Essel Shyam Communication Ltd., New Delhi V. ACIT, New Delhi

ITA 1851/DEL/2013

• Counselvise Citation: 185120114 RSA 2013
• Duration Of Justice: 1 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 04-08-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 01-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PARWINDER KAUR
• Keywords: Question of law
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH B BB B : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE BEFORE SHRI G.D. AGRAWAL, VICE BEFORE SHRI G.D. AGRAWAL, VICE BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND PRESIDENT AND PRESIDENT AND PRESIDENT AND SHRI SHRI SHRI SHRI CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG, JUDICIAL , JUDICIAL , JUDICIAL , JUDICIAL MEMBER MEMBER MEMBER MEMBER ITA NO ITA NO ITA NO ITA NO. .. .1851/DEL/2013 1851/DEL/2013 1851/DEL/2013 1851/DEL/2013 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2009 2009 2009 2009- -- -10 1010 10 M/S ESSEL SHYAM M/S ESSEL SHYAM M/S ESSEL SHYAM M/S ESSEL SHYAM COMMUNICATION LIMITED, COMMUNICATION LIMITED, COMMUNICATION LIMITED, COMMUNICATION LIMITED, C CC C- -- -138, NARAI 138, NARAI 138, NARAI 138, NARAINA INDUSTRIAL NA INDUSTRIAL NA INDUSTRIAL NA INDUSTRIAL AREA, PHASE AREA, PHASE AREA, PHASE AREA, PHASE- -- -I, I,I, I, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 028. 110 028. 110 028. 110 028. PAN : PAN : PAN : PAN : AAACE2299Q. AAACE2299Q. AAACE2299Q. AAACE2299Q. VS. VS. VS. VS. ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CENTRAL CIRCLE CENTRAL CIRCLE CENTRAL CIRCLE CENTRAL CIRCLE- -- -2, 2,2, 2, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. RANO JAIN, CA. RESPONDENT BY : SMT. PARWINDER KAUR, SR.DR. ORDER ORDER ORDER ORDER PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP : : : : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LEARNED CIT(A)-III, NEW DELHI DATED 5 TH FEBRUARY, 2013 FOR THE AY 2009- 10. 2. GROUND NO.1 OF THE ASSESSEES APPEAL IS OF GENER AL NATURE AND NEEDS NO ADJUDICATION. 3. GROUND NOS.2 & 3 OF THE ASSESSEES APPEAL ARE WI TH REGARD TO CLAIM OF DEDUCTION UNDER SECTION 80IA OF THE INCOME -TAX ACT, 1961 IN RESPECT OF INTEREST INCOME EARNED FROM FDRS. 4. AT THE TIME OF HEARING BEFORE US, LEARNED COUNSE L FAIRLY STATED THAT THIS ISSUE IS COMING FROM EARLIER YEARS AND IN AY 2006-07, VIDE ITA NO.636/DEL/2012, THE ITAT SET ASIDE THE MATTER TO T HE FILE OF THE ASSESSING OFFICER WITH THE FOLLOWING OBSERVATION:- ITA-1851/DEL/2013 2 8. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORD OF THE CASE. BE FORE HONBLE DELHI HIGH COURT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2005-06, INTER-ALIA, THE FOLLOWING SUBSTANTIAL QUESTION OF LAW WAS THERE. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL ERRED IN LAW IN NOT DIRECTING EX CLUSION OF ONLY NET INTEREST INCOME, I.E., GROSS INTEREST INCO ME LESS EXPENDITURE INCURRED FOR EARNING SUCH INTEREST INCO ME, WHILE COMPUTING DEDUCTION U/S 80 1 (A) OF THE INCOM E TAX ACT. 9. HONBLE DELHI HIGH COURT UPHELD THE CONTENTION O F REVENUE THAT IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN TH E CASE OF LIBERTY INDIA VS. CIT (2009) 9 SCC 328, THE ASSE SSEE WAS NOT ENTITLED FOR DEDUCTION U/S 80 1A IN RESPECT OF NET INTEREST INCOME AND NOT ON GROSS INTEREST. HONBLE DELHI HIGH COURT OBSERVED AS UNDER: WE HAVE QUOTED SECTION 80 1A AND (2A) ABOVE. FOR DETERMINING THE INCOME DERIVED BY AN UNDERTAKING OR ENTERPRISE, WE HAVE TO COMPUTE THE TOTAL INCOME OF THE ASSESSEE FROM THE BUSINESS REFERRED IN SUB-SECTION (4) TO SECTION 80(1)(A) . THE WORDS USED IN SECTION 80 1 ( A) (1) AND (2A) ARE PROFIT AND GAINS OF ELIGIBLE BUSINESS . ON THE BASIS OF SAME LOGIC AND REASONING, WE HAVE TO FIRST FIND OUT THE PROFIT AND GAINS OF BUSINESS FROM THE SPECIFIED ACTIVITIES. SE CTION 80 1 (A) WAS INTERPRETED AND ELUCIDATED IN LIBERTY INDIA VS. COMMISSIONER OF INCOME TAX,(2009) 9 SCC 328. IT WAS HIGHLIGHTED SECTION 80 1 (A) IS A PROFIT LINKED INC ENTIVE AND ONLY PROFITS DERIVED FROM ELIGIBLE BUSINESS ARE E NTITLED TO DEDUCTION. THE EXPRESSION DERIVED FROM COVERS SOU RCES NOT BEYOND THE FIRST DEGREE. DEVICES TO INFLATE OR REDUCE PROFITS FROM ELIGIBLE BUSINESS SHOULD BE REJECTED. ON DEPB UTILIZATION AND DUTY DRAWBACK IT WAS HELD:- 39. ANALYSING THE CONCEPT OF REMISSION OF DUTY DRA WBACK AND DEPB, WE ARE SATISFIED THAT THE REMISSION OF DU TY IS ON ACCOUNT OF THE STATUTORY/POLICY PROVISIONS IN THE C USTOMS ACT/ SCHEME(S) FRAMED BY THE GOVERNMENT OF INDIA. I N THE CIRCUMSTANCES, WE HOLD THAT PROFITS DERIVED BY WAY OF SUCH INCENTIVES DO NOT FALL WITHI N THE EXPRESSION PROFITS DERIVED FROM INDUSTRIAL UNDERTA KING IN SECTION 80 1 B. ITA-1851/DEL/2013 3 10. HONBLE DELHI HIGH COURT REMANDED THE MATTER OBSERVING IN PARA 23 AS REPRODUCED EARLIER. RESPECT FULLY FOLLOWING THE DECISION OF HONBLE DELHI COURT, WE R ESTORE THE MATTER TO THE FILE OF ASSESSING OFFICER TO EXAM INE THE NEXUS BETWEEN THE INTEREST PAID FOR EARNING THE INT EREST INCOME ON FDRS. TO THE EXTENT DIRECT NEXUS IS THERE , FOR EARNING THE INTEREST ON FDRS, THE DEDUCTION IS TO B E ALLOWED AND GROSS INTEREST, ACCORDINGLY, BE REDUCED BY THE SAID AMOUNT. WE MAY CLARIFY THAT TO THE EXTENT DEDU CTION IS ALLOWED, THE ASSESSEE WILL NOT BE ENTITLED TO CLAIM FURTHER DEDUCTION U/S 36 (I) (III). IN THE RESULT THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 5. SHE, THEREFORE, SUBMITTED THAT THE MATTER MAY BE REMITTED TO THE FILE OF THE ASSESSING OFFICER IN THIS YEAR ALSO TO BE READJUDICATED AS PER THE ABOVE OBSERVATION OF THE ITAT DELHI BENCH GIVEN IN THE LIGHT OF THE DIRECTION OF HON'BLE JURISDICTIONAL HIGH COURT IN A SSESSEES OWN CASE. 6. LEARNED DR HAS NO OBJECTION TO THIS REQUEST OF T HE ASSESSEES COUNSEL. 7. WE, THEREFORE, SET ASIDE THE ORDERS OF LOWER AUT HORITIES ON THIS POINT AND RESTORE THE MATTER TO THE FILE OF THE ASS ESSING OFFICER AND DIRECT HIM TO RE-EXAMINE THE ISSUE AS PER THE ABOVE DIRECTION OF THE ITAT IN ASSESSEES OWN CASE. 8. GROUND NO.4 OF THE ASSESSEES APPEAL READS AS UN DER:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LE ARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIR MING A DISALLOWANCE OF RS.42,500/- MADE BY AO INVOKING THE PROVISION OF RULE 8D(2)(III) UNDER SECTION 14A OF T HE ACT IN RESPECT OF THE INVESTMENT OF RS.85,00,000/-. 9. AT THE TIME OF HEARING BEFORE US, IT IS SUBMITTE D BY THE LEARNED COUNSEL THAT THE ASSESSEE IS NOT INTERESTED IN PROS ECUTING THIS GROUND DUE TO SMALLNESS OF THE DISALLOWANCE. SHE, HOWEVER , STATED THAT THIS ITA-1851/DEL/2013 4 SHOULD NOT BE TAKEN AS A RES-JUDICATA AGAINST THE ASSESSEE IN THE SUBSEQUENT YEAR AND THE ASSESSEE RESERVES ITS RIGHT TO CHALLENGE THE DISALLOWANCE UNDER SECTION 14A IN THE SUBSEQUENT YE AR IF THE FACTS SO WARRANT. 10. AS THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT PRESSED GROUND NO.4, THE SAME IS REJECTED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DE EMED TO BE PARTLY ALLOWED FOR STATISTICAL PURPOSES. DECISION PRONOUNCED IN THE OPEN COURT ON 8 TH AUGUST, 2014. SD/- SD/- ( (( (CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG) )) ) (G.D. AGRAWAL (G.D. AGRAWAL (G.D. AGRAWAL (G.D. AGRAWAL) )) ) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT DATED : 08.08.2014 VK. COPY FORWARDED TO: - 1. APPELLANT : M/S ESSEL SHYAM COMMUNICATIO M/S ESSEL SHYAM COMMUNICATIO M/S ESSEL SHYAM COMMUNICATIO M/S ESSEL SHYAM COMMUNICATION LIMITED, N LIMITED, N LIMITED, N LIMITED, C CC C- -- -138, NARAINA INDUSTRIAL AREA, PHASE 138, NARAINA INDUSTRIAL AREA, PHASE 138, NARAINA INDUSTRIAL AREA, PHASE 138, NARAINA INDUSTRIAL AREA, PHASE- -- -I, I,I, I, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 028. 110 028. 110 028. 110 028. 2. RESPONDENT : ASSISTANT COMMISSIONER OF INCOME TA X, ASSISTANT COMMISSIONER OF INCOME TAX, ASSISTANT COMMISSIONER OF INCOME TAX, ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE CENTRAL CIRCLE CENTRAL CIRCLE CENTRAL CIRCLE- -- -2, NEW DELHI. 2, NEW DELHI. 2, NEW DELHI. 2, NEW DELHI. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR