SIDDHI FERROUS, NAVI MUMBAI V. DCIT CIR 15(1), MUMBAI

CO 163/MUM/2012

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7710 (ITAT-MUMBAI)
• Duration Of Justice: 1 month(s) 22 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 07-09-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2007-2008
• Appeal Filed On: 16-07-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRADEEP SINGH
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NOS.6645 & 6646/MUM/2011 ASSESSMENT YEARS-2007-08 & 2008-09 THE DY. CIT, CIRCLE-15(1), MATRU MANDIR, 1 ST FLOOR, TARDEO ROAD, VS. M/S. SIDDHI FERROUS, 205,DEVRATA, SECTOR 17, VASHI, NAVI MUMBAI (APPELLANT) (RESPONDENT) C.O. NO. 163/MUM/2012 (ARISING OUT OF ITA NO. 6645/M/2011) ASSESSMENT YEARS-2007-08 M/S. SIDDHI FERROUS, 205,DEVRATA, SECTOR 17, VASHI, NAVI MUMBAI VS. THE DY. CIT, CIRCLE-15(1), MATRU MANDIR, 1 ST FLOOR, TARDEO ROAD, (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI PRADEEP SINGH ASSESSEE BY: SHRI NITESH JOSHI DATE OF HEARING :4.09.2012 DATE OF PRONOUNCEMENT:7.9.2012 O R D E R PER N.K. BILLAIYA, AM: THESE TWO APPEALS ARE FILED BY THE REVENUE ARE DIR ECTED AGAINST THE ORDERS OF LD. CIT(A)-26 DT. 14.7.2009 FOR ASSESSMEN T YEAR 2007-08 AND DT. 18.1.2011 FOR ASSESSMENT YEAR 2008-09 AND CROSS OBJ ECTION FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-26 DT. 14. 7.2011 PERTAINING TO ASSESSMENT YEAR 2007-08. IN BOTH THESE APPEALS, REVE NUE HAS TAKEN COMMON GROUNDS EXCEPT AMOUNT OF DISALLOWANCE OF EXPENSES V ARIES THEREFORE BOTH ITA NOS 6645-46/M/2011 C..O. NO.163/M/12 . 2 THESE APPEALS AND C.O. ARE HEARD TOGETHER FOR THE S AKE OF CONVENIENCE AND BREVITY. ITA NO. 6645/M/2011- A.Y. 2007-08 2 THE ONLY GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN ALLOWING DEDUCTION U/S. 80IB ON THE INTEREST OF RS. 18,03,198/- RECEIVED FROM THE CUSTOMERS/DEBTORS FOR DELAYED PAYMENTS. 3. THE FACTS OF THE CASE ARE THAT DURING THE YEAR U NDER CONSIDERATION, THE ASSESSEE FILED RETURN OF INCOME ON 30.10.2007 DECLA RING INCOME OF RS. NIL. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER FOUND THAT THE ASSESSEE HAS SHOWN OTHER INCOME BEING INTE REST RECEIVED FROM THREE PARTIES AMOUNTING TO RS. 17,75,978/- BEING INTEREST ON DELAYED RECEIPT OF SALE PROCEEDINGS AND INTEREST ON BANK GUARANTEE DEPOSIT AMOUNTING TO RS. 27,200/-. THE ASSESSING OFFICER WAS OF THE OPINION THAT THE TOTAL INTEREST SO RECEIVED AMOUNTING TO RS. 18,03,178/- HAS NO NEXUS WITH THE BUSINESS OF THE UNDERTAKING. THEREFORE, THE SAME CANNOT BE CONSIDE RED FOR ALLOWING DEDUCTION U/S. 80IB OF THE ACT. 4. THE AO SOUGHT EXPLANATION FROM THE ASSESSEE IN T HIS MATTER. IN RESPONSE TO WHICH THE ASSESSEE SUBMITTED THAT THE I NTEREST RECEIPTS HAVE A DIRECT NEXUS WITH THE BUSINESS OF THE UNDERTAKING B ECAUSE THE INTEREST HAS BEEN RECEIVED ON DELAYED RECEIPT OF SALE PROCEEDS A ND THE ASSESSEE HAS TO BEAR INTEREST COST ON ITS CC/OD ACCOUNT. IT IS ONL Y FOR THE PURPOSE OF PRESENTATION IN THE ACCOUNTS THAT INTEREST RECEIPTS AND PAYMENTS ARE SHOWN SEPARATELY AND SO FAR AS ON FIXED DEPOSIT IS CONCER NED, THE ASSESSEE SUBMITTED THAT FIXED DEPOSITS HAVE BEEN KEPT AS MAR GIN MONEY FOR THE PURPOSES OF THE BUSINESS. THE SUBMISSIONS OF THE A SSESSEE DID NOT FIND ANY FAVOUR FROM THE AO WHO WENT ON TO DISALLOW THE CLAI M OF THE ASSESSEE U/S. 80IB OF THE ACT ON THE TOTAL INTEREST OF RS. 18,03, 178/-. ITA NOS 6645-46/M/2011 C..O. NO.163/M/12 . 3 5. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A) AND REITERATED ITS STAND THAT INTEREST EARNED HAS A DIRECT NEXUS W ITH THE BUSINESS OF THE ASSESSEE. IN SUPPORT OF ITS CLAIM, THE ASSESSEE REL IED UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS VIDYUT CORPORATION 324 ITR 221 (BOM) AND THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF ADVANCE DETERGENT LTD. 228 CTR 356 (DEL). AFTER CO NSIDERING THESE SUBMISSIONS AND THE CASE LAWS CITED BY THE ASSESSEE , THE LD. CIT(A) WAS CONVINCED THAT INTEREST INCOME HAS DIRECT NEXUS WIT H THE MAIN BUSINESS ACTIVITY OF THE ASSESSEE. HOWEVER, THE LD. CIT(A) RESTRICTED THE CLAIM OF THE ASSESSEE TO RS. 17,75,978/- BEING INTEREST RECEIVED ON DELAYED PAYMENTS OF GOODS SOLD AND DENIED THE CLAIM ON INTEREST OF RS. 27,220/- RECEIVED FROM THE BANK DEPOSITS. 6. REVENUE IS IN APPEAL AGAINST THE FINDING OF LD. CIT(A) AND THE ASSESSEE IS IN CROSS OBJECTION AGAINST THE VERY SAME FINDING S OF THE LD. CIT(A). 7. THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED TH E ORDER OF THE AO. THE LD. COUNSEL FOR THE ASSESSEE REITERATED HIS REL IANCE ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS VID YUT CORPN. (SUPRA). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES. IT IS NOT DISPUTED THAT INTEREST OF RS . 17,75,978/- HAS BEEN RECEIVED ON DELAYED PAYMENTS MADE BY THE CUSTOMERS/ DEBTORS OF THE ASSESSEE. THAT BEING FACT OF THE MATTER, IN OUR HU MBLE OPINION, SUCH INTEREST BEARS A DIRECT NEXUS WITH THE TRADING OF THE ASSESS EE AND THEREFORE ELIGIBLE FOR DEDUCTION U/S. 80IB OF THE ACT. SO FAR AS INTEREST O F RS. 27,220/- IS CONCERNED WHICH IS RECEIVED ON BANK DEPOSITS, WE AGREE WITH THE FINDINGS OF THE LD. CIT(A) THAT SUCH BANK DEPOSIT DO NOT HAVE ANY DIREC T NEXUS WITH THE INDUSTRIAL UNDERTAKING. ACCORDINGLY, FINDINGS OF T HE LD. CIT(A) ARE CONFIRMED. THE LD. COUNSEL ARGUING FOR HIS CROSS OBJECTION SUB MITTED THAT THE NET OF THE INTEREST SHOULD BE TAKEN INTO CONSIDERATION. HOWEV ER NONE OF THE LOWER AUTHORITIES HAVE DISCUSSED THIS ISSUE, THEREFORE WE CANNOT ACCEPT THE ITA NOS 6645-46/M/2011 C..O. NO.163/M/12 . 4 SUBMISSIONS OF THE LD. COUNSEL ON THIS COUNT. ACCO RDINGLY, GROUND NO. 1 & 2 OF THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DI SMISSED AND GROUND NO. 1 OF ITA NOS. 6645 & 6646/M/2011 ARE ALSO DISMISSED. 9. GROUND NOS. 3, 4 & 5 OF THE C.O. OF THE ASSESSEE ARE AGAINST THE ORDER OF THE LD. CIT(A) FOR A.Y. 2007-08. THE SOLE GRIEV ANCE OF THE ASSESSEE IS THAT THE INSPECTION CHARGES RECOVERED FROM THE CUSTOMERS QUALIFIED FOR DEDUCTION U/S. 80IB OF THE ACT. 10. THE FACTS GIVING RISE TO THIS DISPUTE SHOW THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE AS SESSEE HAS RECEIVED GROSS INCOME FROM INSPECTION CHARGES AT RS. 9,09,67 2/- AND EXPENSES INCURRED ON THIS ACCOUNT AMOUNTS TO RS. 6,87,472/-. THE ASSESSEE WAS ASKED WHY THE DIFFERENCE AT RS. 2,22,000/- SHOULD NOT BE DISALLOWED FROM THE CLAIM OF DEDUCTION U/S. 80IB(4) OF THE ACT. THE ASSESSEE REPLIED THAT CUSTOMERS HAVE INSISTED THAT THEY WILL PURCHASE THE GOODS OF THE ASSESSEE ONLY WHEN THE SAME HAVE BEEN APPROVED BY RITES LTD. AND THEREFORE THE ASSESSEE HAD TO INCUR INSPECTION CHARGES WHICH BILLED TO ITS CUSTOM ERS AND THEREFORE IT IS PART OF THE BUSINESS OF THE UNDERTAKING ELIGIBLE FOR EXE MPTION U/S. 80IB OF THE ACT. 11. THE AO REJECTED THE SUBMISSIONS OF THE ASSESSEE . WHEN THE MATTER WAS CARRIED OVER BEFORE THE LD. CIT(A), THE LD. CIT (A) ALSO REJECTED THE SUBMISSION OF THE ASSESSEE AND CONFIRMED THE ADDITI ON MADE BY THE AO. 12. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE POI NTED OUT THAT THE INSPECTION CHARGES ARE PART OF THE SALE BILL ISSUED BY THE ASSESSEE TO ITS CUSTOMERS. THE ASSESSEE HAD TO INCUR INSPECTION CH ARGES BECAUSE IT WAS A CONDITION PRECEDENT BY ITS CUSTOMERS THAT THE GOODS HAVE TO BE FIRST APPROVED BY RITES LTD. THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE FINDINGS OF LOWER AUTHORITIES. ITA NOS 6645-46/M/2011 C..O. NO.163/M/12 . 5 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE ORDERS OF LOWER AUTHORITIES. WE FIND THAT DURING THE YEAR U NDER CONSIDERATION, THE ASSESSEE HAS RECEIVED INSPECTION CHARGES AT RS.9,09 ,672/- AND PAID INSPECTION CHARGES AT RS. 6,87,472/-. THUS RESULT ING IN AN INCOME OF RS. 2,22,2000/-. AS THIS INCOME IS A RESULT OF THE BUSI NESS ACTIVITY OF THE INDUSTRIAL UNDERTAKING, AS THE ASSESSEE HAS CHARGED INSPECTION CHARGES IN THE SALE BILL, THEREFORE WE HAVE NO HESITATION TO HOLD THAT IT BEA RS A DIRECT NEXUS WITH THE BUSINESS OF THE INDUSTRIAL UNDERTAKING THEREFORE EL IGIBLE FOR DEDUCTION U/S. 80IB OF THE ACT. WE ACCORDINGLY REVERSE THE FINDIN GS OF THE LOWER AUTHORITIES AND DIRECT THE AO TO ALLOW THE ASSESSEES CLAIM FOR RS. 2,20,200/- AS DEDUCTION U/S. 80IB OF THE ACT. ACCORDINGLY, C.O. FI LED BY THE ASSESSEE IN GROUND NOS. 3,4, & 5 ARE ALLOWED. 14. IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE DISMISSED AND THE C.O. FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS . DAY OF SEPTEMBER, 2 012 (D.K. AGARWAL) (N.K. BILLAIYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED SEPTEMBER, 2012 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR J BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI ITA NOS 6645-46/M/2011 C..O. NO.163/M/12 . 6 DATE INITIALS 1. DRAFT DICTATED ON: 4.09.2012 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 5.09.2012 SR. PS/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. PS/PS: SR. PS/PS 6. ORDER PRONOUNCED ON: SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: SR. PS/PS 9. DATE ON WHICH FILE GOES TO AR 10. DATE OF DISPATCH OF ORDER: