Asstt. CIT, Cir. 1, Nashik, Nashik V. Ivory Soap Works Pvt. Ltd., Nashik

ITA 158/PUN/2007

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6815 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 31-01-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: H C LEUVA
• Assessee Lawyers: MRS DEEPA KHARE
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI I C SUDHIR, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER I.T.A. NO. 158/PN/07 (ASSTT. YEARS: 2003-04) ASSTT. COMMISSIONER OF I.T. .. APPELLANT CIR.1, NASHIK VS. IVORY SOAP WORKS P.LTD., .. R ESPONDENT H-44, MIDC, AMBAD, NASHIK PAN AAAC14895C APPELLANT BY: SHRI H C LEUVA RESPONDENT BY: MRS DEEPA KHARE ORDER PER I C SUDHIR, J.M THE REVENUE HAS QUESTIONED THE FIRST APPELLATE ORD ER MAINLY ON THE GROUND THAT THE LD CIT(A) HAS ERRED IN HOLDING THAT THE INCOME FROM INTEREST ON FDR/DIVIDEND IS ELIGIBLE FOR DEDUCTION U/S 80IA OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT). 2. AT THE OUTSET, THE LD DR POINTED OUT THAT THE IS SUE RAISED IN THE GROUND IS NOW FULLY SETTLED BY THE HONBLE SUPREME COURT IN T HE CASE OF LIBERTY INDIA V CIT (2009) 317 ITR 218 (SC). THE LD AR DID NOT DISPUTE THIS SUBMISSION OF THE LD DR, BUT AT THE SAME TIME REQUESTED TO ALLOW ALTERNATIVE CLAIM OF NETTING, AS EXPENSES WERE INCURRED FOR EARNING INTEREST, IF THE SAME IS TREATED AS INCOME FROM OTHER SOURCES. 3. CONSIDERING THE ABOVE SUBMISSIONS, WE FIND THAT THE ISSUE AS TO WHETHER INTEREST EARNED ON FDR AND DIVIDEND CAN BE CONSIDER ED ELIGIBLE FOR DEDUCTION U/S 80IA HAS BEEN SETTLED BY THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA (SUPRA) HOLDING THAT SECTIONS 80-I, 80-IA AND 80-IB PROVIDE FOR INCENTIVES IN THE FORM OF DEDUCTIONS WHICH ARE LINKED TO PROFITS AND NOT INVESTMENT. ON ANALYSIS OF ITA NO 158/PN/07 IVORY SOAP WORKS P TD NASHIK 2 SECTIONS 80-IA AND 80-IB IT BECOMES CLEAR THAT ANY INDUSTRIAL UNDERTAKING WHICH BECOMES ELIGIBLE ON SATISFYING SUB-SECTION (2) WOUL D BE ENTITLED TO DEDUCTION UNDER SUB-SECTION (1) ONLY TO THE EXTENT OF PROFITS DERIVED FROM SUCH INDUSTRIAL UNDERTAKING AFTER THE SPECIFIED DATE. APART FROM EL IGIBILITY, SUB-SECTION (1) PURPORTS TO RESTRICT THE QUANTUM OF DEDUCTION TO A SPECIFIED PERCENTAGE OF THE PROFITS. THIS IS THE IMPORTANCE OF THE WORDS DERIV ED FROM AN INDUSTRIAL UNDERTAKING AS AGAINST PROFITS ATTRIBUTABLE TO AN INDUSTRIAL UNDERTAKING. WE THUS FIND INFIRMITY IN THE FIRST APPELLATE ORDER HOLDING THAT KTHE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IA ON THE INTEREST EARNED ON FDR/DI VIDEND AMOUNTING TO RS 12,83,763/- AS BUSINESS PROFIT. UNDISPUTEDLY, EARNI NG INTEREST ON FDR AND DIVIDEND IS NOT THE BUSINESS OF THE ASSESSEE, BUT T HE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING LIQUID AND CAKE SOAP. THUS, UNDISP UTEDLY THERE IS NO DIRECT AND IMMEDIATE RELATION BETWEEN THE BUSINESS OF THE ASSE SSEE AND INCOME EARNED BY WAY OF INTEREST ON FDR/DIVIDEND AMOUNTING TO RS 12, 83,763/-. WE, THUS, WHILE SETTING ASIDE THE FIRST APPELLATE ORDER ON THIS ISS UE, RESTORE THE ASSESSMENT ORDER HOLDING THAT THE ASSESSEE IS NOT ELIGIBLE FOR CLAIM ED DEDUCTION ON THE SAID INTEREST INCOME. THE GROUND IS ACCORDINGLY ALLOWED IN FAVOUR OF THE REVENUE. 4. THE AFORESAID PLEA RAISED BY THE LD AR TO ALLOW NETTING OF EXPENSES INCURRED ON EARNING INTEREST AS INCOME FROM OTHER S OURCES IS CONCERNED, WE FIND THAT THIS ISSUE HAS BEEN RAISED FOR THE FIRST TIME BEFORE THE TRIBUNAL. IT IS, HOWEVER, LEGAL IN NATURE AND ADJUDICATION OF IT DOE S NOT REQUIRE CONSIDERING FRESH MATERIAL OUTSIDE RECORD, WE ALLOW THE SAME. WE FIND SUBSTANCE IN THE PLEA OF THE LD AR AND TO MEET THE ENDS OF JUSTICE, WE REMAND TH E ISSUE TO THE FILE OF THE AO TO VERIFY THE CLAIM OF THE ASSESSEE THAT THERE IS N EXUS BETWEEN THE EXPENSE WAS INCURRED ON EARNING OF INTEREST AND IF HE FINDS IT CORRECT THEN ALLOW THE NETTING OF THE EXPENSES INCURRED AND INTEREST EARNED TREATING THE INTEREST EARNED AS INCOME ITA NO 158/PN/07 IVORY SOAP WORKS P TD NASHIK 3 FROM OTHER SOURCES. THE GROUND RAISED BY THE LD AR IS THUS ALLOWED FOR STATISTICAL PURPOSES. 5. IN THE RESULT, THE APPEAL IS ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF APRIL, 2011. SD/- SD/- (D KARUNAKARA RAO) (I.C. SUDHIR) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE: DATED: 21 ST APRIL, 2011 B COPY OF THE ORDER IS FORWARDED TO : 1. ASSESSEE 2. ACIT, CIR. 1 NASHIK 3. THE CIT(A)-I NASHIK 4. THE CIT-I NASHIK 5. THE D.R, B BENCH, PUNE TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE