TREND SETTERS, MUMBAI V. ACIT 14(3), MUMBAI

ITA 227/MUM/2011

• Counselvise Citation: 22719914 RSA 2011
• Duration Of Justice: 2 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 22-08-2013
• Assessment Year: 2001-2002
• Appeal Filed On: 10-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: B V JHAVERI
• Section: 143(3); 80HHC

Judgement Text

E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI .. , !'# $ $ $ $ %&. !.'.. $( ) !'# !* BEFORE SHRI P.M. JAGTAP, AM AND DR. S.T.M. PAVALAN, JM !./ I.T.A. NOS. 226 TO 228 /MUM/2011 ( )( , $-, )( , $-, )( , $-, )( , $-, / / / / ASSESSMENT YEARS : 2000-01,2001-02 & 2002-03) M/S TREND SETTERS, 117/118, BHARAT INDUSTRIAL ESTATE, TOKERSHI JIWRAJ ROAD, SEWREE, MUMBAI 400 015. ( ( ( ( / VS. ASSTT. COMMISSIONER OF INCOME TAX 14(3), 5 TH FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI- 400 021. #. !./ PAN : AAAFT 1573 B ( ./ / // / APPELLANT ) .. ( 01./ / RESPONDENT ) ./ 2 3 ! / APPELLANT BY : SHRI B.V. JHAVERI 01./ 2 3 ! / RESPONDENT BY : SHRI SHISHIR SRIVASTAVA !($ 2 / // / DATE OF HEARING : 22-08-2013 45- 2 / DATE OF PRONOUNCEMENT :30-08-2013 '6 / O R D E R PER P.M. JAGTAP, A.M. : .. , !'# THESE THREE APPEALS FILED BY THE ASSESSEE ARE DIREC TED AGAINST THREE SEPARATE ORDERS PASSED BY THE LD. CIT(A) - 25, MUMB AI ON 29-10-2010 WHEREBY HE CONFIRMED THE ADDITIONS MADE BY THE A.O. BY DISALLOWING THE ASSESSEES CLAIM FOR DEDUCTION U/S 80HHC OF THE INC OME TAX ACT, 1961 (THE ACT) IN RESPECT OF FOLLOWING INCOME FROM INTEREST R ECEIVED ON FIXED DEPOSITS IN THE BANK:- ITA 226 TO 228/M/11 2 ASSTT. YEAR AMOUNT (RS) 2000-01 16,33,062/- 2001-02 1,15,02,047/- 2002-03 1,18,98,301/- 2. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHI P FIRM WHICH IS ENGAGED IN THE BUSINESS OF EXPORT OF BED LINEN. IN THE RET URNS OF INCOME FILED FOR THE YEARS UNDER CONSIDERATION, DEDUCTION U/S 80HHC OF T HE ACT WAS CLAIMED BY THE ASSESSEE, INTER ALIA, IN RESPECT OF INTEREST RE CEIVED ON FIXED DEPOSITS IN THE BANK. IN THE ASSESSMENT ORIGINALLY COMPLETED U/S 14 3(3) OF THE ACT, THE DEDUCTION CLAIMED BY THE ASSESSEE U/S 80HHC OF THE ACT IN RESPECT OF INTEREST INCOME FROM FIXED DEPOSITS WAS DISALLOWED BY THE A. O. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ACTION OF THE A.O. ON FURTHER APPEAL, THE TRIBUNAL RESTORED THIS ISSUE TO THE FILE OF THE A.O. FOR ALL THE THREE YEARS UNDER CONSIDERATION WITH A DIRECTION TO DECIDE THE SAME A FRESH IN THE LIGHT OF THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF LALSONS ENTERPRISES AFTER ASCERTAINING THE NEXUS, IF ANY, B ETWEEN THE INTEREST INCOME AND THE BUSINESS OF THE ASSESSEE. AS PER DIRECTION OF THE TRIBUNAL, THE A.O. EXAMINED THE ISSUE AFRESH AND MADE ENQUIRIES WITH T HE CONCERNED BANK WHICH REVEALED THAT THE BANK HAD NOT STIPULATED IN TERMS AND CONDITIONS OF ALLOWING THE FINANCE FACILITY FOR ANY SECURITY OR C OLLATERAL SECURITY IN THE FORM OF FIXED DEPOSITS TO BE KEPT BY THE ASSESSEE WITH T HE BANK. KEEPING IN VIEW THESE FACTS GATHERED FROM THE CONCERNED BANK AND RE LYING ON VARIOUS JUDICIAL PRONOUNCEMENTS DISCUSSED IN THE ASSESSMENT ORDERS, THE A.O. HELD THAT THE INTEREST RECEIVED BY THE ASSESSEE ON FIXED DEPOSITS KEPT WITH THE BANK WAS CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES IN ALL THE THREE YEARS UNDER CONSIDERATION AND THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION U/S 80HHC OF THE ACT IN RESPECT OF THE SAID INTEREST IN COME. 3. AGAINST THE ORDERS PASSED BY THE A.O. U/S 143(3) R.W.S. 254 OF THE ACT, THE ASSESSEE AGAIN PREFERRED APPEALS BEFORE THE LD. CIT(A) FOR ALL THE THREE YEARS UNDER CONSIDERATION CLAIMING DEDUCTION U/S 80 HHC IN RESPECT OF ITA 226 TO 228/M/11 3 INTEREST INCOME RECEIVED ON BANK DEPOSIT. ALTERNAT IVELY, IT WAS ALSO CLAIMED BY THE ASSESSEE THAT, IF AT ALL, THE INTEREST INCOM E ON BANK DEPOSIT WAS TO BE EXCLUDED FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 80HHC OF THE ACT, THE SAME SHOULD BE DONE ONLY IN RESPECT OF NET INTEREST INCOME AND NOT THE GROSS INTEREST INCOME. THE LD. CIT(A) DID NOT FIND MERIT IN THE CONTENTIONS RAISED ON BEHALF OF THE ASSESSEE AND KEEPING IN VIEW THE FACT UAL POSITION EMERGING FROM THE ENQUIRIES MADE BY THE A.O. FROM THE CONCERNED B ANK, HE HELD THAT INTEREST INCOME RECEIVED BY THE ASSESSEE ON BANK DE POSITS WAS CHARGEABLE TO TAX IN OTS HANDS UNDER THE HEAD INCOME FROM OTHER SOURCES. HE ALSO REJECTED THE ALTERNATIVE CONTENTION OF THE ASSESSEE RELYING ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. M/S ASIAN STAR CO. LTD. WHEREIN IT WAS HELD THAT GROSS INTEREST RECEIVED HAS TO BE EXC LUDED FOR THE PURPOSE OF SPECIAL DEDUCTION UNDER CHAPTER VI-A. AGGRIEVED BY THE ORDERS OF THE LD. CIT(A) FOR ALL THE THREE YEARS UNDER CONSIDERATION, THE ASSESSEE HAS PREFERRED THESE APPEALS BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE LD. COUN SEL FOR THE ASSESSEE HAS NOT RAISED ANY CONTENTION TO DISPUTE THE POSITION EMERG ING FROM THE ENQUIRIES MADE BY THE A.O. WITH THE CONCERNED BANK THAT THE I NTEREST INCOME ON FIXED DEPOSITS HAVING NO NEXUS WHATSOEVER WITH THE BUSINE SS OF THE ASSESSEE, THE SAID INCOME IS CHARGEABLE TO TAX IN THE HANDS OF TH E ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOURCES AS HELD BY THE AUTHORIT IES BELOW. HE HAS ALSO NOT RAISED ANY ARGUMENT IN SUPPORT OF ASSESSEES AL TERNATIVE CLAIM MADE BEFORE THE LD. CIT(A) FOR EXCLUSION OF ONLY THE NET INTEREST INCOME FOR THE PURPOSE OF COMPUTING THE DEDUCTION U/S 80HHC OF THE ACT. HE, HOWEVER, HAS CONTENDED THAT THE INTEREST INCOME FROM BANK DEPOSI TS HAVING BEEN BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOURCES, DEDUCTION PERMISSIBLE U/S 57(III) OF THE ACT ON ACCOUNT OF EXPENDITURE LAID OUT OR EXPENDED WHOLLY AND EXCLUSI VELY FOR THE PURPOSE OF ITA 226 TO 228/M/11 4 EARNING SUCH INCOME HAS TO BE ALLOWED. HE HAS CONT ENDED THAT SUCH EXPENDITURE, INTER ALIA, ON ACCOUNT OF INTEREST WAS INCURRED BY THE ASSESSEE FOR THE PURPOSE OF EARNING INTEREST INCOME ON BANK DEPOSITS AND SINCE THE DISPUTE AS REGARDS THE HEAD OF INCOME UNDER WHICH S UCH INTEREST INCOME IS CHARGEABLE TO TAX IS FINALLY SETTLED NOW, THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 57(III) SHOULD BE CONSIDERED. THE LD. D.R. HAS NOT DISPUTED THIS PROPOSITION IN PRINCIPLE. HE, HOWEVER, HAS CONTEND ED THAT THE BURDEN IN THIS REGARD IS ON THE ASSESSEE TO ESTABLISH THAT ANY SUC H EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING INTEREST INCOME ON BANK DEPOSITS AND THE A.O. SHOULD BE ALLOWED AN OPP ORTUNITY TO EXAMINE/VERIFY THE CLAIM OF THE ASSESSEE ON THIS. WE FIND MERIT IN THIS CONTENTION OF THE LD. D.R. ACCORDINGLY, THE IMPUGNE D ORDERS OF THE LD. CIT(A) CONFIRMING THE ACTION OF THE A.O. IN TREATING THE I NTEREST INCOME ON BANK DEPOSITS AS INCOME FROM OTHER SOURCES ARE UPHELD AN D THE MATTER IS RESTORED TO THE FILE OF THE A.O. FOR THE LIMITED PURPOSE OF CONSIDERING THE ASSESSEES ALTERNATIVE CLAIM FOR DEDUCTION U/S 57(III) OF THE ACT ON ACCOUNT OF EXPENDITURE, IF ANY, LAID OUT OR EXPENDED WHOLLY AN D EXCLUSIVELY FOR THE PURPOSE OF EARNING THE INTEREST INCOME ON BANK DEPO SITS. 5. IN THE RESULT, APPEALS OF THE ASSESSEE ARE TREAT ED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH AUG. 2013. . '6 2 45- 7'(8 30-8-13 5 2 SD/- SD/- (DR. S.T.M. PAVALAN) (P.M. JAGTAP ) ) !'# JUDICIAL MEMBER !'# / ACCOUNTANT MEMBER MUMBAI ; 7'( DATED 30-8-13 $.)(.!./ RK , SR. PS ITA 226 TO 228/M/11 5 '6 2 0)9: ;:- '6 2 0)9: ;:- '6 2 0)9: ;:- '6 2 0)9: ;:-/ COPY OF THE ORDER FORWARDED TO : 1. ./ / THE APPELLANT 2. 01./ / THE RESPONDENT. 3. < () / THE CIT(A)- 25, MUMBAI 4. < / CIT 14, MUMBAI 5. :$? 0))( , , / DR, ITAT, MUMBAI E BENCH 6. %, @ / GUARD FILE. '6(! '6(! '6(! '6(! / BY ORDER, !1: 0) //TRUE COPY// A A A A/ // /!B !B !B !B ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI