M/s. PDP Steels Ltd., , Kolkata V. ITO, Ward - 3(3), , Kolkata

ITA 2155/KOL/2018

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 3432 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 02-03-2021
• Assessment Year: 2014-2015
• Appeal Filed On: 11-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DHRUBAJYOTI ROY
• Assessee Lawyers: S JHAJHARIA
• Keywords: Business income
• Section: 80IA; 201; 80IC; 80IC

Judgement Text

ITA NO.2155/KOL/2018 M/S PDP STEELS LTD. A.Y. 2014-15 1 | P A GE , A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA [BEFORE SHRI J. SUDHAKAR REDDY, AM AND SHRI A. T. VARKEY, JM] I.T.A. NO. 2155/KOL/2018 ASSESSMENT YEAR: 2014-15 M/S PDP STEELS LTD. (PAN: AABCP 6726 C) VS. ITO, WARD-3(3), KOLKATA APPELLANT RESPONDENT DATE OF HEARING (VIRTUAL) 02.03.2021 DATE OF PRONOUNCEMENT 10.03.2021 FOR THE APPELLANT SHRI S. JHAJHARIA, FCA FOR THE RESPONDENT SHRI DHRUBAJYOTI ROY, JCIT ORDER PER SHRI A. T. VARKEY, JM: THIS IS AN APPEAL PREFERRED BY THE ASSESSEE IS AGA INST THE ORDER OF LD. CIT(A)- 1, KOLKATA DATED 31.08.2018 FOR ASSESSMENT YEAR 201 4-15. 2. IN THE REVISED GROUNDS OF APPEAL, THE ASSESSEE HAS CHALLENGED THE ACTION OF LD. CIT(A) IN NOT GRANTING DEDUCTION U/S 80IC OF THE IN COME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) ON THE INTEREST INCOME FROM FIXED DEPOSIT OF RS. 20,37,345/-. ACCORDING TO THE ASSESSEE, EVEN IF THE INTEREST INC OME FROM FIXED DEPOSIT DOES NOT QUALIFY FOR THE DEDUCTION U/S 80IC, STILL IT BEING A BUSINESS RECEIPT SHOULD BE GIVEN THE BENEFIT OF NETTING. 3. THE LD. A.R SHRI S. JHAJHARIA, FCA SUBMITTED THA T THE REVISED GROUND NO. 2 IN RESPECT OF INTEREST INCOME SURVIVES AND ACCORDING T O HIM ONLY THE NET INTEREST (I.E. INTEREST INCOME- INTEREST PAID-EXPENSES) BE TAKEN O UT OF THE DEDUCTION U/S 80IC. ACCORDING TO LD. A.R, THE INTEREST RECEIPT FROM FD WAS BUSINESS INCOME, BECAUSE THE FDS WERE MAINTAINED IN THE BANK FOR THE PURPOSE OF ISSUE OF BANK GUARANTEE WHICH ITA NO.2155/KOL/2018 M/S PDP STEELS LTD. A.Y. 2014-15 2 | P A GE WERE IN-TURN REQUIRED FOR PURCHASE OF RAW MATERIAL FROM M/S SAIL. IN ORDER TO SUBSTANTIATE THIS FACT ACCORDING TO LD. A.R, NECESS ARY DOCUMENTS WERE ALREADY PLACED BEFORE THE AO AND THE SAME IS ALSO PART OF THE AUDI TED ACCOUNTS. AND HE DREW OUR ATTENTION TO PAGE 5 OF THE PAPER BOOK (LETTER DATE D 08.07.2016 TO THE AO IN ASSESSMENT PROCEEDINGS) AND PAGES 25 AND 29 RESPECT IVELY OF THE PAPER BOOK (WHICH IS THE PART OF THE AUDITED ACCOUNTS OF AY 2014-15) WHICH ACCORDING TO ASSESSEE REVEALS THAT THE FD WITH THE BANK IS FOR ISSUE OF BANK GUARANTEE FOR PROCUREMENT OF RAW MATERIAL FROM M/S SAIL AND HENCE SUCH INTEREST INCOME IS FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. SO, ACCORDING TO HIM, TH E NATURE OF INTEREST INCOME BEING BUSINESS AND EVEN IF THE AFORESAID RECEIPT [INTERE ST FROM FD] IS NOT ELIGIBLE FOR DEDUCTION U/S 80IC IN VIEW OF THE JUDGMENT OF THE H ONBLE CALCUTTA HIGH COURT IN THE CASE OF RECKITT BENCKISER INDIA (P) LTD. VS. AC IT, KOLKATA (2015) 56 TAXMANN.COM 415 (CAL) AND ALSO THE JUDGMENT OF HON BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA LTD. VS. CIT (2009) 183 TAXMAN 349 (SC) BECAUSE, IT DOES NOT HAVE FIRST DEGREE NEXUS WITH THE PROFITS EARNED FROM THE ELIGIBLE UNIT, STILL SUCH INTEREST SHOULD BE ALLOWED TO BE NETTED AS HELD BY THE HON BLE GUJRAT HIGH COURT IN THE CASE OF CIT VS. NIRMA LTD. (2014) 367 ITR 12 (GUJ) AND I T WAS POINTED OUT THAT THE HONBLE GUJRAT HIGH COURT APPLIED SUCH PRINCIPLE IN THE CONTEXT OF SECTION 80I, 80IA ETC. AND EXCLUDED ONLY THE NET INTEREST INCOME FROM SUCH DEDUCTION, SO HE PRAYED THAT BENEFIT OF NETTING SHOULD BE GIVEN TO ASSESSEE. 4. IN THE LIGHT OF THE AFORESAID DISCUSSION, WE ARE NOT REPEATING THE SAME AGAIN FOR THE SAKE OF BREVITY. WE NOTE THAT IN THE REVENU E APPEAL FOR THE SAME ASSESSMENT YEAR I.E. AY 2014-15 WE HAVE CONFIRMED THE ACTION O F LD. CIT(A) IN RESPECT OF CLAIM OF THE ASSESSEE IN RESPECT OF INTEREST INCOME AS NO T ELIGIBLE FOR DEDUCTION U/S 80IC WHEREIN WE HELD AS UNDER: 3. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE LD. CIT(A), WHO IN RESPECT OF THE AOS ACTION DISALLOWING INTEREST INC OME OF RS. 20,37,345/- HAS HELD AS UNDER: IN VIEW OF THE ABOVE DISCUSSION AND RESPECTIVELY F OLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF RECKITT BE NCKISER (INDIA) VS. ADDL. COMMISSIONER OF INCOME TAX (SUPRA), I AM OF THE VIE W THAT THERE IS NO INFIRMITY ITA NO.2155/KOL/2018 M/S PDP STEELS LTD. A.Y. 2014-15 3 | P A GE IN THE FINDING OF THE AO IN HOLDING THAT THE APPELL ANT WAS NOT ENTITLED FOR DEDUCTION U/S 80IC OF THE I. T. ACT, 1961 IN RESPE CT OF THE INTEREST INCOME OF RS. 5,52,844/- FROM BANK DEPOSITS UNDER THE HEAD OTHER INCOME. THEREFORE, THE INTEREST INCOME OF RS. 5,52,844/- IS HELD TO BE NOT ELIGIBLE FOR DEDUCTION UNDER THE SECTION 80IC OF THE ACT. ACCORD INGLY, THIS GROUND IS PARTLY ALLOWED. 4. AGGRIEVED THE REVENUE IS BEFORE US ASSAILING THE AFORESAID ACTION OF LD. CIT(A). HOWEVER, WE NOTE THAT THE LD. CIT(A) AT PAGE 15 OF THE IMPUGNED ORDER HAS CONFIRMED THE ACTION OF THE AO IN RESPECT OF DISALLOWANCE OF INTEREST INCOME FROM FIXED DEPOSIT. HOWEVER, HAS MISTAKENLY TYPED THE FIGURE AS RS. 5,5 2,844/- IN PLACE OF RS. 20,37,345/-. SINCE, THE INTEREST INCOME FROM FIXED DEPOSIT CANNO T BE HAVING FIRST DEGREE NEXUS WITH THE PROFIT AND GAIN DERIVED FROM THE UNDERTAKING WH ICH IS ELIGIBLE FOR DEDUCTION U/S 80IC OF THE ACT, WE CONFIRM THE ORDER OF THE LD. CI T(A) AND CORRECT THE MISTAKE OF THE FIGURES SHOWN AS RS. 20,37,345/- IN PLACE OF RS. 5, 52,844/-. AND SO THE REVENUES APPEAL TO THIS EXTEND SUCCEEDS. HOWEVER, THE ISSUE OF NETTING OF INTEREST INCOME WA S NOT BEFORE US, BECAUSE THE REVENUE APPEAL CAME UP WITHOUT THIS ASSESSEES CROS S-APPEAL. AND SINCE THIS ISSUE HAS COME TO OUR NOTICE ONLY IN THIS APPEAL, IN THE INTE REST OF JUSTICE AND FAIR PLAY AND AS PER SETTLED PRINCIPLE OF LAW, WE ARE OF THE OPINION THAT THE NET INTEREST SHOULD ONLY BE BROUGHT TO TAX. NEEDLESS TO SAY, THE ASSESSEE IN TH IS CASE HAS CLAIMED TO HAVE MADE THE FDS FOR THE PURPOSE OF PROCURING BANK GUARANTEE WHICH WAS A CONDITION PRECEDENT FOR PROCUREMENT OF RAW MATERIAL FROM M/S SAIL. AND THEREFORE, ACCORDING TO US, THE INTEREST INCOME EVEN IF IT DOES NOT QUAL IFY FOR DEDUCTION U/S 80IC OF THE ACT BEING NOT HAVING FIRST DEGREE NEXUS, STILL THE NATU RE OF THE RECEIPT SINCE BEING BUSINESS IN NATURE AND NOT FROM OTHER SOURCES [REFE R CIT VS. NIRMA LTD. (SUPRA)] NEEDS TO BE TREATED AS BUSINESS RECEIPT, IF THE FAC TS ARE CORRECT, WHICH MAY BE VERIFIED BY THE LD CIT(A), SINCE WE HAVE RESTORED CERTAIN IS SUES BACK TO HIM, WHILE ADJUDICATING THE REVENUE APPEAL FOR THIS ASSESSMENT YEAR. AND IF THE CONTENTION OF THE ASSESSEE IS FOUND TO BE CORRECT, THEN NETTING S HOULD BE ALLOWED TO THEIR INTEREST RECEIPT AS HELD BY THE HONBLE GUJRAT HIGH COURT IN THE CASE OF CIT VS. NIRMA LTD.(SUPRA). THEREFORE WE RESTORE THIS ISSUE BACK T O THE FILE OF THE LD. CIT(A) WHO SHALL CONSIDER THIS ISSUE WHICH CONSIDERING OUR OR DER IN REVENUE APPEAL AND DISPOSE OF THE ISSUE IN ACCORDANCE TO LAW. ITA NO.2155/KOL/2018 M/S PDP STEELS LTD. A.Y. 2014-15 4 | P A GE 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE OPEN COURT ON 10 TH MARCH, 2021. SD/- SD/- (J.S. REDDY) (A. T . VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 10.03.2021 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. APPELLANT- M/S PDP STEELS LTD., C/O, SALARPURIA JAJ ODIA & CO. 7, C.R. AVENUE, KOLKATA-700072. 2. RESPONDENT ITO, WARD-3(3), KOLKATA 3. THE CIT(A)- 1, KOLKATA (SENT THROUGH E-MAIL) 4. CIT- , KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, KOLKATA BENCHES, KOLKATA