Skaps Industries India Pvt.Ltd., Ahmedabad V. The Income Tax Officer, Ward-8(2), Ahmedabad

ITA 1710/AHD/2015

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2740 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 11-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K DEV
• Keywords: Business income; Depreciation; Unabsorbed depreciation
• Section: 143(3); 115JB; 10B

Judgement Text

, A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMEBR ./ I.T.A. NO. 1710/AHD/2015 ( ASSESSMENT YEAR : 2009-10) SKAPS INDUSTRIES INDIA PVT. LTD. PLOT NO. A 20, SURVEY NO. 42, MAHAGUJARAT INDUSTRIALS ESTATE, AHMEDABAD BAVLA HIGHWAY, VILL. MORALYA, TA-SANAD, AHMEDABAD 382 210 / VS. I.T.O. WARD-8(2), B-BLOCK, 2 ND FLOOR, PRATYAKSH KAR BHAVAN, PANJARAPOLE, AMBAWADI, AHMEDABAD 380 015 ./ ./ PAN/GIR NO. : AADCP2779D ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI VINIT MOONDRA, A.R. / RESPONDENT BY : SHRI S. K. DEV, SR. D.R. DATE OF HEARING 30/10/2018 !'# / DATE OF PRONOUNCEMENT 02/11/2018 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS)-9, AHMEDABAD (CIT(A) IN SHORT), DATED 0 4.03.2015 ARISING IN THE ASSESSMENT ORDER DATED 18.03.2013 PA SSED BY THE ITA NO. 1710/AHD/15 [SKAPS INDUSTRIES INDIA PVT. LTD. VS. ITO] A.Y. 2009-10 - 2 - ASSESSING OFFICER (AO) UNDER S. 143(3) OF THE INCOM E TAX ACT, 1961 (THE ACT) CONCERNING ASSESSMENT YEAR 2009-10. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL FOR ADJUDICATION: 1. THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING O FFICER ON ACCOUNT OF LOSS ON THEFT OF RS.3,50,000/-. 2. THE LD. C!T(A) HAS GROSSLY ERRED IN LAW AND ON F ACTS IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN CH ARACTERIZING INTEREST INCOME OF RS.3,76,064/- AS 'INCOME FROM OT HER SOURCES'. ACCORDINGLY, THE CIT(A) HAS ERRED IN NOT CONSIDERING THE ABOVE AMOUNT AS PROFIT DERIVED FROM THE BUSINES S OF THE UNDERTAKING WHILE COMPUTING ELIGIBLE DEDUCTION U/S. 10B OF THE ACT. 3. WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT(A) H AS GROSSLY ERRED IN LAW AND ON FACTS IN NOT ALLOWING NETTING O FF OF INTEREST EXPENSES AGAINST INTEREST INCOME OF RS.3,76,064/-. 4. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER FOR SETTING OFF OF BROUGHT FORWARD UNABSORBED DEPRECIATION OF RS.44,55,268/- B EFORE COMPUTING ELIGIBLE DEDUCTION U/S. 10B OF THE ACT. 3. GROUND NO.1 CONCERNS LOSS ON ACCOUNT OF THEFT AM OUNTING TO RS.3,50,000/-. ADDRESSING THE ISSUE, LEARNED AR FO R THE ASSESSEE SUBMITTED THAT THE AFORESAID AMOUNT WAS STOLEN OUT OF CASH MONEY KEPT IN THE FACTORY PREMISES OWING TO BUSINESS EXIG ENCIES. ADMITTEDLY, NO FIR WAS REGISTERED WITH THE POLICE A UTHORITIES TO AVOID AN ATMOSPHERE OF FEAR AND UNEASINESS AMONG TH E EMPLOYEES GIVEN ITS SMALLNESS IN THE CONTEXT. THE LEARNED AR HOWEVER VEHEMENTLY SUBMITTED THAT THE ASSESSEE SUBJECTED TO TAX UNDER THE SPECIAL PROVISIONS OF SECTION 115JB OF THE ACT AND THEREFORE SUCH BUSINESS LOSS HAS NO IMPACT ON TAXES PER SE . MAKING REFERENCE TO THE COMPUTATION OF INCOME, THE LEARNED AR FOR THE A SSESSEE ITA NO. 1710/AHD/15 [SKAPS INDUSTRIES INDIA PVT. LTD. VS. ITO] A.Y. 2009-10 - 3 - SUBMITTED THAT THE TAX LIABILITY AS PER THE MAT PRO VISIONS STANDS AT RS.50.18 LAKHS WHEREAS THE TAX LIABILITY AS PER THE NORMAL PROVISIONS STANDS AT NIL. THUS, GIVEN THESE PECULI AR FACTS AND CIRCUMSTANCES, SUCH DISALLOWANCE ON ACCOUNT OF BUSI NESS LOSS OWING TO THEFT WAS NOT JUSTIFIED. 4. WE HAVE EXAMINED THE ISSUE NARRATED ABOVE. WE O BSERVE THAT THE ASSESSEE HAS POINTED OUT EXISTENCE OF SUFFICIEN T CIRCUMSTANCES FOR BONAFIDES OF CLAIM OF BUSINESS LOSS OWING TO TH EFT. THE ASSESSEE HAS ALSO DEMONSTRATED THAT REVENUE HAS NOT SUFFERED ANY LOSS TOWARDS TAXATION BY SUCH CLAIM OF THE ASSESSEE. TH EREFORE, THE MATTER SHOULD END AT THIS STAGE ITSELF. WE THUS FI ND MERIT IN THE CLAIM OF THE ASSESSEE NOTWITHSTANDING ABSENCE OF FI R FOR SUCH THEFT OWING TO PECULIAR CIRCUMSTANCES. 5. GROUND NO.1 OF THE ASSESSEES APPEAL IS ACCORDIN GLY ALLOWED. 6. GROUND NOS. 2 & 3 CONCERN CHARACTERIZATION OF IN TEREST INCOME AMOUNTING TO RS.3,76,064/- AS INCOME FROM OTHER SO URCES BY THE AO INSTEAD OF ITS TAXABILITY UNDER THE HEAD BUSINE SS INCOME AS CLAIMED BY THE ASSESSEE. THE LEARNED AR FOR THE AS SESSEE POINTED OUT THAT THE ASSESSEE IN THE COURSE OF CARRYING ON ITS EXPORT BUSINESS WAS REQUIRED TO PROCURE BORROWING BY WAY OF LETTER OF CREDITS FROM THE BANK AGAINST WHICH THE ASSESSEE WAS REQUIRED TO PLACE FIXED DEPOSITS BY WAY OF MARGIN MONEY. FOR THESE FACTS, T HE LEARNED AR ADVERTED OUR ATTENTION TO THE FINANCIAL STATEMENT A S WELL AS THE LEDGER ACCOUNT TITLED FIXED DEPOSIT AGAINST LC AP PEARING AT PAGE NO.51 OF THE PAPER BOOK. IT IS THUS THE CASE OF TH E ASSESSEE THAT THE FIXED DEPOSITS GIVING RISE TO THE INTEREST INCOME W AS UTILIZED FOR ADVANCING THE BUSINESS ACTIVITY OF THE ASSESSEE AND NOT USED FOR ITA NO. 1710/AHD/15 [SKAPS INDUSTRIES INDIA PVT. LTD. VS. ITO] A.Y. 2009-10 - 4 - MERE EARNING OF INTEREST INCOME PER SE. THEREFORE, THE INTEREST INCOME DERIVED FROM SUCH FIXED DEPOSITS IS TO BE TR EATED AS BUSINESS INCOME. 7. IN VIEW OF THE LONG LINE OF JUDICIAL PRECEDENTS INCLUDING CIT VS. CALCUTTA NATIONAL BANK LTD. 37 ITR 171 (SC) AND CIT VS. MADRAS REFINERY LTD. 228 ITR 354 (MAD), THE FIXED D EPOSIT IN THE FACTS NARRATED ABOVE ARE IN THE NATURE OF COMMERCIA L ASSET AND THE INTEREST INCOME DERIVED THEREFROM, IN OUR VIEW, HAS BEEN RIGHTLY OFFERED UNDER THE HEAD OF BUSINESS INCOME BY THE ASSESSEE. THE ACTIONS OF THE LOWER AUTHORITIES ARE ACCORDINGLY SE T ASIDE ON THIS SCORE AND THE AO IS DIRECTED TO TREAT THE INTEREST INCOME AS BUSINESS INCOME OF THE ASSESSEE AS CLAIMED. 8. GROUND NOS. 2 & 3 OF THE ASSESSEES APPEAL ARE A CCORDINGLY ALLOWED. 9. GROUND NO.4 CONCERNS SETTING OFF OF BROUGHT FORW ARD UNABSORBED DEPRECIATION OF RS.44,55,268/- PRIOR TO COMPUTATION OF DEDUCTION UNDER S.10B OF THE ACT. 10. AS POINTED OUT ON BEHALF OF THE ASSESSEE, THE I SSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. YOKO GAWA INDI A LTD. 391 ITR 274 (SC). THE HONBLE SUPREME COURT IN PARA 17 OF ITS ORDER HAS OBSERVED THAT STAGE OF DEDUCTION OF THE PROFITS AND GAINS OF THE BUSINESS OF AN ELIGIBLE UNDERTAKING HAS TO BE MADE INDEPENDENTLY AND THE STAGE FOR SET OFF AND CARRY FORWARD LOSSES CONTAINED IN SECTION 70, 72 AND 74 OF THE ACT WOULD APPLY THEREA FTER. THUS, THE DEDUCTION UNDER S.10A/10B OF THE ACT WOULD BE PRIOR TO THE ITA NO. 1710/AHD/15 [SKAPS INDUSTRIES INDIA PVT. LTD. VS. ITO] A.Y. 2009-10 - 5 - COMMENCEMENT OF EXERCISE TO BE UNDERTAKEN UNDER CHA PTER VI OF THE ACT FOR ARRIVING AT THE TOTAL INCOME OF THE ASSESSE E. IN THE LIGHT OF EXPRESS JUDICIAL FIAT AVAILABLE IN THIS REGARD, WE FIND MERIT IN THE PLEA OF THE ASSESSEE ON THIS SCORE. 11. GROUND NO.4 OF THE ASSESSEES APPEAL IS ACCORDI NGLY ALLOWED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 02/11/2018 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 02/11/20 18