M/s IFB Agro Industries Limited, Kolkata V. JCIT, Range-6, kolkata, Kolkata

ITA 1721/KOL/2012

• Counselvise Citation: [2013] 119 COUNSELVISE.COM (IT) 2959 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2013
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 22-11-2012
• Court: TRIBUNAL
• Department Lawyers: AJOY KR SINGH
• Assessee Lawyers: S K TULSIYAN
• Keywords: Business expenditure; Earning of tax free income; Proportionate interest; Bad and doubtful debts; Deemed dividend
• Section: 43B; 14A

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE . . . . . . . . , ! /AND ''# $ $ $ $, , , , ) [BEFORE SHRI P. K. BANSAL, AM & SHRI GEORGE MATHAN, JM] !% !% !% !% / I.T.A NO. 1721/KOL/2012 &' () &' () &' () &' ()/ // / ASSESSMENT YEARS: 2009-10 M/S. IFB AGRO INDUSTRIES LTD. VS. JOINT COMMISSI ONER OF INCOME-TAX, (PAN: AAACI6487L) RANGE-6, KOLKATA. ($+ /APPELLANT ) (,-$+/ RESPONDENT ) & !% !% !% !% / I.T.A NO. 114/KOL/2013 &' () &' () &' () &' ()/ // / ASSESSMENT YEARS: 2009-10 DEPUTY COMMISSIONER OF INCOME-TAX, VS. M/S. IFB AG RO INDUSTRIES LTD. CIRCLE-6, KOLKATA. (CROSS OBJECTOR) (,-$+/ RESPONDENT ) DATE OF HEARING: 12.03.2013 DATE OF PRONOUNCEMENT: 12.03.2013 FOR THE ASSESSEE : SHRI S. K. TULSIYAN, ADVOCAT E FOR THE REVENUE : SHRI AJOY KR. SINGH, CIT (DR) . / ORDER PER SHRI GEORGE MATHAN, JM: ITA NO. 1721/K/2012 IS AN APPAL FILED BY THE ASSESS EE AND ITA NO. 114/KOL/2013 IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD . CIT(A), CENTRAL-VI, KOLKATA IN APPEAL NO. 173/CIT(A)-VI/R-6/11-12/KOL DATED 25.10.2012 FOR TH E AY 2009-10. 2. SHRI S. K. TULSIYAN, ADVOCATE, ADVOCATE REPRESEN TED ON BEHALF OF ASSESSEE AND SHRI AJOY KR. SINGH, CIT (DR) REPRESENTED ON BEHALF OF R EVENUE. 3. IN THE ASSESSEES APPEAL THE ASSESSEE HAS RAISED FOLLOWING GROUNDS: 1. THAT, THE LD. CIT(A) ERRED IN RETAINING ADDITIO N OF INTER-CORPORATE DEPOSIT (ICD) OF RS.11.20 CRS. RECEIVED BY THE APPELLANT FROM M/S IF B AUTOMOTIVE PVT. LTD. OUT OF TOTAL ADDITION OF RS.19.00 CRS. MADE BY THE LD. A.O. TREA TING THE SAME AS DEEMED DIVIDEND U/S.2(22)(E) OF THE I.T. ACT. 2 ITA NO.1721/K/2012 & ITA NO.114/K/2013 M/S. IFB AGRO INDUSTRIES LTD. AY: 2009-10 1 (A). THAT, WHILE RETAINING THE ADDITION OF INTER- CORPORATE DEPOSIT (ICD) OF RS. 11.20 CRS., THE LD.CIT(A) FAILED TO CONSIDER THAT SEC.2(22)(E) OF THE I.T. ACT CONTAINED A DEEMING PROVISION AND THEREFORE ITS TERMS AND CONDITIONS WE RE REQUIRED TO BE INTERPRETED STRICTLY. 1(B). THAT, BOTH THE LD. A.O. AND THE CIT(A) ERRED IN EQUATING LNTER-CORPORATE DEPOSITS (ICD) WITH LOANS AS MENTIONED IN SEC.2(22)(E) OF TH E I.T. ACT. 1 (C). THAT, WHILE ADDING THE INTER-CORPORATE DEPOS IT (ICD) RECEIVED BY THE APPELLANT FROM M/S IFB AUTOMOTIVE PVT. LTD., BOTH THE LD. A.O. AND THE LD. CIT(A) FAILED TO EXAMNE THE MATTER IN THE LIGHT OF THE LEGISLATIVE INTENTION OF ENACTING SEC.2(22)(E) OF THE I.T. ACT. 1 (D). THAT, SINCE THE INTER-CORPORATE DEPOSIT (ICD ) WAS RECEIVED BY THE ASSESSEE FROM M/S IFB AUTOMOTIVE PVT. LTD. NOT FOR ITS OWN BENEFIT, N O ADDITION U/S.2(22)(E) OF THE I.T. ACT WAS CALLED FOR. 2. THAT, BOTH THE LD. A.O. AND THE LD. CIT(A) ERRED IN OMPUTING THE EXPENSES ATTRIBUTABLE TO THE EARNING OF THE ASSESSEES EXEMPT DIVIDEND INC OME OF RS. 1,93,569 AT RS.7,28,706 IN TERMS OF SEC. 14A/RUIE-8D OF THE I.T. RULES. 2(A). THAT, SINCE THE ASSESSEES DIVIDEND INCOME OF RS.1,81,065 RECEIVED AT THE TIME OF THE REDEMPTION OF 29,98,000 UNITS OF BIRLA SUN LIFE LIQ UID PLUS AROSE OUT OF ITS INVESTMENT OF RS.3,00,00,000 WHICH WAS PAID OUT OF ITS OWN FUND, BOTH THE LD. A.O. AND THE CIT(A) ERRED IN DISALLOWING PROPORTIONATE INTEREST EXPENSE S OF RS.5,74,371 IN TERMS OF RULE- 8D(2)(II) OF THE L.T. RULES. 2(B). THAT, BOTH THE LD. A.O. AND THE CIT(A) ERRED IN COMPUTING THE AVERAGE INVESTMENT FOR THE PURPOSE OF RULE-8D(2)(III) OF THE I.T. RULE S AT RS.3,08,67,000 BY TAKING INTO ACCOUNT ALL INVESTMENTS OF THE ASSESSEE AS PER ITS BALANCE SHEET INSTEAD OF ONLY THE DIVIDEND YIELDING INVESTMENTS. 3. THAT, BOTH THE LD. A.O. AND THE CIT(A) ERRED IN DISALLOWING THE LOSS OF RS.10,84,000 ARISING TO THE ASSESSEE ON ACCOUNT OF FLUCTUATION O F FOREIGN EXCHANGE RATES ON THE GROUND THAT AS THE SAID LOSS WAS NOT ACTUALLY PAID BY IT, IT WAS ONLY A NOTIONAL IOSS. 4. THAT, THE APPELLANT CRAVES LEAVE TO ALTER, AMEND , RESCIND AND SUBSTITUTE ANY OF THE ABOVEMENTIONED GROUNDS AND ADD ANY FURTHER GROUNDS BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. AND IN REVENUES APPEAL, THE REVENUE HAS RAISED FOL LOWING GROUNDS: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, LD. CIT(A) ERRED IN IAW IN HOLDING THAT LOAN GRANTED BY M/S IFB AUTOMOTIVE PVT LTD. BE NOT TREATED AS DEEMED DIVIDEND WITHIN THE MEANING OF SEC 2(22)(E) OF THE IT ACT,1961. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, LD. CIT(A) ERRED IN LAW IN HOLDING THAT BAD DEBT CLAIMED BY THE ASSESSEE IS ALLOWED EV EN WHEN CONDITIONS LAID DOWN AS PER SEC 36(1)(VI) IS NOT FULFILLED. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, LD. CIT(A) ERRED IN LAW IN DELETING THE ADDITION MADE U/S 43B EVEN WHEN THE AMOUNT WAS NOT PAID WITHIN DUE DATE. 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, LD. CIT(A) ERRED IN LAW IN DELETING THE ADDITION MADE ON ACCOUNT OF EXCESSIVE AND UNJUS TIFIED BUSINESS EXPENDITURE. 3 ITA NO.1721/K/2012 & ITA NO.114/K/2013 M/S. IFB AGRO INDUSTRIES LTD. AY: 2009-10 5. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, LD. CIT(A) ERRED IN LAW IN DELETING THE ADDITION MADE ON ACCOUNT OF NOTIONAL LOSS DUE T O FOREIGN EXCHANGE FLUCTUATION. 6. THAT THE APPELLANT CRAVES FOR IEAVE TO ADD, DELE TE OR MODIFY ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 4. FIRST WE TAKE UP ITA NO. 1721/K/2012 (ASSESSEES APPEAL). IN THE ASSESSEES APPEAL IN REGARD TO GROUND NO. 1 TO 1(D) THE ASSESSEE HAS C HALLENGED THE ACTION OF CIT(A IN RETAINING THE ADDITION OF THE INTERCORPORATE DEPOSITS OF AN AMOUN T OF RS.11.20 CR. RECEIVED BY THE ASSESSEE FROM M/S. IFB AUTOMOTIVE PVT. LTD. ( M/S. IFB) OUT OF THE TOTAL ADDITION OF RS.19 CR. MADE BY AO BY TREATING THE SAME AS DEEMED DIVIDEND U/S. 2(2 2)(E) OF THE ACT. IT WAS SUBMITTED BY THE LD. AR THAT THE ASSESSEE IS A COMPANY WHICH IS DOIN G THE BUSINESS OF MANUFACTURE OF RECTIFIED SPIRIT AND IMFL, MARINE PRODUCTS AND TRADING OF FEE D AND BEER. IT WAS THE SUBMISSION THAT THE ASSESSEE HAD RECEIVED INTER-CORPORATE DEPOSITS FROM M/S. IFB. IT WAS THE SUBMISSION THAT THE ASSESSEE HELD 18.82% OF THE SHARES OF M/S. IFB. IT WAS THE SUBMISSION THAT THE INTER CORPORATE DEPOSITS RECEIVED BY THE ASSESSEE HAD BEEN TREATED BY THE AO AS A LOAN RECEIVED BY THE ASSESSEE FROM M/S. IFB. IT WAS THE SUBMISSION THAT CONSEQUE NT TO THE TREATMENT OF THE INTER-CORPORATE DEPOSITS AS A LOAN THE AO HAD INVOKED THE PROVISION S OF SECTION 2(22)(E) OF THE ACT AND HAD MADE THE ADDITION OF THE TOTAL OF THE INTER CORPORA TE DEPOSIT RECEIVED. IT WAS THE SUBMISSION THAT THE LD. AR HAD FILED A DETAILED WRITTEN SUBMISSION RUNNING INTO 18 PAGES. IT WAS THE SUBMISSION THAT THOUGH THE AO HAD TAKEN THE FIGURE OF RS.19 CR. IN FACT THE ASSESSEE HAD RECEIVED THE INTER CORPORATE DEPOSITS OF ONLY AN AM OUNT OF RS.11.20 CR. THE LD. AR DREW OUR ATTENTION TO THE LETTERS FROM M/S. IFB AT PAGES 187 TO 201 OF THE PAPR BOOK, WHEREIN IT WAS MENTIONED BY M/S. IFB THAT THEY WERE INTERESTED IN PLACING THE INTER CORPORATE DEPOSIT WITH THE ASSESSEE AS BANKS WOULD NOT BE INTERESTED IN TAKING SHORT TERM DEPOSIT. IT WAS FURTHER SHOWN THAT AN AMOUNT OF RS.17.5 CR. HAD DEPOSITED BY M/S. IFB THROUGH RTGS IN THE BANK ACCOUNT OF THE ASSESEE BUT RS.12 CR. OUT OF THE SAME WAS IMMEDIATE LY RETURNED AS IT WAS DEPOSITED WITHOUT THE ASSESSEES PERMISSION. IT WAS FURTHER SUBMISSION T HAT ON APPEAL THE LD. CIT(A) HAD ACCEPTED THE CONTENTION OF THE ASSESSEE THAT THE INTER CORPO RATE DEPOSIT WAS ONLY TO AN EXTENT OF RS.11.20 CR. IT WAS THE SUBMISSION THAT EVEN THE LD. CIT(A) HAD TREATED THE INTER CORPORATE DEPOSITS AS A LOAN AND HAD CONSEQUENTLY TREATED THE AMOUNT OF RS. 11.20 CR. AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT. THE LD. AR DREW OUR ATTENTION TO THE O RDER OF LD. CIT(A), WHEREIN THE LD. CIT(A) HAD ASKED FOR CERTAIN CLARIFICATIONS AND WHICH WERE ANSWERED BY THE ASSESSEE, THE SAME WAS FOUND IN PAGES 11 TO 14 OF THE ORDER OF THE LD. CIT (A) IN PARA 6 OF HIS ORDER. IT WAS THE SUBMISSION THAT THE INTER CORPORATE DEPOSITS WERE N OT IN THE NATURE OF LOAN AND THE ASSESSEE HAD NEVER ASKED M/S. IFB FOR ANY LOAN. THE LD. AR D REW OUR ATTENTION TO PARA 24 OF THE ORDER 4 ITA NO.1721/K/2012 & ITA NO.114/K/2013 M/S. IFB AGRO INDUSTRIES LTD. AY: 2009-10 OF LD. CIT(A) AT PAGE 22 OF HIS ORDER, WHEREIN THE LD. CIT(A) HAS ON THE GROUND THAT THE WORD INTER-CORPORATE DEPOSIT WAS VERY LIMITED TO COMPA NIES AND WAS SYNONYMOUS WITH THE TERM LOAN AS ALSO ON THE GROUND THAT INTER CORPORATE DEP OSIT IS NOT A LEGAL WORD IN THE I. T. ACT NOR USED ANY WHERE IN THE ACT TO MAKE IT DIFFERENT FROM LOANS OR ADVANCES HELD THE SAME TO BE A LOAN FOR THE PURPOSE OF INVOKING THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. IT WAS THE FURTHER SUBMISSION BY THE LD. AR THAT THE DECISIONS RELIED ON BY THE LD. CIT(A) WERE CLEARLY IN RESPECT OF THOSE COMPANIES WHERE A LOAN HAD BEEN TAKEN, IT WAS NOT A CASE WHERE INTER CORPORATE DEPOSITS WERE TAKEN. IT WAS THE FURTHER SUBMISSION THAT THE ISSUE IN THE ASSESSEES CASE WAS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL, BOMBAY BENCH IN THE CASE OF BOMBAY OIL INDUSTRIES LTD. REPORTED IN (2009) 28 SOT 383 (BOM), WHEREIN IT HAD BEEN HELD THAT INTERCORPORATE DEPOSITS WERE DIFFERE NT FROM LOANS AND ADVANCES AND THE SAME WOULD NOT COME WITHIN THE PURVIEW OF DEEMED DIVIDEN D. IT WAS THE SUBMISSION THAT THE LD. CIT(A) IN PARA 23 OF HIS ORDER DID REFER TO THE DEC ISION IN THE CASE OF BOMBAY OIL INDUSTRIES LTD. (SUPRA), BUT, HOWEVER, WRONGLY INTERPRETATED T HE SAID DECISION TO BE A CASE WHERE THE ISSUE WAS WHETHER INTEREST ON DEPOSITS REPRESENTING INVES TMENT OF SURPLUS FUND WOULD FALL OR NOT UNDER THE DEFINITION OF INTEREST AS GIVEN IN SECTIO N 2(7) OF THE INTEREST TAX ACT, 1974. THE LD. AR FURTHER DREW OUR ATTENTION TO THE DECISION OF T HE HONBLE JURISDICTIONAL HIGH COURT OF CALCUTTA IN THE CASE OF PRADIP KR. MALHOTRA VS. CIT REPORTED IN 338 ITR 538, WHEREIN IT HAS BEEN CATEGORICALLY HELD THAT A GRATUITOUS LOAN OR A DVANCE GIVEN BY A COMPANY TO THOSE CLASSES OF SHAREHOLDERS WOULD NOT COME WITHIN THE PURVIEW OF S ECTION 2(22)(E) OF THE ACT BUT NOT CASES WHERE THE LOAN OR ADVANCE IS GIVEN IN RETURN TO AN ADVANTAGE CONFERRED UPON THE COMPANY BY SUCH SHAREHOLDERS. THE LD. AR FURTHER DREW OUR ATT ENTION TO THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF GUJARAT GAS & FINAN CIAL SERVICES LTD. REPORTED IN 115 ITD 218 (AHD)(SB), WHEREIN IN PARA 68 OF THE SAID ORDER, TH E SPECIAL BENCH HAS CONSIDERED THE ISSUE WHETHER THE INTEREST ON INTER-CORPORATE DEPOSITS IS INTEREST ON LOANS OR ADVANCES AND HAD COME TO A CONCLUSION THAT THE TWO EXPRESSIONS LOANS AND A DEPOSIT ARE TO BE TAKEN DIFFERENT AND DISTINCTION CAN BE SUMMED UP BY STATING THAT IN TH E CASE OF LOAN THE NEEDY PERSON APPROACHES THE LENDER FOR OBTAINING THE LOAN THEREFROM. THE L OAN IS CLEARLY LOAN AT THE TERMS STATED BY THE LENDER. IN THE CASE OF DEPOSITS, HOWEVER, THE DEPO SITOR GOES TO THE DEPOSITEE FOR INVESTING HIS MONEY PRIMARILY WITH THE INTENTION OF EARNING INTER EST. CONSEQUENTLY, THE SPECIAL BENCH HAD HELD THAT INVESTMENTS MADE BY WAY OF SHORT TERM DEP OSITS CANNOT BE CONSIDERED AS LOANS AND ADVANCES. IT WAS THE SUBMISSION THAT IN VIEW OF TH E DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF BOMBAY OIL INDUSTRIES LTD. (SUPRA) AS ALSO THE DECISION OF THE SPECIAL 5 ITA NO.1721/K/2012 & ITA NO.114/K/2013 M/S. IFB AGRO INDUSTRIES LTD. AY: 2009-10 BENCH IN THE CASE OF GUJARAT GAS & FINANCIAL SERVIC ES LTD. (SUPRA) AS ALSO THE DSECISION OF THE HONBLE JURISDICTIONAL HIGH COURT OF CALCUTTA IN TH E CASE OF PRADIP KR. MALHOTRA (SUPRA), THE ADDITION AS SUSTAINED BY THE LD. CIT(A) BY APPLYING THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT WAS LIABLE TO BE DELETED IN SO FAR AS THE ASSES SEE HAD NOT TAKEN ANY LOANS FROM M/S. IFB, BUT M/S. IFB HAD PLACED THE INTERCORPORATE DEPOSITS WI TH THE ASSESSEE. IN REPLY, THE LD. CIT(DR) DREW OUR ATTENTION TO THE ORDER OF THE LD. CIT(A) I N PARA 6 REFERRED TO SUPRA, WHEREIN THE LD. CIT(A) HAD ASKED FOR CERTAIN CLARIFICATIONS FROM T HE ASSESSEE. HE FURTHER DREW OUR ATTENTION TO PARA 8 OF THE ORDER OF CIT(A) TO SUBMIT THAT THE DO CUMENTS AS PRODUCED BEFORE THE LD. CIT(A) REPRESENTING THE DIRECTORS MINUTES BOOK RESOLUTION S PASSED BY THE BOARD OF DIRECTORS COULD BE A FABRICATED DOCUMENT IN SOFAR AS THE DOCUMENTS WER E NOT SERIALLY NUMBERED. IT WAS THE SUBMISSION THAT THE TERM INTERCORPORATE DEPOSIT HAD BEEN RIGHTLY TREATED BY THE LD. CIT(A) AND THE AO TO BE A LOAN OR ADVANCE TO WHICH THE PROVISI ONS OF SECTION 2(22)(E) OF THE ACT APPLIED. THE LD. CIT(DR) VEHEMENTLY SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES AND FURTHER RELIED ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF STAR CHEMICALS PVT. LTD. REPORTED IN 203 ITR 11, WHEREIN IT HAS BEEN HELD TH AT A LOAN TO A SHAREHOLDER TO THE EXTENT TO WHICH THE COMPANY PROCESS ACCUMULATED PROFITS WAS L IABLE TO BE TREATED AS DEEMED DIVIDEND. IT WAS THE SUBMISSION THAT THE ASSESSEE HAVING TAKEN T HE LOAN FROM M/S. IFB UNDER WHATEVER NAME CALLED THE SAME WAS LIABLE TO BE TREATED AS A DEEME D DIVIDEND U/S. 2(22)(E) OF THE ACT. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AT THE OUTSET, A PERUSAL OF THE FACTS IN THE ASSESSEES CASE CLEARLY SHOW THAT THE DISPUTE IN TH E APPEAL PRIMARILY REVOLVES AROUND THE ISSUE AS TO WHETHER THE INTERCORPORATE DEPOSITS RECEIVED BY THE ASSESEE FROM M/S. IFB IS A LOAN OR ADVANCE OR IS A DEPOSIT. ADMITTEDLY, THE PROVI SIONS OF SECTION 2(22)(E) OF THE ACT REFERS TO ONLY LOANS AND ADVANCES IT DOES NOT TALK OF A DEPOSIT. THE FACT THAT THE TERM DEPOSIT CANNOT MEAN A LOAN AND THAT THE TWO TERMS LOAN AND THE TERM DEPOSIT ARE TWO DIFFERENT DISTINCT TERMS IS EVIDENT FROM THE EXPLANATION TO SECTION 269T AS ALSO SECTION 269SS OF THE ACT WHERE BOTH THE TERMS ARE USED. FURTHER, THE SECOND PROVISO TO SECTION 269SS OF THE ACT RECOGNISES THE TERM LOAN TAKEN OR DEPOSIT ACCEP TED. ONCE IT IS AN ACCEPTED FACT THAT THE TERMS LOAN AND DEPOSIT ARE TWO DISTINCT TERMS WHICH H AS DISTINCT MEANING THEN IF ONLY THE TERM LOAN IS USED IN A PARTICULAR SECTION THE DEPOSIT RECEIVED BY AN ASSESSEE CANNOT BE TREATED AS A LOAN FOR THAT SECTION. HERE, WE MAY ALSO MENTION THAT IN SECTION 269T OF THE ACT, THE TERM DEPOSIT HAS BEEN EXPLAINED VIDE VARIOUS CIRCULAR ISSUED BY CBDT. THUS, THE VIEW TAKEN BY THE LD. CIT(A) THAT THE INTERCORPORATE DEPOSIT IS SIMIL AR TO THE LOAN WOULD NO LONGER HAVE LEGS TO 6 ITA NO.1721/K/2012 & ITA NO.114/K/2013 M/S. IFB AGRO INDUSTRIES LTD. AY: 2009-10 STAND. A PERUSAL OF THE DECISION OF HONBLE SPECIA L BENCH OF THIS TRIBUNAL IN THE CASE OF GUJARAT GAS & FINANCIAL SERVICES LTD. REFERRED TO S UPRA, CLEARLY SHOWS THAT THE HONBLE SPECIAL BENCH HAD TAKEN INTO CONSIDERATION THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF HOUSING & URBAN DEVELOPMENT CORPORATION LTD . REPORTED IN 102 TTJ (DEL.)(SB) 936 TO COME TO THE CONCLUSION THAT LOANS AND DEPOSITS ARE TO BE TAKEN DIFFERENT AND DISTINCT. FURTHER, IN VIEW OF THE DECISION OF HONBLE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF BOMBAY OIL INDUSTRIES LTD. , REFERRED TO SUPRA, WHEREIN THE CO ORDINATE BENCH OF THIS TRIBUNAL HAS HELD AS FOLLOWS: 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD. THE AUTHORITIES BELOW HAVE NOT CONTROVERTED THE CLAIM O F THE ASSESSEE COMPANY THAT THE AMOUNT RECEIVED FROM ABOVE THREE COMPANIES IS ICDS. THE AO HELD AGAINST THE ASSESSEE ONLY ON ACCOUNT THAT IT HAD FAILED TO EXPL AIN, THE INVESTMENT IS NEITHER LOAN OR ADVANCE. IT IS A SETTLED POSITION THAT DEPOSITS CA NNOT BE EQUATED WITH LOANS OR ADVANCES. THE JURISDICTIONAL HIGH COURT IN THE DUR GA PRASAD MANDELIAS CASE (SUPRA) HAS NOTICED THE DISTINCTION BETWEEN DEPOSIT S AND LOANS IN THE CONTEXT OF S. 370 OF THE COMPANIES ACT. THE COURT HELD AS UNDER: THERE CAN BE NO CONTROVERSY THAT IN A TRANSACTION OF A DEPOSIT OF MONEY OR A LOAN, A RELATIONSHIP OF A DEBTOR AND CREDITOR MUST COME INTO EXISTENCE. THE TERMS DEPOSIT AND LOAN MAY NOT B E MUTUALLY EXCLUSIVE, BUT NONETHELESS IN EACH CASE WHAT MUST BE CONSIDERE D IS THE INTENTON OF THE PARTIES AND THE CIRCUMSTANCES. IN THE PRESENT C ASE, BARRING THE ASSERTION OF THE RESPONDENT THAT THE MONEYS ADVANCE D BY THE COMPANY TO THE ASSOCIATED CEMENT COMPANIES CONSTITUTE A LOAN A ND OFFEND S. 370 OF THE COMPANIES ACT, THERE IS NOTHING ELSE TO SHOW TH AT MONEYS HAVE BEEN ADVANCED AS A LOAN. IN THE CONTEXT OF THE STATUTORY PROVISIONS, THE WORD LOAN MAY BE USED IN THE SENSE OF A LOAN NOT AMO UNTING TO A DEPOSIT. THE WORD LOAN IN S. 370 MUST NOW BE CONSTRUED AS DE ALING WITH LOANS NOT AMOUNTING TO DEPOSITS, BECAUSE, OTHERWSE, IF DEPOS T OF MONEYS WITH CORPORATE BODIES WERE TO BE TREATED AS LOANS, THEN DEPOSITS WITH SCHEDULED BANKS WOULD ALSO FALL WITHIN THE AMBIT OF S. 370 OF THE COMPANIES ACT. THEREFORE, MONEYS GIVEN BY THE COMPA NY TO THE OTHER BODIES CORPORATE IS A LOAN WITHIN THE MEANING OF S. 370 OF THE COMPANIES ACT MUST BE NEGATIVED. THEREFORE, THE PETITIONERS W OULD WELL BE ENTITLED TO THE RELIEF. SEC. 370 OF THE COMPANIES ACT, 1956 WAS SUBSEQUENTL Y AMENDED TO INCLUDE DEPOSITS NTO ITS AMBIT THEREBY INDICATING THE DISTINCTION B ETWEEN DEPOSITS AND LOANS/ADVANCES. THE RECENT DECISION OF THE TRIBUNAL IN THE CASE OF GUJARAT GAS FINANCIAL SERVICES LTD.S CASE (SUPRA) HAS ELABORATELY CONSIDERED THE ISSUE WHETHER INTEREST ON ICDS IS INTEREST ON LOANS OR ADVANCES AND WHETHER THE SAME IS EXIGIBLE TO CHARGEABLE INTEREST UNDER INTEREST-TAX ACT. THE TRIBUNAL AFTER CONSIDER ING THE ENTIRE PRECEDENT ON THE ISSUE THOUGH IN THE CONTEXT OF THE INTEREST-TAX ACT HAD CATEGORICALLY HELD THAT INTEREST ON ICDS IS NOT AKIN TO INTEREST ON LOANS OR ADVANCE S. THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL CITED SUPRA WHICH RUNS FROM PARAS 6 8 TO 74 IS REPRODUCED BELOW: 68. BEFORE THE AO THE ASSESSEE AS REGARDS INCOME F ROM ICD THE ASSESSEE COMPANY ACCEPTED THIS INTEREST OF RS. 1,21 ,54,153 ALONG WITH INTEREST ON BILL DISCOUNTNG RS. 1,48,74,208 AND OT HER INTEREST OF RS. 3,66,184 CAN BE BOUGHT UNDER THE PURVIEW OF THE INT EREST-TAX ACT, 1974. 7 ITA NO.1721/K/2012 & ITA NO.114/K/2013 M/S. IFB AGRO INDUSTRIES LTD. AY: 2009-10 HOWEVER BEFORE CIT(A) IT WAS SUBMITTED THAT THESE A RE NTEREST ON DEPOSITS AND THE NATURE IS THAT OF THE INVESTMENT A ND SO INTEREST-TAX BEING LEVIABLE ON LOANS AND ADVANCES AND NOT ON FIXED DEP OSITS, THE AMOUNT WAS NOT TO BE INCLUDED. THE CIT(A) HELD: I HAVE CAREFULLY CONSIDERED THE MATTER AND FIND TH AT THE DEFINITION OF INTEREST DOES NOT SPEAK OF EXCLUDING THIS AMOUNT IN ITS DEFINITION. ACCORDINGLY THEREFORE, THE INCLU SION BY THE AO OF THESE ITEMS IS FOUND JUSTIFIED AND IS UPHELD. 69. THE SUBMISSION OF THE ASSESSEE IS THAT THESE IC DS BEING NEITHER LOANS OR ADVANCES, INTEREST EARNED ON THESE IS NOT EXIGIBTE TO INTERES T TAX IN VIEW OF THE DECISION OF AHMEDABAD TRIBUNAL IN THE CASE OF UTKARSH FINCAP (P ) LTD. VS. ITO (2006) 101 TTJ (AHD) 210. RELIANCE IS ALSO PLACED ON THE DECISION OF HOUSING & URBAN DEVELOPMENT CORPORATION LTD. VS. JT. CIT (2006) 102 TTJ (DEL) ( SB) 936 : (2006) 5 SOT 918 (DEL)(SB), STANROSE HOLDING LTD. (ITA NO. 25/MUM/19 66) AND PERSEPOLIS INVESTMENT CO. (P) LTD. (ITA NO. 51/MUM/1997). THE LEARNED DEPARTM ENTAL REPRESENTATIVE ON THE OTHER HAND SUPPORTED THE DECISION OF THE CIT(A) AND SUBMI TTED THAT WHEN ASSESSEE ITSELF HAD OFFERED IT TO TAX WHERE THE QUESTION OF ALLOWING IT AS NOT TAXABLE. HE ALSO SUBMITTED THAT IT IS TAXABLE AS HETD IN BAJAJ AUTO HOLDINGS LTD. VS. DY. CIT (2005) 96 TTJ (MUMBAI) 856 : (2005) 95 ITD 356 (MUMBAI). 70. WE HAVE HEARD THE PARTIES AND CONSIDERED THE RI VA SUBMISSIONS. IT MIGHT BE TRUE THAT ASSESSEE HAD OFFERED IT TO TAX INITIALLY BUT HE CLA IMED IT AS NOT TAXABLE AND THEREFORE THE MATTER HAS TO BE EXAMINED ON MERITS AND TO DETERMIN E AS TO WHETHER IT IS TAXABLE UNDER THE ACT. WE FIND IT IS NOT TAXABLE IN THE LIGHT OF THE DECISION IN THE CASE OF UTKARSH FNCAP (P) LTD. (SUPRA) WHEREIN AHMEDABAD BENCH OF THE TRI BUNAT AFTER CONSIDERING THE DECISION IN THE CASE OF FEDERATION OF ANDHRA PRADESH CHAMBER S OF COMMERCE & INDUSTRY & ORS. VS. STATE OF ANDHRA PRADESH & ORS. (2001) 165 CTR ( SC) 672 : (2001) 247 ITR 36 (SC), CIT VS. SAHARA INDIA SAVINGS & INVESTMENT CORPORATI ON LTD. (2003) 185 CTR (ALL) 136 : (2003) 264 ITR 646 (ALL) AND FOLLOWING THE DECISION S IN THE CASE OF GUJARAT INDUSTRIAL INVESTMENT CORPN. LTD. (SIC), ORIENTAL INSURANCE CO , LTD. VS. DY. CIT (2004) 82 TTJ (DEL) 1084 : (2004) 89 ITD 520 (DEL) HELD THAT INTE REST ON ICDS ARE NOT CHARGEABLE TO INTEREST-TAX, AS THE DEPOSITS ARE NOT IN THE NATURE OF LOANS OR ADVANCES. IT HELD AS UNDER: THE WORDS LOANS AND ADVANCES SHOULD BE UNDERSTOO D CONJOINTLY AND NOT IN ISOLATION. IF SO READ, THE ADVANCES WHICH ARE IN TH E NATURE OF LOAN ALONE SHOULD BE COVERED IN THE TERM. ORDINARILY AN ADVANCE IS A PAYMENT BEFOREHAND AND IT DOES NOT CONNOTE, THE IDEA OF REPAYMENT. IT IS ADJU STED WHEN THE ACTION FOR WHICH THE MONEY IS ADVANCED IS COMPLETED AND IF NOT REPAI D ON EXPIRY OF THE LOAN LIKE A DEPOSIT. THE COMPANY IS NOT BOUND TO ACCEPT THE DEP OSIT MADE, IF PROCEEDINGS ON THE BASIS OF THE PROSPECTUS A PERSON INTEREST TO MA KE A DEPOSIT. BY ISSUING PROSPECTUS OF A COMPANY INVITES OFFER FOR MAKING DE POSIT AND THAT IS NOT OFFER TO RECEIVE DEPOSIT WHEREAS IN CASE OF LOAN THE ASSESSE E PRAYS FOR A LOAN. IT OFFERS TO BORROW MONEY AND ONCE THAT OFFER IS ACCEPTED, THE L ENDER IS BOUND TO GIVE MONEY TO THE BORROWER ON TERMS SETTLED. IT IS ALSO TO BE NOTICED THAT A TAXING STATUTE HAS TO BE STRICTLY CONSTRUED AND THE SUBJEC T CANNOT BE TAXED UNLESS COMES WITHIN THE LETTER OF LAW. THE ARGUMENT THAT A PARTI CULAR INCOME FALLS WITHIN THE SPIRIT OF THE LAW CANNOT BE AVAILED OF BY THE REVEN UE. IT IS TRITE LAW THAT NO TAX CAN BE IMPOSED ON THE SUBJECT WITHOUT THE WORDS IN THE ACT. NO TAX CAN BE IMPOSED BY INFERENCE OR ANALOGY. THE CARDINAL PRINC IPLE OF INTERPRETATION OF FISCAL LAW IS THAT IT SHOULD BE CONSIDERED STRICTLY . IN VIEW OF THE ABOVE, THE INTEREST IN ICDS UNLESS THEY CLEARLY FALL WITHIN TH E MEANING OF INTEREST ON LOANS AND ADVANCES WOULD NOT BE TAXABLE. ICD CAN NEITHER BE A LOAN NOT AN ADVANCE. THEREFORE, THE AO IS DIRECTED TO EXCLUDE THE INTERE ST ON ICD FROM THE ASSESSMENT 8 ITA NO.1721/K/2012 & ITA NO.114/K/2013 M/S. IFB AGRO INDUSTRIES LTD. AY: 2009-10 OF THE ASSESSEE. CONSEQUENTLY, THE LEVY OF PENALTY MADE WOULD ALSO NOT STAND. THEY ARE, ACCORDINGLY DELETED. 71. IT HAS CONSIDERED THE DECISION OF BAJAJ AUTO HO LDINGS LTD.S CASE (SUPRA) REFERRED TO BY THE CIT(A) AND DISTINGUISHED BY STATING THAT MUMBAI BENCH HAS PROCEEDED ON A FOOTING THAT DEPOSIT WOULD BE AN ADVANCE. AND WOULD BE INCL UDIBLE N THE TERM WITH INTEREST ON DEPOSIT AND ADVANCE. THE BOMBAY BENCH IS MORE PERSU ADED BY THE REASON THAT THE INTEREST ON DEPOSIT WAS NOT EXCLUDED FROM THE DEFINITION OF INTEREST AND THE TERM INTEREST ON LOANS AND ADVANCES WAS WIDE ENOUGH TO INCLUDE THE SAME. I T HAD NOT CONSIDERED THAT WHETHER IT WAS NOT A LOAN NOR AN ADVANCE AND AS TO WHETHER THE AMENDED DEFINITION OF INTEREST UNDER THE ACT WAS EXHAUSTIVE OR INCLUSIVE. IN HOLDING THA T THE ICD IS NOT AN ADVANCE THE AHMEDABAD TRIBUNAL ALSO NOTICED THAT THE MEANING OF THE TERM ADVANCE AS UNDERSTOOD IN THE COMMERCIAL WORDS AND AS STATED UNDER THE TITLE WHAT IS ADVANCE IN THE FOLLOWING WORDS : IT WAS HELD IN KM. MOHAMMED ABDUL KADIR ROWTHER VS . S. MUTHIA CHETTIAR (1960) 2 MAD. LJ 13 AT 15 THAT ADVANCE MEA NS LITERALLY A PAYMENT BEFOREHAND; IN CERTAIN CASES IT MAY BE A LO AN BUT IT CANNOT BE SAID THAT A SUM PAID BY WAY OF ADVANCE IS NECESSARI LY A LOAN. IN RAJA OF VENKATAGIRI VS. KRISHNAYYA RAO BAHADUR AIR 1948 PC 150 AT P. 155, IT WAS OBSERVED THAT ORDINARILY AND ADVANCE DOES NOT C ONNOTE ANY IDEA OF REPAYMENT. IT IS, THEREFORE, CLEAR THAT THE WORD AD VANCED USED IN S. 296 MEANS AN ADVANCE IN THE NATURE OF A LOAN AND NOT ME RELY AN ADVANCE AS IS UNDERSTOOD IN THE COMMON PARLANCE IN THE SENSE O F PAYMENT OF MONEY BEFOREHAND AND WHICH IS LIKELY TO BECOME DUE AT SOM E FUTURE TIME. 72. IT HAS ALSO REFERRED TO S. 296 OF COMPANIES ACT REGULATING LOANS TO DIRECTORS FOR BOOK DEBT WHICH WAS IN THE NATURE OF LOANS OR ADVANCES F ROM ITS INCEPTION. 73. IN THE CASE OF HOUSING & URBAN DEVELOPMENT CORP ORATION LTD. (SUPRA), THE SPECIAL BENCH AFTER CONSIDERING VARIOUS DECISIONS AND CIRCU LARS OF CBDT HELD THAT DEPOSITS IN THE FORM OF SECURITIES AND BONDS CANNOT BE CONSIDERED A S LOANS AND ADVANCES AND AS SUCH INTEREST THEREON SHALL BE OUTSIDE THE SCOPE OF INTE REST DEFINED UNDER S. 2(7) OF THE INTEREST- TAX ACT. PARA 22 OF THE ORDER READS AS UNDER: 22. FROM THE FOREGOING DISCUSSION WE ARE OF THE CO NSIDERED VIEW THAT DESPITE SIMILARITIES, THE TWO EXPRESSIONS LOANS AND DEPOSITS ARE TO BE TAKEN DIFFERENT AND THE DISTINCTION CAN BE SUMMED UP BY S TATING THAT IN THE CASE OF LOAN, THE NEEDY PERSON APPROACHES THE LENDER FOR OBTAINING THE LOAN THEREFROM. THE LOAN IS CLEARLY LENT AT THE TERMS ST ATED BY THE LENDER. IN THE CASE OF DEPOSIT, HOWEVER, THE DEPOSITOR GOES TO THE DEPOSITEE FOR INVESTING HIS MONEY PRIMARILY WITH THE INTENTION OF EARNING I NTEREST. IN VIEW OF THIS LEGAL POSITION, IT HAS TO BE HELD THAT INTEREST ON DEPOSITS REPRESENTING INVESTMENT OF SURPLUS FUNDS WOULD ALSO NOT FALL UND ER THE DEFINITION OF INTEREST AS GIVEN IN S. 2(7) OF THE ACT AND AS SUCH WOULD NOT BE LIABLE TO INTEREST TAX. THE ANSWER TO THE QUESTION UNDER REFE RENCE IN OUR HUMBLE OPINION IS THAT INVESTMENTS MADE BY WAY OF SHORT-TE RM DEPOSITS AND ALSO IN THE FORM OF SECURITIES AND BONDS CANNOT BE CONSIDER ED AS LOANS AND ADVANCES AND AS SUCH INTEREST THEREON SHALL BE OUTS IDE THE SCOPE OF INTEREST DEFINED UNDER S. 2(7) OF THE ACT. 74. IN THESE CIRCUMSTANCES WE HOLD THAT INTEREST ON ICDS IS NOT AN INTEREST ON LOAN OR ADVANCE THEREFORE WOULD NOT BE INCLUDIBLE IN THE CH ARGEABLE INTEREST UNDER THE INTEREST- TAX ACT. FROM THE ABOVE IT IS CLEAR THERE IS DISTINCTION BET WEEN DEPOSITS VIS-A-VIS LOANS/ADVANCES. S. 2(22)(E) ENACTS A DEEMING FICTION WHEREBY THE SC OPE AND AMBIT OF THE WORD DIVIDEND HAS BEEN ENLARGED TO BRING WITHIN ITS SWEEP CERTAIN PAYMENTS MADE BY A COMPANY AS PER 9 ITA NO.1721/K/2012 & ITA NO.114/K/2013 M/S. IFB AGRO INDUSTRIES LTD. AY: 2009-10 THE SITUATIONS ENUMERATED IN THE SECTION. SUCH A DE EMING FICTION WOULD NOT BE GIVEN A WIDER MEANING THAN WHAT IT PURPORTS TO DO. THE PROV ISIONS WOULD NECESSARILY BE ACCORDED STRICT INTERPRETATION AND THE AMBIT OF THE FCTION WOULD NOT BE PRESSED BEYOND ITS TRUE LIMITS. THE REQUISITE CONDITION FOR INVOKING S. 2(2 2)(E) OF THE ACT IS THAT PAYMENT MUST BE BY WAY OF LOAN OR ADVANCES. SINCE THERE IS A CLEAR DISTINCTION BETWEEN THE ICDS VIS-A-VIS LOANS/ADVANCES, ACCORDING TO US THE AUTHORITIES BEL OW WERE NOT RIGHT IN TREATING THE SAME AS DEEMED DIVIDEND UNDER S. 2(22)(E) OF THE ACT. SI NCE WE HOLD THAT ICDS DO NOT COME WITHIN THE PURVIEW OF DEEMED DIVIDEND UNDER S. 2(22 )(E) OF THE ACT, THE ALTERNATIVE CONTENTION OF THE ASSESSEE NAMELY BY VIRTUE OF S. 2 (22)(E)(II) OF THE ACT, THE UNSECURED LOANS RECEIVED BY THE ASSESSEE IS NOT DIVIDEND IS N OT ADJUDICATED. WE ARE OF THE VIEW THAT THE INTERCORPORATE DEPOSIT S CANNOT BE TREATED AS A LOAN FALLING WITHIN THE PURVIEW OF SECTION 2(22)(E) OF THE ACT. 6. ADMITTEDLY, THE LD. CIT(A) HAS ALSO ACCEPTED THE FACT THAT WHAT THE ASSESSEE HAS RECEIVED IS INTERCORPORATE DEPOSITS, THIS FACT REMA INS UNCHALLENGED. THE LD. CIT(A) HAS, AFTER ACCEPTING THAT THIS IS INTERCORPORATE DEPOSIT PROCE EDED TO HOLD THAT THE TERM INTERCORPORATE DEPOSIT WAS SYNONYMOUS OF LOAN. AT THIS POINT, THE LD. CIT(A) FELL INTO ERROR AS AN INTERCORPORATE DEPOSIT IS NOT A LOAN BUT A DEPOSIT WHICH HAS A MEANING DIFFERENT FROM THE TERM LOAN. THE DECISIONS AS RELIED ON BY THE LD. CIT(A) AS ALSO BY THE LD. CIT(DR), ADMITTEDLY, ARE ON LOANS. NONE OF THE DECISIONS REFERRED TO BY T HE LD. CIT(A) OR THE LD. CIT(DR) DISCUSSES ANYWHERE THAT DEPOSITS ARE TO BE TREATED AS LOANS. CONSEQUENTLY, RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL I N THE CASE OF BOMBAY OIL INDUSTRIES LTD. REFERRED TO SUPRA, THE ADDITION REPRESENTING INTER CORPORATE DEPOSITS TREATED AS LOAN BY THE AO AND AS CONFIRMED BY THE LD. CIT(A) STANDS DELETED. 7. IN REGARD TO GROUND NOS. 2 TO 2(B) OF THE ASSESS EES APPEAL WHICH WAS AGAINST THE ACTION OF LD. CIT(A) IN COMPUTING THE EXPENSES ATTRIBUTABL E TO THE EARNING OF THE ASSESSEES EXEMPT DIVIDEND INCOME, IT WAS SUBMITTED BY THE LD. AR THA T THE ISSUE IS COVERED BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & B OYCEE MFG. CO. LTD. VS. DCIT REPORTED IN 328 ITR 81. IT WAS THE SUBMISSION THAT THE ASSE SSEE ITSELF HAD INVOKED THE PROVISIONS OF SECTION 14A OF THE ACT AND HAD DISALLOWED THE EXPEN DITURE ATTRIBUTABLE TO THE EARNING OF THE DIVIDEND INCOME. IT WAS THE SUBMISSION THAT THE AS SESSEE HAD A SHARE CAPITAL OF RS.8 CR. AND HAD RESERVES AND SURPLUS AT RS.56 CR. IT WAS THE S UBMISSION THAT THE INVESTMENTS WERE ONLY RS.2,96,17,000/-. IT WAS THE SUBMISSION THAT AS PE R THE DECISION OF GODREJ & BOYCEE MFG. CO. LTD., REFERRED TO SUPRA, THERE MUST BE A PROXIMATE RELATIONSHIP BETWEEN THE EXPENDITURE AND THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME . IT WAS THE SUBMISSION THAT THE AO HAD NOT SHOWN HOW THE EXPENDITURE AS DISALLOWED BY HIM HAD ANY PROXIMATE RELATIONSHIP TO THE 10 ITA NO.1721/K/2012 & ITA NO.114/K/2013 M/S. IFB AGRO INDUSTRIES LTD. AY: 2009-10 INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME . IN REPLY, THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF AO. IT WAS THE SUBMISSION T HAT AS THE ASSESSEE HAD NOT GIVEN ANY CONVINCING REPLY BEFORE THE AO, THE AO HAD MADE THE SAID ADDITION. IT WAS THE SUBMISSION THAT THE ISSUE CAN BE RESTORED TO THE FILE OF THE AO FOR READJUDICATION IN LINE WITH THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & B OYCEE MFG. CO. LTD., REFERRED TO SUPRA,. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PE RUSAL OF THE ORDER OF THE LD. CIT(A) SHOWS THAT THE LD. CIT(A) IN PARA 36 OF HIS ORDER S TATES THAT THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH WITH SUFFICIENT MATERIAL THE MANNER OF CA LCULATING THE AMOUNT DISALLOWABLE FOR EARNING THE EXEMPT INCOME. HOWEVER, A PERUSAL OF THE DECIS ION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCEE MFG. CO. LTD., REFERRED TO SUPRA, SHOWS THAT THIS IS NOT WHAT THE SAID DECISION DIRECTS. UNDER THESE CIRCUMSTANCES, THIS ISSUE IS RESTORED TO THE FILE OF THE AO FOR READJUDICATION IN LINE WITH THE DECISION OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCEE MFG. CO. LTD., REFERRED TO SUPRA. 9. IN REGARD TO GROUND NO.3 OF ASSESSEES APPEAL, W HICH WAS AGAINST THE ACTION OF THE LD. CIT(A) IN DISALLOWING THE LOSS OF RS.10,84,000/- AR ISING TO THE ASSESSEE ON ACCOUNT OF THE FLUCTUATION OF FOREIGN EXCHANGE RATE, IT WAS SUBMIT TED BY THE LD. AR THAT THE ISSUE WAS SQUARELY COVERED BY THE DECISION OF THE HONBLE SUPREME COUR T IN THE CASE OF CIT VS. WOODWARD GOVERNOR INDIA (P) LTD. REPORTED IN 312 ITR 254. I T WAS THE SUBMISSION THAT THE ASSESSEE HAD TAKEN A WORKING CAPITAL LOAN. IT WAS THE SUBMISSIO N THAT THIS ISSUE CAN BE RESTORED TO THE FILE OF THE AO FOR READJUDICATION IN LINE WITH THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF WOODWARD GOVERNOR INDIA (P) LTD., REFERRED TO SUPRA . IT WAS THE FURTHER SUBMISSION THAT IN THE IMMEDIATELY SUBSEQUENT ASSESSMENT YEAR THE ASSESSEE HAD SHOWN A PROFIT OF RS.4,93,000/- AND THE SAME HAD ALSO BEEN OFFERED TO TAX. IN REPLY, T HE LD. DR SUBMITTED THAT THE ISSUE CAN BE RESTORED TO THE FILE OF AO FOR READJUDICATION. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PE RUSAL OF THE ORDER OF THE AO CLEARLY SHOWS THAT THE AO HAS NOT TAKEN INTO CONSIDERATION THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF WOODWARD GOVERNOR INDIA (P) LTD., RE FERRED TO SUPRA, WHEN MAKING THE SAID DISALLOWANCE. UNDER THESE CIRCUMSTANCES, THIS ISSU E IS RESTORED TO THE FILE OF THE AO FOR READJUDICATION AFTER GRANTING THE ASSESSEE ADEQUATE OPPORTUNITY TO SUBSTANTIATE ITS CASE AS ALSO TO TAKE INTO CONSIDERATION THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF WOODWARD GOVERNOR INDIA (P) LTD., REFERRED TO SUPRA. THIS G ROUND OF APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 11 ITA NO.1721/K/2012 & ITA NO.114/K/2013 M/S. IFB AGRO INDUSTRIES LTD. AY: 2009-10 11. GROUND NO. 4 OF THE ASSESSEES APPEAL IS GENERA L IN NATURE. 12. NOW, WE ARE COMING TO REVENUES APPEA I.E. ITA NO.114/K/2013. IN REGARD TO THE REVENUES APPEAL IN GROUND NO. 1, WHICH WAS AGAINST THE ACTION OF CIT(A) IN HOLDING THAT THE LOAN GRANTED BY M/S. IFB WAS NOT TO BE TREATED AS D EEMED DIVIDEND. THE LD. CIT(DR) SUBMITTED THAT THE SUBMISSIONS IN REGARD TO GROUND NO.1 TO 1(D) OF ASSESSEES APPEAL WAS APPLICABLE TO THIS GROUND ALSO. THE LD. AR IN REPL Y, REITERATED THE STAND IN REGARD TO THE SAID GROUNDS IN THE ASSESSEES APPEAL. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AT T HE OUT SET, A PERUSAL OF THE ORDER OF CIT(A) CLEARLY SHOWS THAT THE LD. CIT(A) HAS NOT HE LD THAT THE LOAN GRANTED BY M/S. IFB WAS NOT DEEMED DIVIDEND WITHIN THE MEANING OF SECTION 2 (22)(E) OF THE ACT. CONSEQUENTLY, IT IS NOTICED THAT THE GROUND AS RAISED BY THE REVENUE IS MISCONCIEVED AND THE SAME IS DISMISSED. 14. IN REGARD TO GROUND NO.2 OF REVENUES APPEAL, W HICH WAS AGAINST THE ACTION OF LD. CIT(A) IN HOLDING THAT THE BAD DEBTS CLAIMED BY THE ASSESSEE WAS ALLOWABLE EVEN THOUGH THE CONDITIONS LAID DOWN IN SECTION 36(I)(VI) OF THE AC T IS NOT FULFILLED, IT WAS SUBMITTED BY THE LD. DR THAT THE ASSESSEE HAD NOT SATISFIED THE CONDITIO N THAT THE DEBT HAD EARLIER BEEN TAKEN IN COMPUTING THE ASSESSABE INCOME. THE LD. CIT(DR) VE HEMENTY SUPPORTED THE ORDER OF THE AO. THE LD. AR SUBMITTED THAT THE AMOUNT WAS A TRADING LOSS AND WAS DIRECTLY CONNECTED TO THE ASSESSEES BUSINESS. IT WAS THE SUBMISSION THAT TH IS AMOUNT HAD BEEN SHOWN AS INCOME IN THE YEAR OF SALE. THE TRADING LOSS IN A BUSINESS WAS DE DUCTIBLE IN COMPUTING THE PROFITS OF THE BUSINESS. IT WAS THE SUBMISSION THAT THE COPIES OF THE LEDGER ACCOUNT OF M/S. SATYA SAI SEA FOOD AND M/S. AMRITEESH ENTERPRISES WERE NOT ALSO S ENT TO THE AO BY CIT(A) AND IT WAS ONLY AFTER VERIFYING THE SAME, THE ADDITION AS MADE BY A O HAVE BEEN DELETED. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PE RUSAL OF THE ORDER OF THE LD. CIT(A) IN PARA 58 OF HIS ORDER CLEARLY SHOWS THAT THE LEDGER ACCOUNT OF M/S. SATYA SAI SEE FOOD AND M/S. AMRITEESH ENTERPRISES WAS SENT BY THE LD. CIT(A) TO THE AO. NO DEFECT IN THE SAME HAD BEEN POINTED OUT. FURTHER, A PERUSAL OF THE GROUND AS R AISED BY THE REVENUE CLEARLY SHOWS THAT THE REVENUE IS AGAINST THE ACTION OF THE LD. CIT(A) IN DELETING THE ADDITION BY ACCEPTING A CLAIM OF BAD DEBT WHEREAS LD. CIT(A HAS CATEGORICALLY HELD T HAT IT WAS A BUSINESS LOSS HAVING NEXUS WITH THE BUSINESS DEALING WITH THE ASSESSEE. CONSE QUENTLY, HERE ALSO, IT IS NOTICED THAT THE GROUND AS RAISED BY THE REVENUE IS MISCONCIEVED AS THE LD. CIT(A) HAS NOT HELD THAT THE BAD DEBT IS ALLOWABLE BUT THE LOSS IS ALLOWABLE AS A TR ADING LOSS. CONSEQUENTLY, THE SAID GROUND STANDS DISMISSED. 12 ITA NO.1721/K/2012 & ITA NO.114/K/2013 M/S. IFB AGRO INDUSTRIES LTD. AY: 2009-10 16. IN REGARD TO GROUND NO. 3 OF REVENUES APPEAL, WHICH IS AGAINST THE ACTION OF LD. CIT(A) IN DELETING THE ADDITION MADE BY THE AO U/S. 43B OF THE ACT. THE LD. CIT, DR SUBMITTED THAT THE AMOUNT OF PF AND ESI HAD NOT BEEN PAID WITHIN T HE DUE DATE AS PROVIDED IN THE PF ACT. IN REPLY, THE LD. AR SUBMITTED THAT THE AMOUNTS HAVE B EEN PAID BEFORE THE DUE DATE OF FILING THE RETURN. IT WAS THE SUBMISSION THAT IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ALOM EXTRUSIONS LTD. REPORTRED IN 319 ITR 306, T HE SAME WAS LIABLE TO BE ALLOWED. HE VEHEMENTLY SUPPORTED THE ORDER OF THE LD. CIT(A). A PERUSAL OF THE DECISION OF THE LD. CIT(A) IN PARA 60 AND 61 OF HIS ORDER CLEARLY SHOWS THAT T HE LD. CIT(A) HAS TAKEN INTO CONSIDERATION THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF ARAMBAG HATCHERIES LTD. VS. CIT IN ITA NO.267 OF 2004 DATED 11.03.2011 FOR DELETING THE DISALLOWANCE AS THE PF AND ESI AMOUNTS HAVE BEEN DEPOSITED WITHIN THE DUE DATE OF FILING OF THE INCOME TAX RETURN U/S. 139(1) OF THE ACT. IT IS ALSO NOTICED THAT THE ISS UE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ALOM EXTRUSION S LTD., REFERRED TO SUPRA. UNDER THESE CIRCUMSTANCES, THE SAID GROUND STANDS DISMISSED. 17. IN REGARD TO GROUND NO.4 OF REVENUES APPEAL, W HICH WAS AGAINST THE ACTION OF LD. CIT(A) IN DELETING THE ADDITION MADE ON ACCOUNT OF EXCESSIVE AND UNJUSTIFIED BUSINESS EXPENDITURE, THE LD. CIT,DR SUBMITTED THAT TO PREVE NT THE LEAKAGE OF REVENUE ON ACCOUNT OF UNJUSTIFIED EXPENDITURE 1% OF THE EXPENDITURE CLAIM ED BY THE ASSESSEE WAS TREATED AS EXCESSIVE AND DISALLOWED. THE LD. DR VEHEMENTLY SUPPORTED TH E ORDER OF AO. IN REPLY, THE LD. AR SUBMITTED THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE HAVING NOT BEEN REJECTED AND NO DEFECTS IN THE SAME HAVE BEEN POINTED OUT, CONSEQUENTLY, NO D ISALLOWANCE WAS CALL FOR. HE VEHEMENTLY SUPPORTED THE ORDER OF LD. CIT(A) ON THIS ISSUE. 18. WE HAVE HEARD RIVAL SUBMISSIONS. A PERUSAL OF PARA 66 OF THE ORDER OF CIT(A) CLEARLY SHOWS THAT THE LD. CIT(A) HAS TAKEN INTO CONSIDERAT ION THAT THE GROSS PROFIT AND NET PROFIT RATIO FOR THE CURRENT ASSESSMENT YEAR WAS BETTER THAN THA T OF THE IMMEDIATELY EARLIER ASSESSMENT YEAR. FURTHER, WE ARE OF THE VIEW THAT AS NO DEFECTS IN T HE BOOKS OF ACCOUNT HAVE BEEN POINTED OUT NO AD HOC DISALLOWANCE CAN BE MADE ON PRESUMPTIONS AND SURMISES THAT THERE IS LEAKAGE OF REVENUE. UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE FINDING OF THE LD. CIT(A) ON THIS ISSUE DOES NOT CALL FOR ANY INTERFERENCE AND C ONSEQUENTLY, THE SAID GROUND STANDS DISMISSED. 19. IN REGARD TO GROUND NO. 5 OF REVENUES APPEAL, WHICH IS AGAINST THE ACTION OF LD. CIT(A) IN DELETING THE ADDITION MADE ON ACCOUNT OF NOTIONA L LOSS DUE TO FOREIGN EXCHANGE FLUCTUATIONS, IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THE ISS UE WAS IDENTICAL TO THE ISSUE IN GROUND NO. 3 OF 13 ITA NO.1721/K/2012 & ITA NO.114/K/2013 M/S. IFB AGRO INDUSTRIES LTD. AY: 2009-10 ASSESSEES APPEAL. AS GROUND NO. 3 OF ASSESSEES A PPEAL HAS BEEN RESTORED TO THE FILE OF AO FOR READJUDICATION AFTER TAKING INTO CONSIDERATION THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF WOODWARD GOVERNOR INDIA (P) LTD., REFERRED TO SUPRA, THE SAID GROUND IN REVENUES APPEAL ALSO STANDS ALLOWED FOR STATISTICAL PURPOSES . 20. GROUND NO. 6 OF REVENUES APPEAL IS GENERAL IN NATURE AND DOES NOT CALL FOR ANY ADJUDICATION. 21. IN THE RESULT, BOTH THE APPEALS OF ASSESSEE AND REVENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 22. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- . . . . . . . . , ''# $ $ $ $ , (P. K. BANSAL) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER ( / / / /) )) ) DATED : 12 TH MARCH, 2013 01 &2' &3 JD.(SR.P.S.) 14 ITA NO.1721/K/2012 & ITA NO.114/K/2013 M/S. IFB AGRO INDUSTRIES LTD. AY: 2009-10 . 4 ,&&5 65(7- COPY OF THE ORDER FORWARDED TO: 1 . $+ / APPELLANT JCIT, RANGE-6, KOLKATA & DCIT, CIRCLE-6 , KOLKATA. 2 ,-$+ / RESPONDENT M/S. IFB AGRO INDUSTRIES LTD., PLOT NO. IND 5, SECTOR-I, EAST KOLKATA TOWNSHIP, KOLKATA-700107 3 . &. ( )/ THE CIT(A), KOLKATA 4. 5. &. / CIT KOLKATA 5 <&= ,& / DR, KOLKATA BENCHES, KOLKATA -5 ,&/ TRUE COPY, .>/ BY ORDER, ? !' /ASSTT. REGISTRAR .