The DCITBharuch Circle, Bharuch V. M/s. Enviro Technology Ltd., Bharuch

ITA 2289/AHD/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9588 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-10-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 01-10-2010
• Assessment Year: 2007-2008
• Appeal Filed On: 08-07-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R K DHANESTA
• Assessee Lawyers: S N SOPARKAR
• Section: 80IA

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 AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH A AA A BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI BHAVNESH BHAVNESH BHAVNESH BHAVNESH SAINI SAINI SAINI SAINI, , , , JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER AND AND AND AND SHRI SHRI SHRI SHRI N.S.SAINI N.S.SAINI N.S.SAINI N.S.SAINI, , , , ACCOUNTANT ACCOUNTANT ACCOUNTANT ACCOUNTANT MEMBER MEMBER MEMBER MEMBER DATE OF HEARING :1-10-10 DRAFTED ON: 1-10-10 ITA NO. 2289 /AHD/ 2010 ASSESSMENT YEAR :2007-08 DEPUTY COMM ISSIONER OF INCOME TAX, BHARUCH CIRCLE, ABOVE BANK OF BARODA, STATION ROAD, BHARUCH. VS. ENVIRO TECHNOLOGY LIMITED, 117/118, GIDC ESTATE, ANKLESHWAR, DISTRICT BHARUCH. PAN/GIR NO. : AAACE 4126G (A PPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI R. K. DHANESTA, D.R. RESPONDENT BY: SHRI S.N. SOPARKAR, SR. ADV. O R D E R O R D E R O R D E R O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-VI , BARODA, DATED 9-4-2010. 2. GROUND NO. 1(I) OF APPEAL OF THE REVENUE READS A S UNDER:- 1.(I) ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DIRECTING TO ALLOW DEDUCTION UNDER SECTION 80IA ON OTHER INCOME OF `.36,90,144/- (BEING INTEREST INCOME ON F IXED DEPOSIT, LOAN, I.T. REFUND AND DELAYED PAYMENT FROM CUSTOMERS). 3. THE BRIEF FACTS OF THE CASE ARE THAT IN THE RETU RN OF INCOME FILED FOR THE YEAR, OUT OF THE TOTAL INTEREST INCOM E AGGREGATING TO `.36,90,144/- CREDITED TO THE PROFIT AND LOSS ACCOU NT, THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 80IA OF THE ACT WITH RESPECT TO INTEREST ON FIXED DEPOSITS AMOUNTING TO `.5,85,3 68/- REPRESENTING - 2 - SURPLUS FUNDS OF THE INDUSTRIAL UNDERTAKING INVESTE D BY WAY OF FIXED DEPOSITS AND INTEREST ON DELAYED PAYMENT FROM CUSTO MERS AMOUNTING TO `.5,65,953/-.THE ASSESSING OFFICER DIS ALLOWED THE ENTIRE INTEREST AMOUNTING TO `. 36,90,144/- WHILE C OMPUTING THE DEDUCTION UNDER SECTION 80IA OF THE ACT. 4. IN APPEAL BEFORE THE CIT(A) LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE I SSUE OF ALLOWING DEDUCTION UNDER SECTION 80IA ON INTEREST RECEIVED O N DELAYED PAYMENT RECEIVED FROM THE CUSTOMERS IS COVERED IN F AVOUR OF THE ASSESSEE BY THE FOLLOWING DECISIONS: (I) INDUCTOTHERM (INDIA) LTD. V/S. DEPUTY COMMISSI ONER OF INCOME TAX I.T.A.T. AHMEDABAD. (II) MOTOROLA INC., ERRISON RADIO SYSTEMS A.B. (III) NOKIA NETWORKS OY V/S. DEPUTY COMMISSIONER OF INCOME TAX (IV) DEPUTY C.I.T. VS. NOKIA NETWORKS OY (ITAT DELH I SPL. BENCH) 2005 96 TTJ (DELHI)1. IN CONNECTION WITH INTEREST ON FIXED DEPOSITS PLACE D WITH THE BANK, THE ASSESSEE SUBMITTED THAT THE AMOUNTS SET APART A ND DEPOSITED WITH THE BANK ARE OUT OF THE SECURITY DEPOSIT RECEI VED FROM THE MEMBERS AND OUT OF THE SURPLUS FUNDS/ PROFITS DERIV ED BY THE INDUSTRIAL UNDERTAKING FROM THE BUSINESS OF INFRAST RUCTURE DEVELOPMENT. FURTHER THE ASSESSEE ALSO SUBMITTED TH AT THE AMOUNT OF FIXED DEPOSIT PLACED WITH THE BANKS IS LOWER THA N THE AMOUNT OF MEMBERSHIP DEPOSITS RECEIVED FROM THE CUSTOMERS AND THAT THE AMOUNTS SET APART AND DEPOSITED WITH THE BANK HAVE A DIRECT NEXUS WITH THE BUSINESS OF INFRASTRUCTURE DEVELOPMENT AND ACCORDINGLY ENTITLED TO DEDUCTION UNDER SECTION 80IA OF THE ACT . THE ASSESSEE FURTHER SUBMITTED THAT IT HAD INCURRED INTEREST EXP ENDITURE ON THE MEMBERSHIP DEPOSITS PLACED BY THE CUSTOMERS AMOUNTI NG TO `.15,62,744/- WHICH IS DEBITED TO THE PROFIT AND LO SS ACCOUNT RESULTING IN LOWER PROFITS AND CORRESPONDING LOWER DEDUCTION UNDER - 3 - SECTION 80IA OF THE ACT WHEN IT IS BEING COMPARED W ITH THE INTEREST PAID DURING THE YEAR UNDER REFERENCE. THE ASSESSEE RELIED UPON THE DECISION IN THE CASE OF ASSISTANT COMMISSIONER OF I NCOME TAX V/S. MAXCARE LABORATORIES LTD., I.T.A.T. CUTTACK 92 ITD 11. FURTHER WITHOUT PREJUDICE TO THE ABOVE GROUND OF APPEAL THA T THE INTEREST EARNED ON DELAYED PAYMENT RECEIVED FROM CUSTOMERS A ND INTEREST ON FIXED DEPOSITS PLACED WITH THE BANKS IS ENTITLED TO DEDUCTION UNDER SECTION 80IA OF THE ACT, THE ASSESSEE SUBMITT ED THAT IN CASE THE GROUND OF APPEAL IS DECIDED AGAINST THE ASSESSE E, DEDUCTION UNDER SECTION 80IA BE INCREASED BY THE ENTIRE AMOUN T OF INTEREST EXPENDITURE INCURRED BY THE ASSESSEE ON MEMBERSHIP DEPOSITS PLACED WITH IT AMOUNTING TO `.15,62,744/- AND DEBIT ED TO THE PROFIT AND LOSS ACCOUNT. 5. ON APPEAL, AFTER CONSIDERING THE SUBMISSIONS OF THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE, LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED AS UNDER:- I HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE AND FACTS OF THE CASE. IT IS A CASE WHERE THE LEARNED ASSESSING OFFI CER HAS EXCLUDED WHOLE OF THE INTEREST WHILE DETERMINING TH E DEDUCTION UNDER SECTION 80IA. OUT OF THE VARIOUS IT EMS OF INTEREST, THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS POINTED OUT THAT THE INTEREST ON FIXED DEPOSITS REPRESENTING SURPLUS FUNDS OF THE INDUSTRIAL UNDERT AKING INVESTED AND INTEREST ON DELAYED PAYMENT FROM CUSTO MERS NEEDS TO BE INCLUDED. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS ALSO SUBMITTED T HAT IT HAS INCURRED INTEREST EXPENDITURE ON MEMBERSHIP DEPOSIT S PLACED BY THE CUSTOMERS AMOUNTING TO `.15,62,744/- WHICH HAS RESULTED IN LOWER PROFITS AND CORRESPONDING LOW ER DEDUCTION UNDER SECTION 80IA OF THE ACT. THE LEARNE D AUTHORISED REPRESENTATIVE OF THE ASSESSEE FURTHER S UBMITTED THAT THERE IS NO INTEREST EARNING CLAIMED BY WAY OF DEDUCTION UNDER SECTION 80IA OF THE ACT WHEN IT IS BEING COMP ARED WITH THE INTEREST PAID DURING THE YEAR UNDER REFERENCE. CONSIDERING THE FACTS OF THE CASE, I AGREE WITH THE CONTENTION OF THE ASSESSEE AND DIRECT THE LEARNED ASSESSING OF FICER TO GRANT DEDUCTION UNDER SECTION 80IA ON INTEREST ON F IXED DEPOSITS AMOUNTING TO `.5,85,368/-. REGARDING INTER EST ON DELAYED PAYMENTS FROM CUSTOMERS IS CONCERNED, IT IS INTRICATELY CONNECTED WITH THE BUSINESS ACTIVITIES OF THE - 4 - ASSESSEE AND THE REQUEST OF THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE IN THIS REGARD IS CO NCEDED AND THE LEARNED ASSESSING OFFICER IS DIRECTED ACCOR DINGLY. THUS, THIS GROUND OF APPEAL IS ALLOWED. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTE D THAT THE LEARNED ASSESSING OFFICER OBSERVED THAT ASSESSE E WHILE CALCULATING THE ELIGIBLE PROFIT FOR DEDUCTION UNDER SECTION 80IA REDUCED `.25,38,823/- COMPRISING OF INTEREST ON LOA N `.24,07,233/- AND INTEREST ON I.T. REFUND OF `.1,31,590/- AND HAD NOT REDUCED INTEREST INCOME EARNED ON FIXED DEPOSIT OF `.5,85,3 68/- AND INTEREST INCOME ON DELAYED PAYMENT `.5,65,953/-. THE LEARNE D ASSESSING OFFICER THEREFORE REDUCED THE ELIGIBLE PROFIT FOR D EDUCTION UNDER SECTION 80IA BY THE SAID AMOUNTS. 7. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASS ESSEE SUBMITTED THAT AS REGARDS INTEREST INCOME OF `.5,65 ,953/- EARNED ON DELAYED PAYMENT BY THE CUSTOMERS THE ISSUE STAND S COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HON'BLE G UJARAT HIGH COURT IN THE CASE OF NIRMA INDUSTRIES LTD. V. DCIT (2006) 283 ITR 402 (GUJ). WITH REGARD TO THE INTEREST INCOME EARNE D ON FIXED DEPOSITS OF `.5,85,368/- THE LEARNED AUTHORISED REP RESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE SAME IS TO BE DECID ED AGAINST THE ASSESSEE. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TREATING INDUSTRIAL EFFL UENT OF SMALL SCALE INDUSTRIES. THE ASSESSEE CLAIMED DEDUCTION UN DER SECTION 80IA. THE LEARNED ASSESSING OFFICER FOUND THAT THE ELIGIBLE PROFITS OF THE INDUSTRIAL UNDERTAKING UNDER SECTION 80IA ON WHICH THE ASSESSEE CLAIMED DEDUCTION INCLUDED INTEREST INCOME EARNED ON FIXED DEPOSITS WITH THE BANK `.5,85,368/- AND ON D ELAYED PAYMENT RECEIVED FROM CUSTOMERS `.5,65,953/-. HE THEREFORE, REDUCED THE ELIGIBLE PROFITS BY THE SAID AMOUNTS ON THE GROUND THAT THE SAME - 5 - WERE NOT DERIVED FROM THE INDUSTRIAL UNDERTAKING OF THE ASSESSEE. WE FIND THAT THE ISSUE REGARDING ALLOWABILITY OF DE DUCTION UNDER SECTION 80IA ON INTEREST INCOME EARNED FROM DELAYED PAYMENT RECEIVED FROM CUSTOMERS IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF NIRMA INDUSTRIES LTD V. DCIT (SUPRA) WHEREIN IT WAS HELD THAT INTEREST RECEIVED FROM TRADE DEBTORS FOR LATE PAYMENT OF SAL ES CONSIDERATION IS INCOME DERIVED FROM THE BUSINESS OF INDUSTRIAL U NDERTAKING AND IT CANNOT BE EXCLUDED FROM THE PROFITS OF THE INDUSTRI AL UNDERTAKING WHILE COMPUTING DEDUCTION UNDER SECTION 80I. AS REG ARDS INTEREST INCOME EARNED ON FIXED DEPOSITS KEPT WITH BANK THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS CONCE DED THAT THE SAME IS TO BE DECIDED AGAINST THE ASSESSEE. HENCE W E MODIFY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) AND DIRECT THE LEARNED ASSESSING OFFICER TO REDUCE THE ELIGIBLE PROFITS OF THE INDUSTRIAL UNDERTAKING FOR THE PURPOSES OF ALLO WING DEDUCTION UNDER SECTION 80IA BY INTEREST INCOME EARNED ON FIX ED DEPOSIT `.5,85,368/-. THUS, THIS GROUND OF APPEAL OF THE RE VENUE IS PARTLY ALLOWED. 8. IN THE RESULT THE APPEAL OF THE REVENUE IS PARTL Y ALLOWED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 7 TH THIS DAY OF OCTOBER, 2010. SD/- SD/- (BHAVNESH SAINI) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: ON THIS 7 TH DAY OF OCTOBER, 2010 COMPILED AND COMPARED BY: PATKI COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPON DENT 3. THE CIT CONCERNED 4. THE LD. CIT(AP PEALS)-VI, BARODA. 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD - 6 - DATE INITIALS 1. DRAFT DICTATED ON 1-10-2010 ------------- 2. DRAFT PLACED BEFORE AUTHORITY 5-10-2010 ----- -------- 3. DRAFT PROPOSED & PLACED 5-10-2010 ----------- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED 6-10-2010 ----------- --JM/AM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S 7-10-2010 -------- ----- 6. KEPT FOR PRONOUNCEMENT ON 7-10-2010 --------- ---- 7. FILE SENT TO THE BENCH CLERK ---------------- ------------- 8. DATE ON WHICH FILE GOES TO THE ---------------- ------------- 9. DATE OF DISPATCH OF ORDER ---------------- --- ----------