J.J. Exporters Limited, Kolkata V. ACIT, Circle - 12, Kolkata, Kolkata

ITA 2139/KOL/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48242 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 05-04-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 21-12-2009
• Court: TRIBUNAL
• Department Lawyers: R SALARPRIA
• Assessee Lawyers: P K MISHRA
• Keywords: Earning of tax free income; Rule 8D; Set aside
• Section: 80HHC; 14A; 145; 28

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BEN CH B, KOLKATA () BEFORE . .. . , , , , , SHRI B.R.MITTAL, JUDICIAL MEMBER. /AND . .. .!' !'!' !'. .. . , #$ SHRI C.D.RAO, ACCOUNTANT MEMBER % % % % / ITA NO . 89/KOL/2010 &' ()/ ASSESSMENT YEAR : 2004-05 (+, / APPELLANT ) D.C.I.T., CIRCLE-12, KOLKATA - & - - VERSUS - . (./+,/ RESPONDENT ) M/S. J.J.EXPORTERS LTD, KOLKATA (PAN-AAACJ 6722 H) % % % % / ITA NO . 2139/KOL/2009 &' ()/ ASSESSMENT YEAR : 2004-05 (+, / APPELLANT ) M/S. J.J.EXPORTERS LTD., KOLKATA (PAN-AAACJ 6722 H) - & - - VERSUS - . (./+,/ RESPONDENT ) D.C.I.T., CIRCLE-12, KOLKATA +, 0 1 #/ FOR THE APPELLANT: SHRI P.K.MISHRA, SR.DR ./+, 0 1 #/ FOR THE RESPONDENT: SHRI R.SALARPRIA #2 / ORDER . .. .!' !'!' !'. .. . , , , , #$ #$ #$ #$ PER SHRI C.D.RAO, AM THE ABOVE CROSS APPEALS ONE FILED BY THE REVENUE A ND THE OTHER FILED BY THE ASSESSEE ARE AGAINST THE ORDER DATED 31.08.2009 OF THE CIT(A)-XXXII, KOLKATA PERTAINING TO A.YR. 2004-05. ITA NO.89/KOL/2010 (BY THE REVENUE): 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS :- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, LD.CIT(A) ERRED IN DIRECTING TO TREAT THE INTEREST INCOME OF RS.12,04, 130/- FROM BANK AND OTHER PARTIES INCLUDING INTEREST ON I.T.REFUND UNDER THE HEAD INCOME FROM BUSINESS INSTEAD OF INCOME FROM OTHER SOURCES. 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, LD. CIT(A) HAS ERRED IN DIRECTING TO NOT INCLUDE REJECTS AND MISC. INCOME A S A PART OF TOTAL TURNOVER THOUGH HONBLE ITAT, CHENNAI IN THE CASE OF JCIT V S- VIRADHUNAGAR TEXTILES MILLS LTD. (97 ITD 306), HELD THAT SCRAP SALES SHOU LD BE INCLUDED IN THE TOTAL TURNOVER. ITA NO.2139/KOL/2009 (BY THE ASSESSEE) : 1. FOR THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF AO IN DISALLOWING RS.1,00,579/- ON ACCOUNT OF PRIOR PERIOD EXPENSES. EVEN OTHERWISE AND WITHOUT PREJUDICE THE DISALLOWANCE MADE WAS HIGHLY EXCESSIV E AND WHOLLY UNREASONABLE. 2. FOR THAT THE LD. CIT(A) ERRED IN DIRECTING THE AO TO APPLY RULE 8D OF THE INCOME TAX RULE READ WITH SECTION 14A TO CALCULATE THE EXPENSES TO BE DISALLOWED BEING RELATED TO EXEMPT INCOME WITHOUT A PPRECIATING THE FACT THAT SUCH RULE-8D HAVING BEEN NOTIFIED ONLY ON 24.03.200 8 CANNOT BE APPLIED FOR COMPUTATION OF SUCH EXPENSES. SINCE, NO EXPENSES WE RE INCURRED TO EARN SUCH EXEMPT INCOME, NO AMOUNT WAS DISALLOWABLE. MOREOVER THE DIRECTION OF LD. CIT(A) WOULD TANTAMOUNT TO ENHANCEMENT AND SINCE NO NOTICE WAS ISSUED FOR ENHANCEMENT THE DIRECTION WAS BAD AND ILLEGAL. EVEN OTHERWISE AND WITHOUT PREJUDICE THE DISALLOWANCE MADE WAS HIGHLY EXCESSIV E AND WHOLLY UNREASONABLE. 3. FOR THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF AO IN NOT INCREASING THE PROFIT U/S 80HHC(3) BY 90% OF THE DE PB BENEFIT OF RS.17,49,005/- UNDER THE THIRD PROVISO TO THE AMEND ED SECTION 80HHC(3) READ WITH SECTION 28(IIID) WHILE COMPUTING THE DEDUCTION U/S 80HHC. 4. FOR THAT YOUR PETITIONER CRAVES THE RIGHT TO PUT ADDITIONAL GROUNDS AND/OR TO ALTER/AMEND/MODIFY THE PRESENT GROUNDS AT THE TIME OF HEARING. 3. THE FIRST GROUND RAISED BY THE REVENUE IS RELAT ING TO TREATING OF INTEREST INCOME FROM BANKS AND I.T.REFUND. 4. AFTER HEARING THE RIVAL SUBMISSIONS, IT IS OBSE RVED THAT THE LD. CIT(A) HAS DIRECTED THE AO TO TREAT THE INTEREST INCOME FROM B ANK AS WELL AS I.T. REFUND AS INCOME FROM BUSINESS BY FOLLOWING THE ORDERS OF THE TRIBUN AL IN ASSESSEES OWN CASE FOR THE EARLIER YEARS BY OBSERVING THAT THE FACTS OF THE CA SE RELATING TO THE EARNING OF INTEREST DURING THE YEAR UNDER CONSIDERATION REMAINS MATERIA LLY THE SAME AS IN THE PAST. BUT HOWEVER, WE ARE OF THE VIEW THAT IN THE EARLIER ASS ESSMENT YEARS THERE IS NO ELEMENTS OF INTEREST ON INCOME TAX REFUND. THEREFORE, TO THA T EXTENT WE DISALLOW THE CLAIM OF THE ASSESSEE TO TREAT THE SAME AS INCOME FROM BUSINESS. IN OUR CONSIDERED VIEW INTEREST ON INCOME TAX REFUND IS TO BE TREATED AS INCOME FROM O THER SOURCES. THEREFORE GROUND NO.1 OF THE REVENUE IS ALLOWED IN PART. 3 5. THE SECOND GROUND OF THE REVENUE AS WELL AS THE THIRD GROUND OF THE ASSESSEE RELATE TO THE CALCULATION OF ELIGIBILITY OF DEDUCTI ON U/S 80HHC OF THE IT ACT. 6. AFTER HEARING THE RIVAL SUBMISSIONS, IT IS OBSER VED THAT THE LD. CIT(A) HAS ACCEPTED THE ASSESSEES VERSION IN RESPECT OF 80HHC OF THE IT ACT BY FOLLOWING THE ORDERS OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A .YEAR 2003-04. WHEREAS IN RESPECT OF 90% OF DEPBS THE LD. CIT(A) HAS CONFIRMED THE AC TION OF THE AO AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. THE RELEVANT O BSERVATIONS OF THE LD. CIT(A) ARE AS UNDER :- 8.5. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE A.R. IT HAS ALREADY BEEN DECIDED BY THE HONBLE ITAT IN ASSESSEES APPEAL FOR ASSESSMENT YEAR 2003-04 THAT (I) SALE OF SUCH R EJECTS ARE NOT TO BE CONSIDERED AS PART OF TOTAL TURNOVER AND (II) THE M ISC. INCOME OF THE NATURE TAKEN BY THE AO AS PART OF THE TOTAL TURNOVER ARE N OT TO BE CONSIDERED AS SUCH AS PART OF THE TOTAL TURNOVER. ACCORDINGLY, THE AO IS DIRECTED TO FOLLOW THE ORDERS OF THE HONBLE ITAT ON THESE ISSUES WHILE COMPUTING DEDUCTION U/S 80HHC IN THIS CASE. AS REGARDS ASSESSEES OBJECTION TO NOT INCREASING 9 0% OF DEPB BENEFIT OF RS.17,49,005/- AS PER THIRD PROVISO TO SEC.80HHC(3) READ WITH SEC. 28 (IIID) OF THE ACT, IT IS OBSERVED THAT THE AO HAD NOT DONE SO FOR THE REASON THAT THE ASSESSEE DID NOT FURNISH ANY EVIDENCE TO SHOW THAT THE FOLLOWING TWO BASIC CONDITIONS, WHICH ARE MATERIAL TO CONSIDER ASSESSEE S CLAIM IN THIS REGARD, WERE FULFILLED BY IT: (A) IT HAD AN OPTION TO CHOOSE EITHER THE DULY DRAWBACK OR THE DUTY ENTITLEMENT PASS BOOK SCHEME, BEING THE DUTY REMISSION SCHEME, AND (B) THE RATE OF DRAWBACK CREDIT ATTRIBUTABLE TO THE CUS TOMS DUTY WAS HIGHER THAN THE RATE OF CREDIT ALLOWABLE UNDER THE DUTY ENTITLE MENT PASS BOOK SCHEME, BEING THE DUTY REMISSION SCHEME. DURING THE APPELLATE PROCEEDINGS ALSO THE ASSESSEE HAS NOT SUBMITTED ANY SUCH EVIDENCE, THEREFORE, I FIND NO REASON TO INTERFERE WITH THE DECISION OF THE AO IN THIS REGARD AND THIS CLAIM OF THE ASSESSEE IS DISMI SSED. THIS GROUND OF APPEAL IS, THEREFORE, ALLOWED IN PAR T WITH ABOVE DIRECTIONS. 6.1. SINCE THE LD. CIT(A) HAS FOLLOWED THE EARLIER ORDERS OF THE TRIBUNAL WE FIND NO MERITS IN THE GROUNDS RAISED BY THE REVENUE. THEREF ORE, WE DISMISS GROUND NO.2 OF THE REVENUE. 7. IN RESPECT OF GROUND NO.3 OF THE ASSESSEE KEEPIN G IN VIEW OF THE FACT THAT THE ASSESSEE HAS FILED THE REQUIRED DETAILS EVEN BEFORE THE AO/CIT(A). IN THE INTEREST OF 4 JUSTICE WE SET ASIDE GROUND NO.3 OF THE ASSESSEE TO THE FILE OF AO TO DECIDE AFRESH AS PER LAW AFTER GIVING A REASONABLE OPPORTUNITY OF BE ING HEARD TO THE ASSESSEE. THE ASSESSEE IS AT LIBERTY TO FURNISH RELEVANT DETAILS CALLED BY THE REVENUE. GROUND NO.3 OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 8. GROUND NO.1 OF THE ASSESSEE RELATES TO THE PRIOR PERIOD EXPENSES. 9. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAREF UL PERUSAL OF THE DETAILS OF THE PRIOR PERIOD EXPENDITURE WHICH ARE PLACED AT PAPER BOOK PAGE NO.9 WE FIND NO INFIRMITY IN THE ORDERS OF THE LD. CIT(A) AND CONFI RM THE SAME. THE RELEVANT OBSERVATIONS OF THE LD. CIT(A) ARE AS UNDER :- 5.3. THE CLAIM HAS BEEN EXAMINED. THERE IS NO DI SPUTE THAT THE ASSESSEE REGULARLY MAINTAINS THE ACCOUNTS ACCORDING TO THE M ERCANTILE SYSTEM AND THE SAID EXPENSES OF RS.1,00,579/- DEBITED TO THE P&L A /C OF THIS YEAR UNDER APPEAL ON A/C OF SALES TAX, SUNDRY EXPENSES AND RATES AND TAXES RELATED TO EARLIER YEARS. FROM THE DETAILS FILED NEITHER IT COULD BE PROPERLY ASCERTAINED NOR IT COULD BE PROPERLY EXPLAINED BY THE A.R. WHETHER THE LIABILIT Y, THOUGH RELATING TO THE EARLIER YEARS, WERE NOT ASCERTAINABLE DURING THOSE YEARS AND THAT SUCH LIABILITY HAD ACTUALLY ACCRUED OR ARISEN TO THE ASSESSEE ONLY DURING THE YEAR UNDER APPEAL ON THE BASIS OF THE BILLS ETC. RAISED ON THE ASSESS EE DURING THE YEAR UNDER APPEAL. IN ABSENCE OF SUCH POSITIVE INFORMATION AND THE SUP PORTING MATERIALS & DOCUMENTS DISALLOWANCE OF THE SAID EXPENSES OF RS.1 ,00,579/- MADE BY THE AO U/S 145 OF THE ACT IS CONFIRMED. 10. IN THE RESULT GROUND NO.1 OF THE ASSESSEE IS DI SMISSED. 11. GROUND NO.2 RAISED BY THE ASSESSEE IS RELATING TO DISALLOWANCE U/S 14A OF THE IT ACT. 12. AFTER HEARING THE RIVAL SUBMISSIONS, IT IS OBSE RVED THAT THIS TRIBUNAL HAS CONSISTENTLY TAKEN A VIEW THAT IN THE CASE OF ASSES SES WHOSE PRINCIPAL BUSINESS IS NOT RELATING TO DEALING OF SHARES AND EARNING OF DIVIDE ND THEN THE DISALLOWANCE U/S 14A OF THE IT ACT UP TO ASSESSMENT YEAR 2007-08 AT 1% OF T HE DIVIDEND INCOME. THEREFORE, WE RESTRICT THE DISALLOWANCE US/ 14A OF THE IT ACT AT 1% OF THE DIVIDEND INCOME. GROUND NO.2 OF THE ASSESSEE IS ALLOWED IN PART. 5 13. IN THE RESULT THE APPEAL OF THE REVENUE IS ALLO WED IN PART AND ASSESSEES APPEAL IS ALLOWED IN PART FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 30.06.2011. SD/- SD/- . .. . . .. . , ,, , B.R.MITTAL, JUDICIAL MEMBER . .. .!' !'!' !'. .. . , ,, , #$ #$ #$ #$ , C.D.RAO, ACCOUNTANT MEMBER. ( (( ('$ '$ '$ '$) )) ) DATE: 30.06.2011. #2 0 .3 4#3(5- COPY OF THE ORDER FORWARDED TO: 1. M/S.J.J.EXPORTERS LTD., 23C, ASHUTOSH CHOWDHURY AVE NUE, KOLKATA- 700019. 2 THE D.C.I.T., CIRCLE-12, KOLKATA 3. THE CIT, 4. THE CIT(A)-XXXII, KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA /3 ./ TRUE COPY, #2&:/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES R.G.(.P.S.)