Meghmani Organics Ltd., Ahmedabad V. The ACIT.,Cent.Circle-1(1), Ahmedabad

ITA 1156/AHD/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0376 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 18-08-2016
• Assessment Year: 2002-2003
• Appeal Filed On: 25-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income
• Section: 80HHC

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./ ITA NO.1156/AHD/2013 / ASSESSMENT YEAR : 2002-03 MEGHMANI ORGANICS LTD., PLOT NO.183-184, PHASE-II, GIDC VATVA, AHMEDABAD PAN : AABCM 0644 E VS ACIT, CENTRAL CIRCLE-1(1), AHMEDABAD / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SMT. URVASHI SHODHAN, AR REVENUE BY : SHRI K. MADHUSUDAN, SR DR / DATE OF HEARING : 18/08/2016 / DATE OF PRONOUNCEMENT: 30/09/2016 / O R D E R PER R.P. TOLANI, JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, AHMEDABAD D ATED 26.03.2013 FOR ASSESSMENT YEAR 2002-03. 2. GROUND NOS. 1 & 2 IN RESPECT OF COMPUTATION OF D EDUCTION U/S 80HHC ARE CONTENDED TO BE INFRUCTUOUS CONSEQUENT TO MA ORDER IN THE CASE OF ASSESSEE DATED 30.05.2016. SIMILARLY, GROUND NO S. 5 &6 ARE CLAIMED TO BE GENERAL IN NATURE. THESE GROUNDS ARE ACCORDINGLY D ISMISSED. 3. GROUND NOS. 3 & 4 WHICH RAISE THE ISSUE OF NETTI NG OF INTEREST IN RESPECT OF FDR, MARGIN MONEY FOR OPENING LCS AND SA LES TAX REFUND BEING FOR THE PURPOSE OF BUSINESS. 3.1 LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF EMPIRE PU MPS (P.) LTD VS. ACIT, [2015] 54 TAXMANN.COM 317 (GUJ.), HOLDING AS UNDER: - ITA NO. 1156/AHD/2013 MEGHMANI ORGANICS LTD VS. ACIT AY : 2002-03 2 10. THUS, IT IS CLEAR THAT THE INCOME EARNED FROM FIXED DEPOSIT PLACED FOR BUSINESS PURPOSE CANNOT BE TREATED AS INCOME FROM O THER SOURCE BUT MUST BE SEEN AS PART OF THE ASSESSEES BUSINESS INCOME. IN THE PRESENT CASE ALSO THE ASSESSEE WAS COMPELLED TO PARK A PART OF ITS FUNDS IN FIXED DEPOSITS UNDER THE INSISTENCE OF THE FINANCIAL INSTITUTIONS AND THEREF ORE THE INCOME RECEIVED THEREUPON CANNOT BE TERMED TO BE INCOME FROM OTHER SOURCES. 3.2 FURTHER RELIANCE IS PLACED ON THE JUDGMENT OF H ONBLE SUPREME COURT IN THE CASE OF ACG ASSOCIATED CAPSULES (P.) LTD VS. CIT, [2012] 343 ITR 89 (SC), WHEREIN IT WAS HELD AS UNDER:- 10. UNDER CLAUSE (1) OF EXPLANATION (BAA), NINETY PER CENT OF ANY RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, CH ARGES OR ANY OTHER RECEIPT OF A SIMILAR NATURE INCLUDED IN ANY SUCH PROFITS AR E TO BE DEDUCTED FROM THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. THE EXPRESSION 'INCLUDED A NY SUCH PROFITS' IN CLAUSE (1) OF THE EXPLANATION (BAA) WOULD MEAN ONLY S UCH RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, CHARGES OR A NY OTHER RECEIPT WHICH ARE INCLUDED IN THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. THEREFORE, IF ANY QUANTUM OF THE RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, CHARGES OR ANY OTHER RECEIPT OF A SIMILAR NATURE IS ALLOWED AS EXPENSES UNDER SECTIONS 30 TO 44D OF THE ACT AND IS NOT INCLUDED IN THE PROFITS OF BUSINE SS AS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION', NINETY PER CENT OF SUCH QUANTUM OF RECEIPTS CANNOT BE REDUCED UNDER CLAUSE (1) OF EXPLANATION (BAA) FROM THE PROFITS OF THE BUSINESS. IN OTHER WORDS, O NLY NINETY PER CENT OF THE NET AMOUNT OF ANY RECEIPT OF THE NATURE MENTIONED I N CLAUSE (1) WHICH IS ACTUALLY INCLUDED IN THE PROFITS OF THE ASSESSEE IS TO BE DEDUCTED FROM THE PROFITS OF THE ASSESSEE FOR DETERMINING 'PROFITS OF THE BUSINESS' OF THE ASSESSEE UNDER EXPLANATION (BAA) TO SECTION 80HHC. 4. THE LD. DR, ON THE OTHER HAND, RELIED ON THE JUD GMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. GASKETS & RADIATORS DISTRIBUTORS, [2008] 296 ITR 440 (GUJ.), WHICH IS IN RESPECT OF S ECTION 80HHC, HOLDING THAT INTEREST ON DEPOSITS, EXPORT INCENTIVE AND OCTROI R EFUND RECEIVED BY THE ASSESSEE CANNOT BE TREATED AS BUSINESS INCOME. 5. THE LD. COUNSEL FOR THE ASSESSEE, IN REJOINDER, CONTENDS THAT THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF GASKETS & RADIATORS ITA NO. 1156/AHD/2013 MEGHMANI ORGANICS LTD VS. ACIT AY : 2002-03 3 DISTRIBUTORS (SUPRA), CITED BY THE LD. DR, IS DATED 12.09.2006; WHEREAS THE JUDGMENT IN THE CASE OF EMPIRE PUMPS (P.) LTD (SUPR A) HAS BEEN RENDERED ON 14.10.2014 AFTER CONSIDERING THE HONBLE SUPREME COURT JUDGMENT IN THE CASE OF LIBERTY INDIA. SIMILARLY, THE HONBLE SUPR EME COURT IN THE CASE OF ACG ASSOCIATED CAPSULES (P.) LTD (SUPRA) HAS TAKEN A VIEW IN FAVOUR OF THE ASSESSEE IN THE CONTEXT OF SECTION 80HHC. 6. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. RESPECTFULLY FOLLOWING THE HONBLE SUPREME COURT JU DGMENT IN THE CASE OF ACG ASSOCIATED CAPSULES (P.) LTD (SUPRA) AND THE JU DGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF EMPIRE PUMPS (P.) LTD (SUPRA) DATED 14.10.2014, WE HOLD THAT THE FDR INTEREST FOR LCS A ND INTEREST ON SALES TAX REFUND IS TO BE NETTED AND DEDUCTION U/S 80HHC IS T O BE WORKED OUT ACCORDINGLY; THUS, THESE GROUNDS OF THE ASSESSEE AR E ALLOWED. 7. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN THE COURT ON 30 TH SEPTEMBER, 2016 AT AHMEDABAD. SD/- SD/- AMARJIT SINGH (ACCOUNTANT MEMBER) R.P. TOLANI (JUDICIAL MEMBER) AHMEDABAD; DATED 30/09/2016 *BIJU T. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR)