Sunland Alloys, Delhi V. ACIT, New Delhi

ITA 1748/DEL/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5202 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 04-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RINKU SINGH SENIOR
• Keywords: Business income; Rule of consistency; Set aside
• Section: 244A; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE HONBLE VICE PRESIDENT, SHRI G.D. AGRAWAL AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.1748/DEL./2016 (ASSESSMENT YEAR : 2011-12) M/S. SUNLAND ALLOYS, VS. JCIT, RANGE 39, A 49/1, WAZIRPUR INDL. AREA, (NOW ACIT, CIRCLE 36(1)), DELHI 110 052. NEW DELHI. (PAN :AAXFS1913K) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SUDHIR KUMAR, CA SHRI ACHIN GARG, ADVOCATE REVENUE BY : SMT. RINKU SINGH, SENIOR DR DATE OF HEARING : 15.05.2019 DATE OF ORDER : 29 .05.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, M/S. SUNLAND ALLOYS (HEREINAFTER REFERR ED TO AS THE ASSESSEE) BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 21.03.2016 PASSED BY THE COMMI SSIONER OF INCOME-TAX (APPEALS)-20, NEW DELHI QUA THE ASSESSME NT YEAR 2011-12 ON THE GROUNDS INTER ALIA THAT :- 1 THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 20, NEW DELHI [HEREAFTER THE CIT (A)] ERRED IN DISMISSING T HE GROUND OF APPEAL THAT THE ASSESSMENT IS BAD IN LAW INTER ALIA BECAUSE ANY VALID NOTICE U/S 143 (2) OF THE INCOME TAX ACT, 196 1 (HEREAFTER ITA NO.1748/DEL/2016 2 THE ACT) WAS NEITHER ISSUED NOR SERVED WITHIN THE L IMITATION PERIOD PROVIDED BY PROVISO TO SECTION 143 (2) OF TH E ACT. 2 THE LD. CIT (A) ERRED IN UPHOLDING THE DISALLOWA NCE OF DEDUCTION OF RS.2,61,488 U/S 80IB OF THE ACT IN RES PECT OF INTEREST ON FIXED DEPOSITS MADE FOR PLEDGING TO OPEN LETTER OF CREDIT AND TO OBTAIN BANK GUARANTEE. WITHOUT PREJUDICE AND ALTERNATIVELY: THE LD. CIT (A ) ERRED IN UPHOLDING NOT SETTING OFF OF RS.10,45,953 BEING INT EREST ON FDR, WHICH WERE PURCHASED FROM THE OD ACCOUNT, AGAINST T HE INTEREST PAID TO BANK ON THE OD ACCOUNT. 3 THE LD. CIT (A) ERRED IN HOLDING THAT THE GROUND OF APPEAL THAT, 'THE LD. JCIT ERRED IN CHARGING INTERE ST U/S 234D OF THE ACT AND FURTHER ERRED IN WITHDRAWING INTEREST U /S 244A OF THE ACT; AND WITHOUT PREJUDICE THE SAME ARE EXCESSIVE' IS CONSEQUENTIAL, WITHOUT CONSIDERING THE SUBMISSIONS. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : ASSESSEE FIRM IS INTO THE BUSINESS OF MANUFACTURING OF ALUMINUM ALLOY INGOTS AND TRADING OF NON-FERROUS METAL SCRAP AND STARTED ITS MANUFACTURING UNIT FOR MANUFACTURING OF ALUMINUM ALLOYS INGOTS DURING FINANCIAL YEAR 2003-0 4 AND CONTINUED TILL THE YEAR UNDER ASSESSMENT. ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80-IB OF THE INCOME-TAX ACT , 1961 (FOR SHORT THE ACT) @ 25% OF THE PROFIT DERIVED FROM I NDUSTRIAL UNDERTAKING ENGAGED IN MANUFACTURING ACTIVITIES. AS SESSEE DECLARED GROSS PROFIT OF RS.15,07,12,312/- ON THE TOTAL TURN OVER OF RS.3,36,71,24,650/- YIELDING GP RATE OF 4.48 % AS AGAINST GP RATE OF 5.6% DECLARED IN THE IMMEDIATE PRECEDING YEAR. AO NOTICED THAT THE ASSESSEE HAS CLAIMED EXCESS DEDUCTION UNDER SEC TION 80-IB OF ITA NO.1748/DEL/2016 3 THE ACT. FROM THE REPORT, AO NOTICED THAT THE TOTA L AMOUNT OF DEDUCTION AVAILABLE TO THE ASSESSEE UNDER SECTION 8 0-IB OF THE ACT WAS RS.1,63,29,836/- WHEREAS THE ASSESSEE HAS INCLU DED INTEREST RECEIVED FROM FIXED DEPOSIT (FD) WITH BANKS AMOUNTI NG TO RS.10,45,953/- AS OTHER INCOME AND HAS CLAIMED DEDU CTION UNDER SECTION 80-IB OF THE ACT ON THESE RECEIPTS ALSO. S INCE IMMEDIATE SOURCE OF INTEREST IS DEPOSITING (FDRS) WHICH IS NO T THE BUSINESS, SO THE INTEREST INCOME CANNOT BE HELD TO BE DERIVED FROM THE INDUSTRIAL UNDERTAKING. CONSEQUENTLY, AO MADE ADDI TION OF RS.2,61,488/- ON ACCOUNT OF EXCESS CLAIM OF EXEMPT ION UNDER SECTION 80-IB OF THE ACT. 3. WITHOUT PREJUDICE AND ALTERNATIVELY ASSESSEE CLA IMED SETTING OFF OF RS.10,45,953/- BEING INTEREST ON FDRS WHICH WAS PURCHASED FROM THE OD ACCOUNT AGAINST THE INTEREST PAID TO TH E BANK ON THE OD ACCOUNT. 4. AO ASSESSED THE TOTAL INCOME OF THE ASSESSEE AT RS.3,39,05,870/-. 5. ASSESSEE CARRIED THE MATTER BY WAY OF AN APPEAL BEFORE THE LD. CIT (A) WHO HAS PARTLY ALLOWED THE APPEAL. FEE LING AGGRIEVED, THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. ITA NO.1748/DEL/2016 4 6. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUND NO.1 7. GROUND NO.1 IS GENERAL IN NATURE, HENCE DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. GROUND NO.2 8. UNDISPUTEDLY, ASSESSEE IS ENTITLED FOR DEDUCTION AS CLAIMED FOR THE YEAR UNDER ASSESSMENT. THE ASSESSEE HAS NO T PRESSED ITS PRIMARY CONTENTION TO CLAIM DEDUCTION IN RESPECT OF INTEREST EARNED ON FIXED DEPOSITS RATHER PRESSED THE ALTERNATIVE CO NTENTION WHICH WAS RAISED WITHOUT PREJUDICE FOR SETTING OFF OF AMO UNT OF INTEREST EARNED ON FDRS AGAINST THE AMOUNT PAID TO THE BANK ON ACCOUNT OF INTEREST ON CASH CREDIT. 9. THE AO HAS ONLY DISPUTED THE INCLUSION OF INTERE ST RECEIVED ON FDRS WITH BANK AMOUNTING TO RS.10,45,953/- FOR T HE PURPOSE OF DEDUCTION UNDER SECTION 80-IB OF THE ACT ON THE GRO UND THAT THE SAME IS NOT BUSINESS INCOME. 10. LD. AR FOR THE ASSESSEE CONTENDED THAT WITHOUT PREJUDICE AND IN THE ALTERNATIVE, ASSESSEE IS ENTITLED FOR SE TTING OFF OF RS.10,45,953/- AGAINST THE INTEREST PAID TO THE BAN K ON OD ACCOUNT ITA NO.1748/DEL/2016 5 ON THE BASIS OF RULE OF CONSISTENCY AS SETTING OFF IS ALLOWED TO THE ASSESSEE IN THE LAST YEAR AND IN THE SUBSEQUENT YEA R, WHICH FACT IS NOT DISPUTED. ON THE OTHER HAND, LD. DR FOR THE RE VENUE SUPPORTED THE ORDER PASSED BY THE AO AS WELL AS LD. CIT BY RE LYING UPON THE DECISION CITED AS CONVENTIONAL FASTNERS VS. CIT 2018-TIOL-20- SC-IT, CIT VS. JYOTI APPARELS (2008) 166 TAXMAN 3 43 (DELHI) AND CIT VS. MEREENA CREATIONS 330 ITR 199 (DELHI) . 11. ASSESSEE HAS COME UP WITH A SPECIFIC SUBMISSION THAT FDRS HAVE BEEN PURCHASED FROM THE CASH CREDIT ACCOUNT MA INTAINED WITH THE BANKS AND DURING THE YEAR UNDER ASSESSMENT, ASS ESSEE FIRM HAS PAID RS.3,12,39,400/- AS INTEREST ON THESE CASH CRE DIT ACCOUNTS AND AS SUCH INTEREST EARNED ON FIXED DEPOSITS ON BANKS SHOULD BE SET OFF FROM/AGAINST THE AMOUNT PAID TO THE BANK ON ACCOUNT OF INTEREST IN THE CASH CREDIT ACCOUNTS. 12. WE ARE OF THE CONSIDERED VIEW THAT WHEN ASSESSE E HAS PURCHASED THE FDRS FROM THE CASH CREDIT ACCOUNTS ON WHICH IT HAS PAID INTEREST OF RS.3,12,39,400/-, THE INTEREST EAR NED ON THE FDRS IS ELIGIBLE TO BE SET OFF FROM/AGAINST THE AMOUNT PAID TO THE BANK AS INTEREST ON CASH CREDIT ACCOUNT EVEN BY FOLLOWING T HE RULE OF CONSISTENCY. THESE FACTS ARE PROVED FROM THE STATE MENT OF ACCOUNT ISSUED BY THE CANARA BANK AND STATE BANK OF INDIA, AVAILABLE AT PAGES 7 TO 13 OF THE PAPER BOOK. ITA NO.1748/DEL/2016 6 13. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE AR E OF THE CONSIDERED VIEW THAT WHEN THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE DURING THE YEAR UNDER ASS ESSMENT AND BY FOLLOWING THE RULE OF CONSISTENCY, ASSESSEE IS ENTI TLED FOR SETTING OFF OF THE INTEREST EARNED ON FIXED DEPOSIT WITH THE BA NK AGAINST THE AMOUNT OF INTEREST PAID TO THE BANK ON ACCOUNT OF C ASH CREDIT ACCOUNT ON THE LINE OF EARLIER YEARS AS WELL AS SUB SEQUENT YEARS. CONSEQUENTLY GROUND NO.2 IS DETERMINED IN FAVOUR OF THE ASSESSEE. GROUND NO.3 13. GROUND NO.3 BEING CONSEQUENTIAL IN NATURE NEEDS NO SPECIFIC FINDINGS. 14. RESULTANTLY, THE APPEAL FILED BY THE ASSESSEE I S HEREBY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 29 TH DAY OF MAY, 2019. SD/- SD/- (G.D. AGRAWAL) (KULDIP SINGH) VICE PRESIDENT JUDICIAL MEMBE R DATED THE 29 TH DAY OF MAY, 2019 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-20, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.