M/s. Kirby Building Systems India (Uttaranchal) Pvt. Ltd., Haridwar V. ACIT, Haridwar

CO 197/DEL/2012

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1438 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 28 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 21-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 19-10-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 24-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CIT AS DEHRADUN DATED A Y B
• Keywords: Business income; Business expenditure; Difference of opinion; Capital receipt; Change of opinion
• Section: 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH:D NEW DELHI BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER & SMT. BEENA PILLAI, JUDICIAL MEMBER I.T.A .NO. 923/DEL/2012 (ASSESSMENT YEAR-2008-09) & CROSS OBJECTION NO. 197/DEL/2012 (ASSESSMENT YEAR-2008-09) ORDER PER BEENA PILLAI, JUDICIAL MEMBER : THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AS W ELL AS THE REVENUE ARISING OUT OF THE ORDER PASSED BY THE CIT( A)S-1, DEHRADUN DATED 11/10/2011 FOR A.Y. 2008-09. 2. BRIEF FACTS OF THE CASE AS RECORDED BY THE LD.AO ARE THAT THE ASSESSEE FILED ITS E-RETURN ON 30/09/2008 DECLARING NIL INCOME. THE ACIT, CIRCLE-HARIDWAR, D-29 & 30, INDUSTRIAL AREA, HARDWAR. VS KIRBY BUILDING SYSTEMS INDIA (UTTARANCHAL) PVT. LTD., PLOT NO. 2, SECTOR-11, IIE, SIDCUL, HARDWAR. AACCK5926G KIRBY BUILDING SYSTEMS INDIA (UTTARANCHAL) PVT. LTD., PLOT NO. 2, SECTOR-11, IIE, SIDCUL, HARDWAR. AACCK5926G VS ACIT, CIRCLE-HARDWAR, D-29 & 30, INDUSTRIAL AREA, HARIDWAR. APPELLANT BY SHRI S.K. JAIN, SR. DR RESPONDENT BY SHRI HARPREET SINGH, ADV. SHRI ADITYA GUPTA, ADV. DATE OF HEARING 19.10.2015 DATE OF PR ONOUNCEMENT 21.10.2015 ITA NO. 923/D/2012 & CO NO. 197/D/2012 2 CASE WAS SELECTED FOR SCRUTINY. THE ASSESSEE IS EN GAGED IN THE MANUFACTURE OF PRE-ENGINEERED BUILDING AND HAS MANU FACTURING FACILITY LOCATED AT PLOT NO. 2, SECTOR-11, IIE, SID CUL, HARDWAR. IN THE RETURN FILED BY THE ASSESSEE IT HAD CLAIMED A DEDUC TION U/S 80IC OF THE ACT AT AN AMOUNT OF RS. 22,19,333/-. DURING TH E ASSESSMENT PROCEEDINGS, THE LD.AO OBSERVED THAT SEVERAL RECEIP TS DOES NOT HAVE DIRECT NEXUS WITH THE MANUFACTURING ACTIVITIES, WHI CH HAVE BEEN INCLUDED FOR CLAIMING DEDUCTION U/S 80IC OF THE ACT . THESE ARE AS UNDER: I) INTEREST INCOME AMOUNTING TO RS. 32,34,811/- EA RNED ON FDRS WHICH WAS CREATED TO PLEDGE WITH THE BANK AS MARGIN MONEY FOR OPENING OF LETTER OF CREDIT (LC) OR ISSUING OF BANK GUARANTEE. II) MISCELLANEOUS INCOME/PROVISION RETURN BACK AMO UNTING TO RS. 51,14,800/-. III) GAIN ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATI ON AMOUNTING TO RS. 61,29,796/-. 3. THE LD.AO MADE ADDITION OF THE RESPECTIVE AMOUNT AS NOT BEING ELIGIBLE TO BE INCLUDED FOR CALCULATING THE CLAIM O F DEDUCTION U/S 80IA OF THE ACT. 4. AGGRIEVED BY THE ORDER OF THE LD.AO, THE ASSESSE E WENT INTO APPEAL BEFORE THE LD. CIT(A) I. 5. THE LD. CIT(A) AFTER GOING THROUGH THE ARGUMENTS OF THE ASSESSEE OBSERVED THAT THE INTEREST ON FDS GIVEN AS SECURITY FOR LCS, IS ELIGIBLE FOR DEDUCTION U/S 80IC. HOWEVER, THE INTEREST ON F DS ON BANK GUARANTEE WAS HELD TO BE NOT ELIGIBLE. IN RESPECT OF THE REMAINING ADDITION MADE BY THE LD.AO, IN LIEU OF THE MISCELLA NEOUS INCOME, THE LD. CIT(A) HELD THAT, THE ASSESSEE HAD MADE THE PRO VISION IN RESPECT OF THE BUSINESS EXPENDITURE AND THERE IS NO REASON WHY THE SAME SHOULD NOT BE TREATED AS ANYTHING BUT PROFIT DERIVED FROM BUSINESS WHEN PART ITA NO. 923/D/2012 & CO NO. 197/D/2012 3 OF SUCH LIABILITY HAS BEEN RETURNED BACK AS THE SAM E IS NOT REQUIRED ANY MORE. THE LD. CIT(A), THEREFORE, DELETED THE A DDITION MADE IN RESPECT OF THE PROVISION WRITTEN OFF. IN RESPECT O F FOREIGN EXCHANGE GAIN ON ACCOUNT OF EXCHANGE FLUCTUATION RATE BETWEE N THE DATE OF RECEIPT OF THE IMPORTED MATERIAL AND THE DATE OF PA YMENT FOR THE SAME. THE LD. CIT(A) OBSERVED THAT EXCHANGE FLUCTU ATION IS A PART AND PARCEL OF INTERNATIONAL MONITORY SYSTEM. AS A RESUL T, THERE CAN BE GAIN OR LOSS IN TERMS OF THE LOCAL CURRENCY, EVEN THOUGH THE VALUE OF THE TRANSACTION IN TERMS OF THE CURRENCY IN WHICH THE C ONTRACT WAS MADE REMAINS THE SAME. THE LD. CIT(A) HENCE DELETED THE ADDITION MADE BY THE LD. ASSESSING OFFICER IN RESPECT OF FOREIGN EXC HANGE FLUCTUATION RATE AND HELD THE GAIN TO BE ELIGIBLE FOR DEDUCTION U/S 80IC OF THE ACT. 6. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE ASS ESSEE AS WELL AS THE REVENUE IS IN APPEAL BEFORE US IN RESPECT OF THE RE SPECTIVE CONFIRMATION OF THE ADDITION/DELETION MADE BY THE L D.CIT(A). 7. WE SHALL FIRST DEAL WITH THE APPEAL FILED BY THE REVENUE IN ITA NO. 923/DEL/2012. THE GROUNDS OF APPEAL FILED BY THE R EVENUE ARE AS UNDER: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN A LLOWING CLAIM OF DEDUCTION U/S 80IC ON INCOME FROM INTEREST , MISCELLANEOUS INCOME AND INCOME FROM FOREIGN EXCHAN GE FLUCTUATION IN SPITE OF CLEAR CUT FINDING GIVEN IN THE ASSESSMENT ORDER THAT THESE WERE NOT DERIVED BY THE ASSESSEE FROM THE MANUFACTURING ACTIVITY OF THE ELI GIBLE BUSINESS. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS BY UPH OLDING THE SUBMISSION OF THE ASSESSEE IGNORING THE DECISIO N OF THE HONBLE APEX COURT IN THE CASE OF LIBERTY INDIA VS. CIT, 183 TAXMANN 349 (2009). 3. THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND THAT O F THE ASSESSING OFFICER BE RESTORED. 7. THE LD. DR RELIES UPON THE ORDER PASSED BY THE L D. ASSESSING OFFICER IN RESPECT OF THE GROUNDS RAISED IN THE REVENUES A PPEAL. ITA NO. 923/D/2012 & CO NO. 197/D/2012 4 8. WE HAVE PERUSED THE RECORDS FILED BEFORE US, THE ORDERS PASSED BY THE AUTHORITIES BELOW AND THE ARGUMENTS BY BOTH THE PARTIES. 9. . SECTION 80IC OF THE ACT HOLDS THAT INCOME QUAL IFYING FOR DEDUCTION UNDER THIS SECTION SHOULD BE DERIVED FROM BUSINESS OF MANUFACTURE OR PRODUCTION OF ARTICLE OR THING WHICH IS ELIGIBLE FO R DEDUCTION. THE EXPRESSION DERIVED FROM IN TAXATION LOSS MEANS SOME THING WHICH HAS DIRECT OR IMMEDIATE NEXUS WITH THE SPECIFIED ACTIVI TY WHICH IN THE PRESENT CASE MEANS MANUFACTURE AND SALE OF PRE-ENGI NEERED BUILDINGS. THE EXPRESSION DERIVED FROM IS A NARROWER EXPRESSION, THEN THE WORDS ATTRIBUTABLE TO, WHICH INCLUDES DI RECT AS WELL AS INDIRECT RECEIPTS, WHICH MAY NOT HAVE IMMEDIATE OR DIRECT NEXUS WITH THE SPECIFIED ACTIVITY. IN THE PRESENT CASE, IN VI EW OF THE WORDS DERIVED FROM, WE HAVE TO LOOK AT THE IMMEDIATE SOUR CE WHICH HAS GENERATED OR REMITTED IN THE SAID RECEIPT/INCOME. THE MEANING OF DERIVE FROM AS EXPLAINED BY THE APEX COURT IN THE DECISION OF LIBERTY INDIA VS. CIT (2009) 317 ITR 218 ALSO NEEDS TO BE A PPLIED IN THE CASE OF PROVISIONS FOR 80IC. 11. GROUND NO. 1 DEALS WITH THE DELETION OF INCOME FROM INTEREST, MISCELLANEOUS INCOME AND INCOME FROM FOREIGN EXCHAN GE FLUCTUATION. BANK INTEREST : HE LD.CIT(A) HAS OBSERVED THAT THE ASSESSEE HAS TO IMPORT RAW MATERIALS FOR WHICH IT HAS TO OPEN LETTERS OF CREDI T. LD. CIT(A) IN HIS ORDER SUMMARIZES SUBMISSIONS OF THE ASSESSEE AS UND ER; THE ASSESSEE HAS TO IMPORT RAW MATERIALS FOR WHICH IT HAS TO OPEN LETTERS OF CREDIT(LC). THE LC IS AN INTEGRAL PART O F THE BUSINESS ACTIVITY CARRIED ON BY THE ASSESSEE. SINCE PLEDGING OF FDR I S NECESSARY FOR DRAWING LC, THE FDR IS ALSO AN INTEGRAL PART OF THE BUSINESS. THE LD.CIT(A) AT PARA 1.4 OF HIS ORDER OBSERVES THAT SU CH FDS HAD TO BE ITA NO. 923/D/2012 & CO NO. 197/D/2012 5 MADE BEFORE THE RAW MATERIAL COULD BE IMPORTED AND HENCE THE FDS WERE INEXTRICABLE PART O THE ASSESSEES BUSINESS. WE, DO NOT FIND ANY INFIRMITY WITH THE FINDINGS OF THE LD.CIT(A). WE TH EREFORE UPHOLD THE ACTION OF THE LD.CIT(A) IN RESPECT OF INTEREST OF F DS GIVEN AS SECURITY FOR LCS. MISCELLANEOUS INCOME : AN AMOUNT OF RS. 51,14,800/- REPRESENTING EXCESS PR OVISION FOR EXPENDITURE MADE IN THE PAST AND CREDITED BACK IN T HE ACCOUNTS DURING THE PREVIOUS YEAR AS IT WAS NOT REQUIRED ANY LONGER WAS SHOWN AS MISCELLANEOUS INCOME BY THE ASSESSEE. LD. CIT(A ) IN HIS ORDER SUMMARIZES SUBMISSIONS OF THE ASSESSEE AS UNDER; IN THE COURSE OF CARRYING OUT BUSINESS OPERATION OF THE ASSESSEE THAT THE ASSESSEE HAD DEBITED THIS MISCELLANEOUS INCOME TO THE P&L ACCOUNT AND CLAIMED AS BUSINESS EXPENDITURE WHILE C OMPUTING THE PROFITS OF BUSINESS WHICH WAS ELIGIBLE FOR DEDUCTIO N U/S 80IC. THE LD. CIT(A) OBSERVED THAT THE PROVISION FOR EXPE NSES HAD BEEN MADE FOR AY 2007-08 AND WHEN THE SAME WAS NOT REQUI RED IT WAS CREDITED BACK IN A.Y. 2008-09 AND THAT SUCH AMOUNT HAS BEEN TREATED AS PART OF THE BUSINESS INCOME IN ACCORDANCE WITH P ROVISION OF SECTION 41 OF THE I.T. ACT. IT HAS BEEN OBSERVED BY THE LD. CIT(A) THAT THE PROVISION HAS BEEN MADE IN RESPECT OF BUSINESS EXPE NDITURE AND THERE IS NO REASON WHY THE SAME SHOULD BE TREATED AS ANYT HING BUT PROFIT DERIVED FROM BUSINESS WHEN PART OF SUCH LIABILITY I S RETURNED BACK AS THE SAME IS NOT REQUIRED ANYMORE. WE, DO NOT FIND ANY INFIRMITY WITH THE FINDINGS OF THE LD.CIT(A). WE THEREFORE UPHOLD THE ACTION OF THE LD.CIT(A) IN DEL ETING THE ADDITION IN RESPECT OF THE MISCELLANEOUS INCOME. FOREIGN EXCHANGE GAIN : ITA NO. 923/D/2012 & CO NO. 197/D/2012 6 THE ASSESSEE RECORDED A FOREIGN EXCHANGE FLUCTUATIO N GAIN ON ACCOUNT OF EXCHANGE FLUCTUATION. LD. CIT(A) IN HIS ORDER S UMMARIZES SUBMISSIONS OF THE ASSESSEE AS UNDER; IN THE COURSE OF CARRYING OUT BUSINESS OPERATION OF THE ASSESSEE, EXCHANGE FLUCTUATION IS A PART AND PARTIAL OF INTER NATIONAL MONITORY SYSTEM. THE LD.CIT(A) IN PARA 3.2 OBSERVES THAT, THE LIABIL ITY DETERMINE AT THE TIME OF CONTRACT CHANGES WITH THE CHANGE IN EXCHANG E RATE WHEN THE LIABILITY IS SETTLED. AS A RESULT, THERE IS GAIN O R LOSS IN TERMS OF LOCAL CURRENCY. IN REALITY THERE IS NO GAIN OR LOSS. TH E COST OF THE PURCHASE EITHER GOES UP OR GOES DOWN AS THE CASE MAY BE. NO DOUBT, THE FLUCTUATION IN THE COST OF THE PURCHASE HAS THE EFF ECT OF REDUCING OR ENHANCING THE PROFIT OF BUSINESS. THE LD.CIT(A) HEL D THAT SUCH FLUCTUATION IS AN ESSENTIAL AND INEXTRICABLE FUNCTI ON OF THE BUSINESS AND THE GAIN IN QUESTION CANNOT BE SEGREGATED FROM THE PROFITS DERIVED FROM THE BUSINESS. WE, DO NOT FIND ANY INFIRMITY WITH THE FINDINGS OF THE LD.CIT(A). WE THEREFORE UPHOLD THE ACTION OF THE LD.CIT(A) IN DEL ETING THE ADDITION MADE BY THE LD. ASSESSING OFFICER IN RESPECT OF FOR EIGN EXCHANGE FLUCTUATION. GROUND NO. 2: 12. HONBLE SUPREME COURT IN THE CASE OF LIBERTY IN DIA VS. CIT REPORTED IN (2009) 317 ITR 218 HELD AS UNDER; ANALYSING CHAPTER VI-A, WE FIND THAT SECTION 80-IB/8 0-IA ARE A CODE BY THEMSELVES AS THEY CONTAIN BOTH SUBSTANTIVE AS WELL AS PROCEDURAL PROVISIONS. THEREFORE, WE NEED TO EXAMIN E WHAT THESE PROVISIONS PRESCRIBE FOR 'COMPUTATION OF PROFITS OF THE ELIGIBLE BUSINESS'. IT IS EVIDENT THAT SECTION 80-IB PROVIDE S FOR ALLOWING OF DEDUCTION IN RESPECT OF PROFITS AND GAINS DERIVED F ROM THE ELIGIBLE ITA NO. 923/D/2012 & CO NO. 197/D/2012 7 BUSINESS. THE WORDS 'DERIVED FROM' ARE NARROWER IN CONNOTATION AS COMPARED TO THE WORDS 'ATTRIBUTABLE TO'. IN OTHER W ORDS, BY USING THE EXPRESSION 'DERIVED FROM', PARLIAMENT INTENDED TO COVER SOURCES NOT BEYOND THE FIRST DEGREE. 13. HONBLE SUPREME COURT IN A SUBSEQUENT DECISION, IN THE CASE OF MEPCO INDUSTRIES LTD., VS. CIT REPORTED IN (2009) 31 9 ITR 208, HELD THAT THE NATURE OF A SUBSIDY IN EACH CASE, IS SEPAR ATE AND DISTINCT AND, THEREFORE, THE NATURE OF SUBSIDY HAS TO BE EXA MINED IN EACH CASE INDEPENDENTLY. HONBLE SUPREME COURT HELD AS UNDER; SAHNEY STEEL AND PRESS WORKS LTD. [1997] 228 ITR 253 (SC) WAS A CASE WHICH DEALT WITH PRODUCTION SUBSIDY, PONNI SUG ARS AND CHEMICALS LTD. [2008] 306 ITR 392 (SC) DEALT WITH SUBSIDY LINKED TO LOAN REPAYMENT WHEREAS THE PRESENT CASE DEALS WITH A SUBSIDY FOR SETTING UP AN INDUSTRY IN THE BACKWARD AREA. THEREF ORE, IN EACH CASE, ONE HAS TO EXAMINE THE NATURE OF THE SUBSIDY. THE JUDGMENT OF THIS COURT IN SAHNEY STEEL AND PRESS WORKS LTD. [19 97] 228 ITR 253 WAS ON ITS OWN FACTS ; SO ALSO, THE JUDGMENT OF THI S COURT IN PONNI SUGARS AND CHEMICALS LTD. [2008] 306 ITR 392 (SC). THE NATURE OF THE SUBSIDIES IN EACH OF THE THREE CASES IS SEPARAT E AND DISTINCT. THERE IS NO STRAIT JACKET PRINCIPLE OF DISTINGUISHI NG A CAPITAL RECEIPT FROM A REVENUE RECEIPT. IT DEPENDS UPON THE CIRCUMS TANCES OF EACH CASE. AS STATED ABOVE, IN SAHNEY STEEL AND PRESS WOR KS LTD. [1997] 228 ITR 253 (SC), THIS COURT HAS OBSERVED THAT THE PRODUCTION INCENTIVE SCHEME IS DIFFERENT FROM THE SCHEME GIVIN G SUBSIDY FOR SETTING UP INDUSTRIES IN BACKWARD AREAS. IN THE CIR CUMSTANCES, THE PRESENT CASE IS AN EXAMPLE OF CHANGE OF OPINION. TH EREFORE, THE DEPARTMENT HAS ERRED IN INVOKING SECTION 154 OF THE ACT. (EMPHASIS SUPPLIED) ITA NO. 923/D/2012 & CO NO. 197/D/2012 8 14. IN THE LIGHT OF THE DECISION OF MEPCO INDUSTRIE S LTD.(SUPRA), ONE CAN HAVE NO ESCAPE FROM THE CONCLUSION THAT THE NAT URE OF THE SUBSIDY HAS TO BE EXAMINED BY THE COURT, IN EACH CA SE, IN ORDER TO DETERMINE IF AS ASSESSEES UNDERTAKING IS ENTITLED TO A PARTICULAR DEDUCTION UNDER SEC. 80 IC OF THE ACT. 15. IN THE PRESENT CASE THE ISSUE IS WHETHER THE I NTEREST INCOME, MISCELLANEOUS EXPENSES, FOREIGN EXCHANGE FLUCTUATIO N COMES WITHIN THE FIRST DEGREE. 16. IN THE LIGHT IF THE ABOVE DISCUSSION, WE ARE TH EREFORE OF THE CONSIDERED OPINION THAT THE DECISION OF THE LD.CIT( A) IN DELETING THE ADDITION MADE BY THE LD.AO IN RESPECT OF BANK INTE REST, MISCELLANEOUS EXPENSES AND FOREIGN EXCHANGE FLUCTUA TION GAIN, DO NOT SUFFER FROM ANY INFIRMITY, LEGAL OR FACTUAL AND CAN BE SAID TO HAVE A DIRECT NEXES WITH THE BUSINESS ACTIVITY CARRIED O N BY THE ASSESSEE. 17. CROSS OBJECTION NO. 197/DEL/2012 : THE GROUND RAISED BY THE ASSESSEE IS AS UNDER: 1. THE LD. CIT(APPEALS)-1, DEHRADUN ERRED IN LAW AND I N FACTS IN HOLDING THAT THE INTEREST INCOME EARNED ON FIXED DEPOSITS MADE WITH THE BANKS FOR PROVIDING GUARANTEE TO ITS CUSTOMERS, IN LIEU OF PERFORMANCE GUARANTEE OR ADVA NCE PAYMENTS RECEIVED FROM THEM, IS NOT A PROFIT DERIVE D FROM THE ELIGIBLE BUSINESS AND CONSEQUENTLY DENYING THE BENE FIT OF DEDUCTION U/S 80IC OF THE ACT ON THE SAID INTEREST I NCOME. THE RESPONDENT CRAVES FOR LEAVE TO ADD, AMEND, VARY, OMIT OR SUBSTITUTE ANY OF THE AFORESAID GROUNDS OF CROSS OB JECTION AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE AP PEAL. 18. LD. CIT(A) IN HIS ORDER SUMMARIZES SUBMISSIONS OF THE ASSESSEE AS UNDER; THE ASSESSEE HAD EARNED INTEREST IN THE FIXED DEPOS ITS MADE WITH THE BANKS FOR PROVIDING BANK GUARANTEE. THAT CUSTOMERS OF THE ASSESSEE, GENERALLY RELEASES 90 TO 95% OF THE SALE VALUE AND RETAIN THE BALANCE 5 TO 10% AS PERFORMANCE GUARANTEE. THIS PERFORMANC E GUARANTEE IS ITA NO. 923/D/2012 & CO NO. 197/D/2012 9 OFTEN EN-CASHED BY ASSESSEE BY GIVING EQUIVALENT AM OUNT OF BANK GUARANTEE. SOMETIMES ASSESSEE RECEIVED ADVANCES FR OM CUSTOMERS FOR WHICH IT HAS TO GIVE BANK GUARANTEE IN FAVOUR O F THE LETTER. THE LD.CIT(A) HELD THAT THE INTEREST ON FDS FOR THE PU RPOSES OF GIVING BANK GUARANTEE IS NOT LINKED TO THE BUSINESS ACTIVI TY OF THE ASSESSEE. THE LD.AR PLACED RELIANCE ON PAGE 104 OF THE PAPER BOOK WHICH IS A PURCHASE ORDER, WHEREIN THE TERMS OF THE PAYMENT HA VE BEEN AGGEED UPON BY THE ASSESSEE. IT IS OBSERVED THAT THE BANK GUARANTEE TO AN EXTENT OF 10% HAS TO BE GIVEN BY THE ASSESSEE IN IT S DUE COURSE OF THE BUSINESS. THE LD. CIT ON ONE HAND HAS OBSERVED THA T THE LETTERS OF CREDIT IS AN INTEGRAL PART OF THE ASSESSEES BUSINE SS. ON THE OTHER HAND HE DID NOT APPRECIATE THAT THE BANK GUARANTEE IS ALSO A PART OF THE BUSINESS ACTIVITY CARRIED ON BY THE ASSESSEE. THE TERMS OF THE PAYMENT AT PAGE 105 OF THE PB IS VERY CLEAR THAT TH E ASSESSEE IS NECESSARILY TO GIVE THE ADVANCE BANK GUARANTEE TO I TS CUSTOMERS IN THE FORMAT AS AGGRIEVED UPON BETWEEN THEM. 19. WE ARE THEREFORE OF THE CONSIDERED OPINION THAT THE BANK GUARANTEE IS A PART OF THE PURCHASE PROCESS, AND TH E INCOME ARISING THERE FROM, HAS TO BE SAID TO HAVE BEEN DERIVED FRO M THE ASSESSEES BUSINESS. WE, THEREFORE, DELETE THE ADDITION MADE BY THE LD. ASSESSING OFFICER IN RESPECT OF THE INTEREST EARNED FROM BANK GUARANTEE. 20. THE CROSS OBJECTION OF THE ASSESSEE STANDS ALLO WED IN LIEU OF OUR ABOVE FINDINGS. 21. THE ASSESSEE HAS FILED AN ADDITIONAL GROUND TO THE CROSS OBJECTION ON 09/07/2013, WHEREIN THE FOLLOWING GROU NDS HAVE BEEN RAISED: 1. WHETHER THE ASSESSING OFFICER HAS ERRED IN LAW AND ON FACTS IN TREATING THE SUM OF RS. 64,06,165/- BEING FOREIGN ITA NO. 923/D/2012 & CO NO. 197/D/2012 10 EXCHANGE FLUCTUATION GAIN ON ECB LOAN AS TAXABLE IN COME IN THE HANDS OF THE APPELLANT? 2. WHETHER THE ASSESSING OFFICER HAS ERRED IN LAW AND O N FACTS OF THE CASE IN NOT CONSIDERING THE NET INTERE ST INCOME ON FDRS AFTER SETTING OFF OF BANK CHARGES FOR THE P URPOSE OF COMPUTING TAXABLE INCOME OF THE APPELLANT? 22. THE ASSESSEE SUBMITS THAT INADVERTENTLY THE GRO UND COULD NOT BE RAISED IN THE CROSS OBJECTION. 23. THE ASSESSEE SUBMITS THAT THESE GROUNDS WERE RA ISED BEFORE THE LD. CIT(A) AS THE SAME IS VERIFIABLE FROM THE F ORM NO. 35 FROM THE RECORD. IT IS ALSO OBSERVED BY US THAT THE LD. CIT (A) HAS NOT ADJUDICATED UPON THESE GROUNDS. WE, THEREFORE, SET ASIDE THE A DDITIONAL GROUND TO THE LD. CIT(A) FOR HIS ADJUDICATION. NEEDLESS TO S AY THAT THE ASSESSEE MAY BE GRANTED OPPORTUNITY OF HEARING IN RESPECT OF THE SAME. 24. ACCORDINGLY, THE REVENUES APPEAL STANDS DISMIS SED AND THE ASSESSEES CROSS OBJECTION STANDS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 21/10/2 015 SD/- SD/- (N.K. SAINI) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL ME MBER DATED: 21/10/2015 *KAVITA, P.S. COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI ITA NO. 923/D/2012 & CO NO. 197/D/2012 11 DATE 1. DRAFT DICTATED ON 19.10.2015 2. DRAFT PLACED BEFORE AUTHOR 20.10.2015 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 20.1015 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 20.10.15 5. APPROVED DRAFT COMES TO THE SR.PS/PS 20.10.15 6. KEPT FOR PRONOUNCEMENT ON 21.10.15 7. FILE SENT TO THE BENCH CLERK 26.10.15 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.