ITO 8(2)(1), MUMBAI V. INTERNATIONAL GOLD COMPANY LTD, MUMBAI

ITA 1263/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55768 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 03-11-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 16-02-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: O A MAO
• Assessee Lawyers: NITESH JOSHI
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI BEFORE SHRI B.R. MITTAL (JUDICIAL MEMBER) AND SHRI P.M. JAGTAP (ACCOUNTANT MEMBER) ITA NO.1263/MUM/2010 ASSESSMENT YEAR-2006-07 THE ITO 8(2)(1), AAYAKAR BHAVAN, MUMBAI-400 020 VS. M/S. INTERNATIONAL GOLD CO. LTD., G/48, GEMS-JEWELLERY COMPLEX, SEEPZ, ANDHERI(E), MUMBAI-400 096 PAN-AAACI 2830H (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI O.A. MAO RESPONDENT BY: SHRI NITESH JOSHI DATE OF HEARING :3.11.2011 DATE OF PRONOUNCEMENT: 09.11.2011 O R D E R PER B.R. MITTAL, JM : THE DEPARTMENT HAS FILED THIS APPEAL FOR ASSESSMENT YEAR 2006-07 AGAINST ORDER OF LD. CIT(A) DT.8 TH DECEMBER, 2009 ON FOLLOWING GROUND: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ALLOWED THE CLAIM OF ASSESSEE U/S. 1 0A OF THE I.T. ACT ON THE INCOME FROM JOB CHARGES, MISCELLANEOUS I NCOME AND INTEREST INCOME TREATING THE SAME AS INCOME DERIVED FROM THE EXPORT ORIENTED UNDERTAKING ELIGIBLE FOR DEDUCTION UNDER THE SAID SECTION WITHOUT PROPER APPRECIATION OF THE FAC T THAT THESE ITEMS OF INCOME CANNOT BE TREATED AS INCOME DERIVED FROM THE INDUSTRIAL UNDERTAKING. 2. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF MANUFACTURING AND EXPORT OF STUDDED GOLD & PLATINUM JEWELLERY. T HE ASSESSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME AT RS. NIL. ITA NO. 1263/M/10 2 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AS SESSING OFFICER OBSERVED THAT ASSESSEE REDUCED INTEREST OF RS. 7,27 ,940/- RECEIVED ON DEPOSITS FROM THE INTEREST PAYABLE OF RS. 1,02,12,8 92/-. HE ALSO OBSERVED THAT ASSESSEE CREDITED TO PROFIT & LOSS ACCOUNT INC LUDING JOB WORK CHARGES OF RS. 24,51,165/-, INTEREST INCOME OF RS. 46,215/-, I NTEREST ON INCOME TAX REFUND OF RS. 3,978/- AND MISCELLANEOUS INCOME OF R S. 2,98,831/-. THE AO WHILE CONSIDERING ADMISSIBILITY OF DEDUCTION U/S. 1 0A OF THE ACT ASKED THE ASSESSEE TO EXPLAIN WHY ABOVE RECEIPTS SHOULD NOT B E ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. IT IS OBSERVED TH AT ASSESSEE CONTENDED THAT JOB CHARGES ARE RECEIVED FOR MAKING ALTERATION S, REPAIRS ETC., IN THE NORMAL COURSE OF BUSINESS AND AS SUCH ARE PART AND PARCEL OF THE PROFITS ELIGIBLE FOR EXEMPTION U/S. 10A OF THE ACT. THE ASS ESSEE ALSO STATED THAT INTEREST RECEIVED OF RS. 7,27,940/- WAS ON DEPOSIT/ MARGIN MONEY PLACED WITH BANK AGAINST CREDIT FACILITIES AVAILED. IT WAS ALSO CONTENDED THAT INTEREST OF RS. 46,215/- WAS THE INTEREST RECEIVED ON ADVANCES/ LOANS GIVEN TO EMPLOYEES DURING NORMAL COURSE OF ITS BUSINESS. THE ASSESSEE ALSO STATED BEFORE AO THAT THERE IS NO POSITIVE INCOME FROM INTEREST WHIC H COULD BE EXCLUDED FROM PROFIT OF THE UNDERTAKING. IN RESPECT OF MISCELLAN EOUS INCOME, ASSESSEE CONTENDED THAT THE SUM OF RS. 2,97,327/- WAS RECEIV ED TOWARDS SALE OF SCRAP GENERATED FROM MANUFACTURING PROCESS AND A SUM OF RS. 1,504/- WAS RECEIVED TOWARDS REFUND OF OCTROI PAID ON PURCHASES . THE ASSESSEE STATED THAT ABOVE RECEIPT HAD A NEXUS WITH THE PROFIT DERI VED BY UNDERTAKING ELIGIBLE FOR DEDUCTION U/S. 10A OF THE ACT. HOWEVER, AO DID NOT ACCEPT THE SAID CONTENTION OF ASSESSEE. THE AO RELYING ON THE DECI SION OF HONBLE SUPREME COURT IN THE CASE OF K. RAVINDRANATHAN NAIR VS DCIT 263 ITR (ST) 3 AND ALSO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CA SE OF CIT VS SHRI RAM HONDA POWER EQUIP 289 ITR 475 HELD THAT INTEREST EA RNED ON FIXED DEPOSITS FOR THE PURPOSE OF AVAILING OF CREDIT FACILITIES FROM BANK COULD NOT BE SAID TO BE INCOME DERIVED FROM EXPORT BUSINESS, IT HAD NO IMMEDIATE NEXUS AND THE SAID INCOME WAS TREATED AS INCOME FROM OTHER SOURCE S AND NOT BUSINESS INCOME. THE AO FURTHER STATED THAT JOB WORK CHAR GES RECEIVED, MISCELLANEOUS INCOME ON SALE OF SCRAP ALSO COULD N OT BE SAID TO HAVE BEEN ITA NO. 1263/M/10 3 DERIVED FROM ELIGIBLE UNDERTAKING FROM THE MANUFACT URE AND EXPORT OF STUDDED GOLD AND PLATINUM JEWELLERY. ACCORDINGLY, AO EXCLUDED THE SAID INCOMES WHILE COMPUTING DEDUCTION U/S. 10A OF THE A CT. BEING AGGRIEVED, ASSESSEE FILED APPEAL BEFORE FIRST APPELLATE AUTHOR ITY. 4. IT IS RELEVANT TO STATE THAT LD. CIT(A) ALLOWED T HE APPEAL OF ASSESSEE AND DIRECTED THE AO TO ALLOW DEDUCTION U/S. 10A OF THE ACT IN RESPECT OF INTEREST RECEIVED BY ASSESSEE ON FIXED DEPOSIT HELD IN BANK, JOB WORK CHARGES, INTEREST RECEIVED ON ADVANCES TO EMPLOYEES, INTERES T ON INCOME TAX REFUND AND ALSO RECEIPT OF SALE OF SCRAPS BY OBSERVING IN PARA 3.3 & 3.4 AS UNDER: 3.3. THE APPELLANT SUBMITTED THAT JOB CHARGES WERE RECEIVED FOR MAKING ALTERATIONS, REPAIRS ETC. IN FOREIGN CUR RENCY FROM OVERSEAS CUSTOMERS AND WAS VERY MUCH PART OF BUSINE SS. SALE OF SCRAP WAS PART OF MANUFACTURING ACTIVITIES. INT EREST WAS RECEIVED ON DEPOSITS/MARGIN MONEY PLACED WITH BANKS AGAINST CREDIT FACILITIES AVAILED AND ON ADVANCES TO EMPLOY EES. HENCE, THESE AND OTHER MISCELLANEOUS ACCEPTS ACCRUED TO TH E APPELLANT IN THE COURSE OF BUSINESS ACTIVITIES. THESE RECEIP T EXCEPT INTEREST TON FDS HAD BEEN HELD ELIGIBLE FOR EXEMPTI ON U/S. 10A VIDE CIT(A) ORDER FOR 2004-05 AND 2005-06. FURTHER RELIANCE WAS PLACED ON THE DECISION OF ITAT, BANGALORE IN TH E CASE OF MOTOROLA INDIA ELECTRONICS (114 ITR 387) REGARDS IN TEREST ON FDS HELD ELIGIBLE FOR EXEMPTION. 3.4 THE SUBMISSION HAS BEEN CONSIDERED. THE HONBL E MUMBAI ITAT IN LIRONGSTONE JEWELLERY (P) LTD VS DCI T (2009) (31 SOT 323)(BOM) HAD FOLLOWED THE DECISION IN THE CASE OF MOTOROLA INDIA ELECTRONICS CITED BY THE APPELLANT. THE INTEREST ON FDS HELD IN BANK TO OBTAIN CREDIT FACILITIES IS HENCE ELIGIBLE FOR EXEMPTION. REGARDING JOB WORK CHARGES, INTEREST ON ADVANCES TO EMPLOYEES INTEREST ON I.T. REFUND AND SALE OF SC RAP, AGREEING WITH MY PREDCESSORS ARE ALSO TREATED AS INCOME FROM INDUSTRIAL UNDERTAKING ELIGIBLE FOR DEDUCTION U/S. 10A. THIS GROUND IS ALLOWED. 5. AT THE TIME OF HEARING, IT IS RELEVANT TO STATE THAT THIS APPEAL WAS FIXED ALONGWITH APPEALS FILED BY ASSESSEE AS WELL AS DEPA RTMENT FOR ASSESSMENT YEAR 2005-06 BEING ITA NO. 1118/M/09 FILED BY ASSES SEE AND ITA NO. 1344/M/09 FILED BY DEPARTMENT AND IN THAT APPEAL ON E OF THE GROUND TAKEN BY ASSESSEE WAS IN RESPECT OF NOT ALLOWING DEDUCTION U /S. 10A OF THE ACT IN ITA NO. 1263/M/10 4 RESPECT OF INTEREST RECEIVED BY ASSESSEE ON FIXED D EPOSIT STATED TO BE PLACED WITH BANKS TO AVAIL CREDIT FACILITIES AND ALSO RECE IPT OF INTEREST ON LOANS/ADVANCES TO EMPLOYEES. IT IS ALSO RELEVANT T O STATE THAT IN THE SAID APPEAL, LD. CIT(A) CONFIRMED THE ACTION OF AO TO TR EAT THE SAID INCOME AS INCOME FROM OTHER SOURCES. 6. CONSIDERING THE ABOVE FACTS, WE OBSERVE THAT THE SUBMISSION OF ASSESSEE AS MENTIONED BY LD. CIT(A) AT PARA 3.3. AN D ALSO HER FINDING GIVEN IN PARA 3.4 OF IMPUGNED ORDER AS MENTIONED HEREINAB OVE, ARE CONTRADICTORY AND THEREFORE ARE NOT FACTUALLY CORRECT. IT APPEARS THAT LD. CIT(A) HAS NOT GIVEN THE FINDING IN HER ORDER BASED ON CORRECT FAC TS. THEREFORE, WE RESTORE THIS GROUND TO LD. CIT(A) WITHOUT GOING TO THE MERI TS OF THE ORDER WITH A DIRECTION TO DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER GIVING OPPORTUNITY OF HEARING TO BOTH THE PARTIES. HENCE, GROUND OF APPEAL TAKEN BY DEPARTMENT IS ALLOWED FOR STATISTICAL PURPOSES BY R ESTORING THE ISSUE TO THE FILE OF LD. CIT(A). 7. IN THE RESULT, APPEAL FILED BY DEPARTMENT IS ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 9 TH DAY OF NOVEMBER, 2011 SD/- SD/- ( P.M. JAGTAP) (B.R. MITTAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 9 TH NOVEMBER, 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR I BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI ITA NO. 1263/M/10 5 DATE INITIALS 1. DRAFT DICTATED ON: 3.11.2011 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 4.11.2011 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: