The DCIT, Circle-1, Eluru V. M/s Gupta Enterprises, Eluru

ITA 118/VIZ/2002

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2839 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 7 year(s) 8 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 1997-1998
• Appeal Filed On: 14-03-2002
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B JAYA KUMAR
• Section: 80HHC

Judgement Text

PAGE 1 OF 3 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 117 & 118/VIZAG/2002 ASSESSMENT YEARS: 1997-98 & 1998-99 DCIT, CIRCLE-1, ELURU VS. M/S. GUPTA ENTERPRISES, ELURU (APPELLANT) (RESPONDENT) . PAN NO: AACFG 6508 R, GIR NO.G-311 APPELLANT BY: SHRI B. JAYA KUMAR, DR, RESPONDENT BY: G.V.N. HARI, CA ORDER PER BENCH: BOTH THE APPEALS FILED BY THE REVENUE ARE DIRECTED AGAINST THE COMMON ORDER DATED 18/12/2001 PASSED BY THE LD CIT (A), RA JAHMUNDRY AND THEY RELATE TO THE ASSESSMENT YEARS 1997-98 AND 1998-99. SINCE THE ISSUES URGED IN THESE TWO APPEALS ARE COMMON IN NATURE, WE FIND IT CONVEN IENT TO DISPOSE BOTH THE APPEALS BY THIS COMMON ORDER. 2. ALL THE GROUNDS RAISED BY THE REVENUE GIVE RISE TO A SINGLE ISSUE VIZ., WHETHER THE LD CIT (A) IS JUSTIFIED IN HOLDING THAT ONLY NET INTEREST RECEIPTS HAVE TO BE EXCLUDED AS PER CLAUSE (BAA) OF EXPLANATION T O SEC. 80HHC (4A) OF THE ACT FOR THE PURPOSE OF CALCULATING THE DEDUCTION U/S 80 HHC OF THE ACT. PAGE 2 OF 3 3. THE FACTS ARE STATED IN BRIEF. THE ASSESSEE IS I N THE BUSINESS OF EXPORT OF HUMAN HAIR AND SANDAL WOOD. THE ASSESSEE CLAIMED DE DUCTION U/S 80HHC ON EXPORT TURNOVER IN THESE TWO YEARS. WHILE COMPUTING THE DEDUCTION U/S 80HHC, THE ASSESSEE ADJUSTED THE INTEREST RECEIPTS AGAINST THE INTEREST PAYMENTS AND HENCE DID NOT DEDUCT THE INTEREST RECEIPTS AS PER C LAUSE (BAA) OF THE EXP. TO SEC.80HHC (4A) OF THE ACT, FOR THE REASON THAT THE INTEREST PAYMENT WAS MORE THAN THE INTEREST RECEIPTS. HOWEVER, THE AO EXCLUDE D 90% OF THE GROSS INTEREST RECEIPTS AND ACCORDINGLY RECOMPUTED THE DEDUCTION U /S 80HHC OF THE ACT. LD CIT (A) REVERSED THE ORDER OF THE AO. HENCE THE REV ENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE RECORD. THE LD DR RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COU RT IN THE CASE OF SHREE KRISHNA POLYESTER LTD., VS. DCIT (2005 (274 ITR 21) TO SUBMIT THAT THE INTEREST INCOME IS ASSESSABLE UNDER INCOME FROM OTHER SOURCE S AND HENCE THE GROSS INTEREST HAS TO BE EXCLUDED. ON THE OTHER HAND THE LD AR SUBMITTED THAT THE INTEREST HAS BEEN EARNED ON THE DEPOSITS KEPT WITH THE BANK AS MARGIN MONEY IN CONNECTION WITH BUSINESS COMPULSION AND HENCE THE I NTEREST RECEIPTS ARE ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS. LD AR FURTHER SUBMITTED THAT THE AO HIMSELF HAS TREATED THE INTEREST RECEIP TS AS INCOME UNDER THE HEAD INCOME FROM BUSINESS ONLY. FROM THE ORDERS OF AO AS WELL AS LD CIT (A) WE NOTICE THAT THERE APPEARS TO BE NO CONTROVERSY WITH REGARD TO THE NATURE OF INTEREST RECEIPTS. THE AO HAS NOT ASSESSED THE SAME UNDER THE HEAD INCOME FROM OTHER SOURCES. HENCE THERE IS NO CONTROVERSY WITH REGARD TO THE HEAD UNDER WHICH THE INTEREST INCOME IS ASSESSABLE AND A CCORDINGLY THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF SHREE KRISHNA POLY ESTER LTD., VS. DCIT SUPRA, IS NOT APPLICABLE TO THE FACTS OF THE CASE. IT IS A WELL SETTLED PROPOSITION THAT WHEN THE FIXED DEPOSITS HAVE NEXUS WITH THE BUSINES S AND BORROWINGS, THEN INTEREST IS ASSESSABLE UNDER THE HEAD INCOME FROM B USINESS AND THE ASSESSEE IS PAGE 3 OF 3 ENTITLED TO ADJUST THE INTEREST EARNED ON FIXED DEP OSITS AGAINST THE INTEREST PAID ON BORROWINGS. SUCH A VIEW HAS BEEN EXPRESSED BY TH E HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. PAWAN KUMAR JAIN (2008) (298 ITR 443). SINCE THE DECISION RENDERED BY THE LD CIT (A) IN THESE TWO OR DERS ARE IN ACCORDANCE WITH THE DECISION OF THE HONBLE DELHI HIGH COURT CITED ABOVE, WE DO NOT FIND ANY INFIRMITY IN HIS ORDER ON THIS ISSUE. 5. IN THE RESULT BOTH THE APPEALS FILED BY THE REVEN UE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 7-12-2009 SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, 7 TH DECEMBER, 2009. COPY TO 1 THE DCIT, CIRCLE-1, ELURU 2 M/S GUPTA ENTERPRISES, POST BOX NO: 44, EASTERN S TREET, ELURU 534001, WEST GODAVARI DISTT. 3 THE CIT RAJAHMUNDRY 4 THE CIT(A), RAJAHMUNDRY 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM