Vimal Oil & Foods Ltd., Ahmedabad V. The DY.CIT., Cent.Circle-1(2), Ahmedabad

CO 185/AHD/2009

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9513 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 8 month(s) 8 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 29-04-2014
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 02-04-2014
• Assessment Year: 1999-2000
• Appeal Filed On: 20-08-2009
• Court: TRIBUNAL
• Assessee Lawyers: P M MEHTAAR
• Keywords: Business income
• Section: 143(3); 80HHC

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD , !, '# ' $ BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ITA NO. 2500/AHD/2007 AY 1999-2000 DCIT, CENTRAL CIRCLE-1(2), AHMEDABAD. VS. VIMAL OIL & FOOD LTD. 1/2, NATIONAL CHAMBERS, ASHRAM ROAD, AHMEDABAD. PAN:AAACV0765H APPELLANT RESPONDENT C.O. NO. 185/AHD/2009 AY 1999-2000 VIMAL OIL & FOOD LTD. 1/2, NATIONAL CHAMBERS, ASHRAM ROAD, AHMEDABAD. PAN: AAACV0765H VS. DCIT, CENTRAL CIRCLE-1(2), AHMEDABAD. APPELLANT RESPONDENT REVENUE BY : SH. SUBHASH BAINS , DR ASSESSEE(S) BY : SH. P.M. MEHTA, AR % & !#/ // / DATE OF HEARING : 02/04/2014 ()* & !# / DATE OF PRONOUNCEMENT: 29/04/2014 '+/ O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : REVENUE IS IN APPEAL AND THE RESPONDENT ASSESSEE IN CROSS-OBJECTION, BOTH ARISING FROM AN ORDER OF CIT( A)-I, AHMEDABAD DATED 30.03.2007. 2. AT THE OUTSET, IT IS WORTH TO MENTION THAT VIDE AN ORDER OF ITAT, AHMEDABAD BENCH DATED 20.12.2013 BEARING M A NO. 108/AHD/2013 (IN 2500/AHD/2007), MA NO. 109/AHD/201 3 (C.O. ITA NO. 2500/AHD/20 07 & CO NO. 185/AHD/2009 VIMAL OIL & FOOD LTD. VS. DCIT, C.C.-1(2),AHD AY 1999-2000 - 2 - 185/AHD/2009) FOR ASSESSMENT YEAR 1999-2000 TITLED AS VIMAL OIL & FOODS LTD., AHMEDABAD VS. DCIT, CENT. CIRCLE-1(2) , AHMEDABAD, IT WAS HELD AS UNDER: 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT THE ISSUE RAISED BY REVENUE BEFORE THE TRIBUNAL WAS NET INTER EST RECEIVED FROM CUSTOMERS WAS TO BE CONSIDERED FOR TH E PURPOSE OF DEDUCTION U/S. 80HHC. IN THE CASE OF AC G ASSOCIATED CAPSULES PVT. LTD. VS. CIT (2012) 247 CT R (SC) 372 THE HONBLE APEX COURT HAS HELD THAT 90% OF NOT THE GROSS RENT OR GROSS INTEREST BUT ONLY THE NET INTER EST OR NET RENT WHICH HAS BEEN INCLUDED IN THE PROFITS OF THE BUSINESS OF THE ASSESSEE AS COMPUTED UNDER THE HEAD PROFITS AN D GAINS OF BUSINESS OF PROFESSION IS TO BE DEDUCTED UNDER CLAUSE (1) OF EXPLANATION (BAA) TO SECTION 80HHC FOR DETERMINI NG THE PROFITS OF THE BUSINESS. 6. IN THE CASE OF NIRMA IND. LTD. VS. DCIT, IT HAS BEEN HELD THAT INTEREST RECEIVED FROM TRADE DEBTORS FOR LATE PAYMENT OF SALES CONSIDERATION IS INCOME DERIVED FR OM THE BUSINESS OF THE INDUSTRIAL UNDERTAKING AND IT CANNO T BE EXCLUDED FROM THE PROFITS OF THE INDUSTRIAL UNDERTA KING WHILE COMPUTING DEDUCTION U/S. 80IB. 7. SINCE THE ISSUE OF GROSS INTEREST OR NET INTERES T HAS BEEN SETTLED BY THE DECISION OF HONBLE APEX COURT. WE ARE OF THE VIEW THAT IN VIEW OF THE AFORESAID DECISION OF APEX COURT, THERE SEEMS TO BE APPARENT MISTAKE IN THE OR DER. WE THEREFORE RECALL OUR ORDER ONLY WITH RESPECT TO DEC IDE GROUND NO. 3 OF ITA NO. 2500/AHD/2007 IN LIGHT OF FOREGOIN G. REGISTRY IS DIRECTED TO FIX THE CASE FOR THE LIMITE D PURPOSE OF DECIDING GROUND NO. 3 IN NORMAL COURSE. 3. IN THE REVENUES APPEAL, GROUND NO. 3 HAS BEEN RECALLED WHICH IS REPRODUCED HEREIN BELOW AS READY REFERENCE: THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN REDUCIN G THE AMOUNT OF INTEREST RECEIVED ON ACCOUNT OF LATE PAYM ENT FROM CUSTOMERS FROM THE PROFITS OF THE BUSINESS FOR CALC ULATING DEDUCTION U/S 80HHC OF THE ACT. 4. AS FAR AS THE VERDICT OF LD. CIT(A) IS CONCERNE D, HE HAS HELD AS UNDER: ITA NO. 2500/AHD/20 07 & CO NO. 185/AHD/2009 VIMAL OIL & FOOD LTD. VS. DCIT, C.C.-1(2),AHD AY 1999-2000 - 3 - I HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF THE CO UNSEL FOR APPELLANT AND GONE THROUGH THE CASE LAWS RELIED UPON BY THE LD. COUNSEL. WITH REGARD TO IN THE INTEREST ON LATE PAYMENT FOR RS 1,51,491 IS CONSIDERED, I AGREE WITH THE SUBMISSION OF THE APPELLANT THAT SUCH INTEREST INCO ME IS BUSINESS INCOME AND 90% OF SUCH INCOME CANNOT BE RE DUCED FROM BUSINESS PROFIT. IN VIEW OF THE DECISION OF J URISDICTIONAL HIGH COURT IN THE CASE OF NIRMA INDUSTRIES LTD. SO FAR AS BALANCE INTEREST IS CONCERNED, THE APPELLANT HAS NO PROVED NEXUS BETWEEN INTEREST INCOME AND INTEREST EXPENDIT URE HENCE DISALLOWANCE MADE BY AO TO THAT EXTENT IS CON FIRMED. 5. WE HAVE HEARD BOTH THE SIDES. THE LD. CIT(A) H AS HELD THAT IN RESPECT OF INTEREST ON LATE PAYMENT OF RS 1 ,51,491/-, SUCH INTEREST INCOME IS BUSINESS INCOME AND 90% OF SUCH INCOME CANNOT BE REDUCED FROM THE BUSINESS PROFIT. THE LD. CIT(A ) HAS GIVEN THE VERDICT THAT SUCH INTEREST INCOME CANNOT BE REDUCED FROM THE BUSINESS PROFIT, BUT INADVERTENTLY, REVENUE HAS WRO NGLY QUOTED IN THE GROUND THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN REDUCING THE AMOUNT OF INTEREST RECEIVED ON LATE PA YMENT FROM CUSTOMER. ALTHOUGH THE GROUND RAISED BY THE REVENU E IS NOT CORRECTLY WORDED, BUT WE DEEM IT PROPER THAT THE IS SUE BEING ORIGINALLY DECIDED BY THE TRIBUNAL EARLIER AND WE A RE IN THE SECOND ROUND, THEREFORE, IT IS JUSTIFIABLE TO DECIDE THE L EGAL ISSUE INSTEAD OF WITHHOLDING THE JUDGMENT FOR THIS SIMPLE REASON. A S FAR AS THE LEGALITY OF THE ISSUE IS CONCERNED, WE HAVE NOTED T HAT THE HONBLE GUJARAT HIGH COURT IN THE CASE OF NIRMA INDUSTRIES LIMITED 283 ITR 402 (GUJ.) HAS HELD THAT THE INTEREST RECEIVED FROM TRADE DEBTORS FOR LATE PAYMENT OF SALES CONSIDERATION IS ASSESSAB LE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OF PROFESSION. THE HONBLE HIGH COURT HAS PRONOUNCED THAT THE DISTINCTION DRAW N BY THE REVENUE BETWEEN THE SOURCE OF SALE PROCEEDS AND THE SOURCE OF INTEREST WAS ERRONEOUS IN LAW, AND IN PRINCIPLE, TH ERE IS NO DISTINCTION AS TO THE SOURCE, HENCE THE INTEREST EA RNED IS ELIGIBLE INCOME FOR THE PURPOSE OF COMPUTING THE RELIEF. SI NCE THE LD. ITA NO. 2500/AHD/20 07 & CO NO. 185/AHD/2009 VIMAL OIL & FOOD LTD. VS. DCIT, C.C.-1(2),AHD AY 1999-2000 - 4 - CIT(A) HAS ALSO FOLLOWED THIS VERY DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT, THEREFORE THE VIEW TAKEN BY LD. CIT(A) IS HEREBY UPHELD AND THE GROUND RAISED BY THE REVENUE IS DISMISSED. 6. AS FAR AS THE C.O. NO. 185/AHD/2009 OF THE ASSE SSEE IS CONCERNED, SINCE THE C.O. HAS ALSO BEEN RECALLED VI DE PARA 12 OF THE M.A. ORDER AS NOTED ABOVE, THEREFORE THE GROUND WHI CH IS RECALLED IS TO BE DECIDED HEREUNDER. FOR READY REFERENCE, PARA 12 OF THE MA ORDER IS REPRODUCED BELOW: BEFORE US, THE LD. A.R. HAS SUBMITTED THAT THE NET INTEREST INCOME WAS NIL. WE ARE THEREFORE OF THE VIEW THAT IN THE LIGHT OF THE DECISION OF HON. APEX COURT IN THE CAS E OF ACG ASSOCIATED CAPSULES PVT. LTD. (SUPRA) THERE SEEMS T O BE AN APPARENT MISTAKE. WE THEREFORE RECALL THE C.O. FOR THE LIMITED PURPOSE OF DECIDING THE AFORESAID GROUND OF ASSESSEE. REGISTRY IS DIRECTED TO FIX THE CASE FOR THE LIMITE D PURPOSE OF DECIDING GROUND NO. 3 IN NORMAL COURSE. 7. THROUGH THE SAID C.O., THE GROUND RAISED BY THE CROSS- OBJECTOR WAS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN HOLDING THAT FOR THE PURPOS ES OF CLAUSE (BAA) OF THE EXPLANATION TO SECTION 80HHC OF THE INCOME-TAX ACT NETTING OF INTEREST IS NOT TO BE DON E. 8. IN THIS REGARD, WE HAVE NOTED THAT EARLIER THE RESPECTED CO-ORDINATE BENCH VIDE IMPUGNED ORDER DATED 22.03.2 013 HAD HELD AS UNDER: HOWEVER, WHILE COMPUTING THE NET INCOME ONLY THE EXPENDITURE WHICH HAS NEXUS WITH THE EARNING OF SUC H INCOME ONLY WILL BE REDUCED FROM THOSE INCOME. WE THEREFORE SET ASIDE THE ORDER OF THE CIT(A) ON THIS POINT AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSIN G OFFICER. WE ALSO DIRECT THE AO TO PROVE THE NEXUS OF INTERES T INCOME WITH EXPENDITURE. WE THUS DIRECT HIM TO EXCLUDE TH E NET INCOME FROM INTEREST INCOME FROM THE PROFITS OF THE INDUSTRIAL UNDERTAKING FOR COMPUTING DEDUCTION UNDER SECTION 8 0IA. ITA NO. 2500/AHD/20 07 & CO NO. 185/AHD/2009 VIMAL OIL & FOOD LTD. VS. DCIT, C.C.-1(2),AHD AY 1999-2000 - 5 - THUS, THIS GROUND IS ACCORDINGLY ALLOWED FOR STATIS TICAL PURPOSE. 9. ALTHOUGH THIS WAS RECALLED, BUT WE HAVE NOTED T HAT INSTEAD OF READING SECTION 80IA, IF THIS VERDICT OF THE TRIBUNAL IS TO BE READ AS PER THE PROVISIONS OF SECTION 80HHC, THE N THERE IS NO MATERIAL INFIRMITY. A WELL KNOWN DECISION OF HONB LE SUPREME COURT IN THE CASE OF ACG ASSOCIATED CAPSULES 343 ITR 89 ( SC) HAS BEEN QUOTED BEFORE US. IT WAS HELD IN THIS CASE THAT 90 % OF THE NET INTEREST WHICH HAD BEEN INCLUDED IN THE PROFITS OF THE BUSINESS OF THE ASSESSEE AS COMPUTED UNDER THE HEAD PROFITS AN D GAINS OF BUSINESS OF PROFESSION, WAS TO BE DEDUCTED UNDER C LAUSE (1) OF EXPLANATION (BAA) OF SECTION 80HHC FOR DETERMINING THE PROFITS OF BUSINESS. WE, THEREFORE, REITERATE THAT FOLLOWING THIS DECISION, THE ASSESSING OFFICER IS TO COMPUTE THE DEDUCTION U/S 8 0HHC ACCORDINGLY. WE ARE NOT GOING TO INTERFERE WITH TH E EARLIER DIRECTION OF THE RESPECTED CO-ORDINATE BENCH WHEREIN IT WAS D IRECTED TO THE ASSESSEE (INADVERTENTLY MENTIONED ASSESSING OFFICER ) TO PROVE THE NEXUS OF INTEREST INCOME WITH THE EXPENDITURE. WE HAVE TAKEN THIS DECISION TO REVERT THE ISSUE BACK TO ASSESSING OFFI CER BECAUSE OF ONE MORE REASON THAT ON PERUSAL OF THE IMPUGNED ORD ER OF THE ASSESSING OFFICER PASSED U/S 153A(B) READ WITH SECT ION 143(3) DATED 28.12.2006, THERE WAS NO DISCUSSION ON THE C OMPUTATION OF REVISED DEDUCTION U/S 80HHC OF I.T. ACT IN THE MAIN BODY OF THE ASSESSMENT ORDER. ONLY AN ANNEXURE IS AFFIXED THRO UGH WHICH A REVISED COMPUTATION WAS MADE BY THE ASSESSING OFFIC ER BUT NO REASON WAS GIVEN IN THE ASSESSMENT ORDER AS TO WHY AND ON WHAT BASIS THE 80HHC DEDUCTION AS CLAIMED BY THE ASSESSE E WAS REVISED. DUE TO THE LACK OF THE SAID CLARITY, IT IS OTHERWIS E WORTH TO RESTORE THIS ISSUE TO THE STAGE OF THE ASSESSING OFFICER TO BE DECIDED IN THE LIGHT OF THE DISCUSSION AFOREMENTIONED. ITA NO. 2500/AHD/20 07 & CO NO. 185/AHD/2009 VIMAL OIL & FOOD LTD. VS. DCIT, C.C.-1(2),AHD AY 1999-2000 - 6 - 10. RESULTANTLY, THE GROUND RAISED IN C.O. OF THE ASSESSEE MAY BE TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 11. AS FAR AS THE FINAL RESULT IN ITA NO. 2500/AHD /2007 AND C.O. NO. 185/AHD/2009 IS CONCERNED, THE SAME SHALL NOT CHANGE AS HELD VIDE PARA 21 OF THE PREVIOUS ORDER. ORDER PRONOUNCED IN THE COURT ON TUESDAY, THE 29 TH OF APRIL, 2014 AT AHMEDABAD. SD/- SD/- ( ANIL CHATURVEDI ) ACCOUNTANT MEMBER (MUKUL KR. SHRAWAT) JUDICIAL MEMBER AHMEDABAD; DATED /04/2014 GHANSHYAM MAURYA, SR. P.S. ITA NO. 2500/AHD/20 07 & CO NO. 185/AHD/2009 VIMAL OIL & FOOD LTD. VS. DCIT, C.C.-1(2),AHD AY 1999-2000 - 7 - '+ & ,- .'-* '+ & ,- .'-* '+ & ,- .'-* '+ & ,- .'-*/ COPY OF THE ORDER FORWARDED TO : 1. /0 / THE APPELLANT 2. ,1/0 / THE RESPONDENT. 3. 2 / CONCERNED CIT 4. 2 ( ) / THE CIT(A)-III, AHMEDABAD 5. -56 , , , / DR, ITAT, AHMEDABAD 6. 678 9% / GUARD FILE. '+ '+ '+ '+ / BY ORDER, : :: :/ // / ; ; ; ; ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION- 28.04.2014 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S. - 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT .. 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 8. DATE OF DESPATCH OF THE ORDER