHT OF ABOVE DISCUSSI ON AFTER PROVIDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 9. 3 RD EFFECTIVE GROUND RAISED IN THIS APPEAL IS IN RESPE CT OF CALCULATION OF DEDUCTION U/S 80 HHC IN RESPECT OF D EPB. 10. THE LEARNED REPRESENTATIVES OF THE PARTIES SUBM ITTED THAT CALCULATION OF DEDUCTION U/S 80 HHC IN RESPECT OF D EPB IS REQUIRED TO BE CALCULATED IN THE LIGHT OF SPECIAL DECISION OF I TAT MUMBAI IN THE CASE OF M/S TOPMAN EXPORTS & OTHERS [2009] 318 ITR (AT) 87(MUM.)(SB). THEREFORE THIS ISSUE ALSO IS REMITTE D BACK TO THE FILE OF AO WITH A DIRECTION TO DECIDE THE ISSUE AND CALCULA TE THE DEDUCTION IN THE LIGHT OF THE SAID DECISION OF M/S TOPMAN EXPORT S AFTER PROVIDING OPPORTUNITY OF HEARING TO THE ASSESSEE. 11. IN THE RESULT THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. PRONOUNCED ON THIS 22 ND DAY OF APRIL 2010. SD/- SD/- (ASHA VIJAYRAGHAVAN) (A.L. GEHL OT) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED: 22 ND APRIL 2010. ITA NO. 6982/M/06 UNITED RICELAND PVT. LTD. 7 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE K BENCH I.T .A.T. MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR I.T.A.T. MUMBAI. KV S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON 6.4.10 SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR 7.4.10 SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER