M/s Raghunath Exports, Aligarh V. ACIT, Aligarh

ITA 152/AGR/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0392 (ITAT-AGRA)
• Duration Of Justice: 1 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 26-08-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 15-04-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 143(3); 80HHC; 80IB; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI R.K. GUPTA, JUDICIAL MEMBER AND SHRI P.K. BANSAL, ACCOUNTANT MEMBER ITA NOS.151 & 152/AGR/2009 ASST. YEARS: 2003-04 & 2004-05 M/S. RAGHUNATH EXPORTS, VS. ASSTT. COMM ISSIONER OF INCOME-TAX-1, GOPAL GANJ, ALIGARH. SARAI LAVARIA, ALIARH. (PAN : AADFR 5365 E). (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PANKAJ GARGH, ADVOCATE RESPONDENT BY : NONE (APPLICATION REJECTED) ORDER PER P.K. BANSAL, A.M.: THESE TWO APPEALS, SINCE INVOLVE COMMON ISSUE, FILE D AGAINST THE ORDERS OF THE CIT(A) DATED 19.01.2009, IS BEING DISPOSED OF BY THIS COMM ON ORDER. SINCE THE ISSUES INVOLVED IN BOTH THE ASSESSMENT YEARS ARE COMMON, WE ARE DISPOSING O F THE APPEAL AFTER CONSIDERING THE FACTS RELATING TO THE A.Y. 2003-04 AS AGREED BY THE LD. A .R. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E SUBMITTED THE ORIGINAL RETURN ON 29.11.2003 DECLARING INCOME OF RS.76,55,234/- AFTER CLAIMING DEDUCTION UNDER SECTION 80HHC AT RS.92,22,835/- AND A FURTHER DEDUCTION UNDER SECTIO N 80IB AMOUNTING TO RS.25,51,740/-. THE 2 ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) AT RS .79,98,400/- VIDE ORDER DATED 28.03.2005. THE A.O. SUBSEQUENTLY INITIATED PROCEEDINGS UNDER S ECTION 147 OF THE ACT AS HE NOTED THAT THE DEDUCTION UNDER SECTION 80HHC AND 80IB HAS BEEN CLA IMED AND ALLOWED IN EXCESS WHICH RESULTED IN ESCAPEMENT OF INCOME. IN RESPONSE TO N OTICE UNDER SECTION 148, THE ASSESSEE FILED RETURN OF INCOME ON 05.01.2006 DECLARING A NET TAXA BLE INCOME OF RS.56,99,539/- AFTER CLAIMING DEDUCTION UNDER SECTION 80HHC AT RS.91,95,453 AND R S.45,97,727/- UNDER SECTION 80IB. THE ASSESSMENT WAS COMPLETED VIDE ORDER DATED 06.06.200 6 ON A TOTAL INCOME OF RS.1,12,84,452/-. IN THE REASSESSMENT PROCEEDINGS THE A.O. DENIED THE DE DUCTION TO THE ASSESSEE UNDER SECTION 80IB AMOUNTING TO RS.45,97,727/- WHICH WAS CLAIMED BY TH E ASSESSEE AFTER CONSIDERING THE DUTY DRAW BACK AMOUNTING TO RS.3,54,32,191/-, DEPB ENTITLEMEN T OF 21,93,748/- AND ALSO INTEREST INCOME ON FDR AMOUNTING TO RS.11,01,812/-. THE A.O. TOOK THE VIEW THAT DUTY DRAW BACK AND DEPB ENTITLEMENT DID NOT CONSTITUTE INCOME DERIVED FROM THE INDUSTRIAL UNDERTAKING AND, THEREFORE, EXCLUDED THE SAME FROM DEDUCTION UNDER SECTION 80IB . THE INTEREST INCOME ON FDR WAS ASSESSED AS INCOME FROM OTHER SOURCES AND, THEREFOR E, DEDUCTION UNDER SECTION 80IB WAS NOT ALLOWED. THE A.O. OBSERVED THAT AFTER EXCLUDING TH E DUTY DRAW BACK AND INTEREST ON FDR, THE PROFIT DERIVED FROM INDUSTRIAL UNDERTAKING COMES TO A NEGATIVE FIGURE AND ACCORDINGLY NO DEDUCTION UNDER SECTION 80IB WAS ALLOWED. IN RESPE CT OF DEDUCTION UNDER SECTION 80HHC THE SAME WAS ALLOWED AT RS.82,08,266/- AS AGAINST RS.91 ,95,453/- CLAIMED BY THE ASSESSEE BY EXCLUDING THE INTEREST INCOME ON FDR AMOUNTING TO R S.11,01,812/- AS THE SAME INCOME WAS ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES . THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE CIT(A) CONFIRMED THE REOPENING OF ASSE SSMENT AND THE COMPUTATION OF THE DEDUCTION BY THE A.O. UNDER SECTION 80IB AND 80HHC OF THE ACT. IN GROUND NOS.1 & 2 THE 3 ASSESSEE HAS CHALLENGED BEFORE US THE INITIATION OF THE PROCEEDINGS UNDER SECTION 147 OF THE ACT ON THE GROUND THAT THERE HAD BEEN CHANGE OF OPINION ABOUT THE ALLOWABILITY OF THE DEDUCTION UNDER SECTION 80HHC AND 80IB OF THE ACT. 3. AFTER CAREFULLY CONSIDERING THE SUBMISSIONS MADE BY THE LD. A.R., WE ARE OF THE VIEW THAT THE PROCEEDINGS INITIATED UNDER SECTION 147 OF THE ACT ARE VALID. THE LAW IS VERY CLEAR THAT THE INTEREST INCOME RECEIVED BY THE ASSESSEE ON FDR. CA NNOT BE REGARDED TO BE THE INCOME DERIVED FROM THE INDUSTRIAL UNDERTAKING AS HAS BEEN HELD BY THE HONBLE SUPREME COURT IN THE CASE OF PANDIAN CHEMICALS LIMITED VS. CIT, 262 ITR 278 (SC) . THE INTEREST INCOME HAS TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES AND, THERE FORE, IT CANNOT EVEN BE TREATED AS INCOME FROM BUSINESS. IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF PANDIAN CHEMICALS LIMITED VS. CIT (SUPRA), WE ARE OF THE VI EW THAT THERE HAD BEEN ESCAPEMENT OF INCOME WHILE FRAMING THE ASSESSMENT SO FAR AS THE CLAIM OF DEDUCTION ON INTEREST ON FDR UNDER SECTION 80IB AND 80HHC IS CONCERNED. SIMILARLY, THE ISSUE WHETHER THE ASSESSEE WILL BE ENTITLED TO CLAIM DEDUCTION UNDER SECTION 80IB ON THE DEPB AND DUTY DRAW BACK BENEFIT HAS BEEN DECIDED BY THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA VS. CIT, 317 ITR 218 (SC) IN WHICH IT WAS CLEARLY LAID DOWN THAT THE PROFIT DERIVED BY WA Y OF INCENTIVE SUCH AS DEPB/DUTY DRAW BACK DO NOT FALL WITHIN THE EXPRESSION PROFIT DERIVED F ROM INDUSTRIAL UNDERTAKING UNDER SECTION 80IB. IN VIEW OF THIS SETTLED POSITION OF LAW, IN OUR OPI NION, THE ACTION OF THE A.O. IN INITIATING PROCEEDINGS UNDER SECTION 147 OF THE ACT IS VALID A ND ACCORDINGLY WE DISMISS THE GROUND NOS.1&2. 4 4. GROUND NOS.3 & 4 WHICH RELATE TO THE CLAIM OF TH E ASSESSEE UNDER SECTION 80IB IN RESPECT OF THE DEPB AND DUTY DRAW BACK, AFTER CAREFULLY CON SIDERING THE SUBMISSIONS MADE BY THE LD. A.R., WE ARE OF THE VIEW THAT THE ISSUE IS DULY COV ERED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA VS. CIT, 317 ITR 218 (SC) IN WHICH HONBLE SUPREME COURT HAS CATEGORICALLY HELD THAT THE PROFIT DERIVED BY W AY OF DEPB/DUTY DRAW BACK DO NOT FALL WITHIN THE EXPRESSION PROFIT DERIVED FROM INDUSTRIAL UNDE RTAKING UNDER SECTION 80IB. WE, ACCORDINGLY, DISMISS GROUND NOS.3 & 4 AND CONFIRM T HE ORDER OF CIT(A) ON THIS ISSUE. 5. SO FAR GROUND NOS.5 & 6 ARE CONCERNED, WE HAVE C AREFULLY CONSIDERED THE SUBMISSION MADE BY THE LD. A.R. IT IS NOT DENIED THAT THE ASS ESSEE HAS NOT DERIVED INTEREST ON FDR WHICH IS NOT THE BUSINESS OF THE ASSESSEE. THE INTEREST SO EARNED IS DIRECTLY CONNECTED WITH THE FDR. THE IMMEDIATE SOURCE FROM WHICH THE INTEREST INCOME IS DERIVED IS THE FDR. THE FDRS ARE NOT INTRINSICALLY CONNECTED WITH THE BUSINESS OF THE AS SESSEE. THE INTEREST INCOME HAS TO BE ASSESSED, IN OUR OPINION, UNDER THE HEAD INCOME FROM OTHER S OURCES. AS PER CLAUSE (BAA) OF THE EXPLANATION OF SECTION 80HHC, 90% OF THE INCENTIVE PROFIT OF THE RECEIPT BY WAY OF INCENTIVE COMMISSION, INTEREST, RENT CHARGES OR ANY OTHER REC EIPT OF LIKE NATURE INCLUDED IN THE BUSINESS PROFIT HAS TO BE DEDUCTED FROM THE BUSINESS PROFIT COMPUTED UNDER THE HEAD INCOME FROM BUSINESS TO ARRIVE AT PROFITS OF THE BUSINESS FOR THE PURPOSE OF COMPUTATION OF DEDUCTION IN ACCORDANCE WITH PROVISIONS OF SECTION 80HHC(3) ELIG IBLE FOR DEDUCTION UNDER SECTION 80HHC(1). IN THE CASE OF THE ASSESSEE, SINCE THE INTEREST HAS BEEN DERIVED FROM THE FIXED DEPOSIT, IT CANNOT BE ASSESSED, IN OUR OPINION, UNDER THE HEAD INCOME FR OM BUSINESS. THEREFORE, THE INTEREST SO DERIVED WILL NOT FORM PART OF THE BUSINESS PROFIT, SO THAT 90% OF SUCH INTEREST CAN BE DEDUCTED IN 5 VIEW OF CLAUSE (BAA) OF EXPLANATION GIVEN UNDER SEC TION 80HHC OF THE ACT. THE PROVISIONS OF SECTION 80HHC ARE VERY CLEAR AND THERE IS NO AMBIGU ITY IN THIS REGARD. WE, THEREFORE, DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDER OF THE CIT (A) CONFIRMING THE ORDER OF THE A.O. ACCORDINGLY, WE CONFIRM THE ORDER OF THE CIT(A) AND DISMISS GROUND NOS.5 & 6 TAKEN BY THE ASSESSEE. 6. IN ITA NO.152/AGR/2009, SINCE THE ISSUES INVOLVE D ARE SAME EXCEPT FOR CHANGE IN FIGURES, ALL THESE GROUNDS ARE ALSO STAND DISMISSED IN VIEW OF THE AFORESAID FINDINGS. 7. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASS ESSEE STAND DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 17.09.2010). SD/- SD/- (R.K. GUPTA) (P.K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: AGRA DATE: 17 TH SEPTEMBER, 2010. PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT BY ORDER 3. CIT CONCERNED 4. CIT (APPEALS) CONCERNED 5. DR, ITAT, AGRA BENCH, AGRA 6. GUARD FILE ASSIST ANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL, AGRA TRUE COPY