DCIT Circle 14 (1), V. Picnic Ltd,

ITA 2306/DEL/2007

• Counselvise Citation: 230620114 RSA 2007
• Duration Of Justice: 8 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 09-07-2015
• Assessment Year: 1997-1998
• Appeal Filed On: 07-05-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY
• Keywords: Additional evidence
• Section: 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : F NEW DELHI BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI J.SUDHAKAR REDDY ACCOUNTANT MEMB ER ITA NOS: 2306, 2307/DEL/2007 AYS : - 1997-98, 1998-99 DCIT VS. M/S. PICRIC LIMIT ED, CIR. 14 (1), E-98, G.K. ENCLAV E-1, NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIKRAM SAHAY, SR. DR RESPONDENT BY :SHRI NEERAJ JAIN, CA DATE OF HEARING :09.7.2015 DATE OF PRONOUNCEMENT : 15 .7.2015 O R D E R PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER BOTH THESE APPEALS FILED BY THE REVENUE ARE DIRECTE D AGAINST THE ORDER OF LD.CIT(APPEALS)-XVII NEW DELHI DATED 16.2.2006 P ERTAINING TO THE ASSESSMENT YEARS 1997-98 & 1998-99 ON THE FOLLOWING GROUNDS : 1. LD. CIT(A) HAS ERRED IN LAW AND IN THE FACTS AND C IRCUMSTANCES OF THE CASE IN HOLDING THAT THERE WAS A DIRECT NEXUS BETWEEN INTER EST BEARING FUNDS AND FDRS MADE BY THE ASSESSEE AND THAT THE ASSESSEE WAS ENTI TLED TO THE BENEFIT OF SET OFF OF INTEREST PAID FROM INTEREST EARNED. 2. LD. CIT(A) HAS ERRED IN LAW AND IN FACT AND CIRCUMS TANCES OF THE CASE IN ADMITTING FRESH DOCUMENTS WITHOUT CALLING FOR ANY REPORT FROM THE ASSESSING OFFICER WHICH IS AGAINST THE PROVISIONS OF RULE 46A OF THE INCOME TA X RULES. 3. LD. CIT(A) HAS ERRED IN LAW AND IN FACTS OF THE CAS E IN DIRECTING THE AO TO VERIFY THE WORKING OF INTEREST OF RS. 20,55,060/- FOR THE ASSE SSMENT YEAR 1997-98 AND RS. 19,50,000/- FOR THE ASSESSMENT YEAR 1998-99 THE BO RROWED FUNDS UTILISED FOR FDRS. 2. THE ISSUE THAT ARISES FOR CONSIDERATION IN THIS APPEAL, IS WHETHER THE FIRST APPELLATE AUTHORITY HAS, IN THE IMPUGNED ORDER, ENS URED THAT THE DIRECTIONS OF THE ITA NOS.2306, 2307/DEL/2007 DCIT VS. M/S. PICRIC LIMITED 2 TRIBUNAL G BENCH IN ITA NO. 2478/DEL/2000 ORDER DAT ED 22 ND APRIL, 2004 READ WITH ITA NOS. 2306 AND 2307/DEL/2007 F BENCH ORDER DATED 30.4.2008 HAVE BEEN FOLLOWED OR NOT. THE TRIBUNAL IN ITS ORDER DATED 30 .4.200 8 AT PARA 6 IT IS HELD AS FOLLOWS :- 6. AS PER THE FINDINGS CONTAINED IN PARA 5 OF A PPELLATE ORDER, WE ARE INCLINED TO AGREE WITH THE LEARNED DR THAT THERE IS A VIOLAT ION OF RULE 46A, IN THE INTEREST OF JUSTICE AND FAIR PLAY, WE RESTORE BOTH THE APPEALS TO THE FILE OF THE ASSESSING OFFICER AND ASSESEE IS DIRECTED TO PRODUC E ALL THE DOCUMENTS FILED BEFORE THE CIT(APPEALS), BEFORE THE ASSESSING OFFIC ER ALSO FOR DECIDING THE ISSUE AFRESH. ASSESSING OFFICER IS ALSO DIRECTED TO REDECIDE THE ISSUE STRICTLY WITHIN SPECIFIC DIRECTIONS GIVEN BY THE ITAT VIDE I TS ORDER DATED 22.4.2004, AS REPORTED AT 90 ITD 301. 3. THE ASSESSEE CLAIMED EXEMPTION U/S 10B BEING 100% EXPORT ORIENTED UNIT. IT OBTAINED INTEREST BEARING PACKING CREDIT FROM THE B ANKS. APART FROM THAT PACKING CREDIT WAS UTILISED TO MAKE FIXED DEPOSITS IN THE V ERY SAME BANK AND THESE FIXED DEPOSITS HAVE BEEN USED AS MARGIN MONEY TO THE PART ICULAR BANK AND FURTHER LOAN FACILITIES WERE AVAILED BY THE ASSESSEE. THE QUESTI ON THAT WAS BEFORE THE TRIBUNAL WAS A) WHETHER THE INTEREST EARNED ON SUCH FIXED DE POSITS IS ASSESSABLE AS INCOME FROM OTHER SOURCES OR INCOME FROM BUSINESS B) WHILE COMPUTING DEDUCTION U/S 10B WHETHER NET INTEREST HAS TO BE EXCLUDED OR THE GROS S INTEREST RECEIVED HAS TO BE EXCLUDED, FOR THE REASON THAT THE INTEREST INCOME I S NOT DERIVED FROM THE BUSINESS OF THE ASSESSEE WHICH A 100% EXPORT ORIENTED UNIT. 4. THE TRIBUNAL IN THE FIRST GROUND OF APPEAL ON 22 ND APRIL, 2004 HELD THAT, THE INTEREST INCOME HAS TO BE ASSESEED UNDER THE HEAD I NCOME FROM BUSINESS . AS FAR AS THE COMPUTATION OF DEDUCTION U/S 10B IS CONCERNED T HE TRIBUNAL DIRECTED THE AO TO VERIFY THE CLAIM OF THE ASSESSEE THAT, THE FDRS IN QUESTION WERE MADE FROM PACKING ITA NOS.2306, 2307/DEL/2007 DCIT VS. M/S. PICRIC LIMITED 3 CREDIT ACCOUNT AND THAT THE INTEREST PAID ON SUCH BORROWINGS HAVE A DIRECT NEXUS WITH THE INTEREST EARNED ON FDRS. IT OBSERVED AS FO LLOWS : SET OFF OF INTEREST PAID WOULD BE ALLOWED IF THERE IS DIRECT NEXUS BETWEEN INTEREST BEARING BORROWED FUNDS AND THE FDRS MADE BY THE ASSESSEE. 5. IT IS FURTHER OBSERVED THAT IF IT IS PROV ED THAT INTEREST BEARING FUNDS WERE UTILISED FOR MAKING FIXED DEPOSITS, THEN INTEREST P AID TO BANKS WOULD HAVE TO BE ALLOWED AS SET OFF AGAINST INTEREST ON FDRS . THE I SSUE WAS SET ASIDE TO THE FILE OF THE AO. THEREAFTER THE CASE AGAIN TRAVEL TO ITAT. T HE TRIBUNAL IN ITS ORDER DATED 30.4.2008 OBSERVED AS EXTRACTED ABOVE. THEREAFTER T HE AO PASSED AN ORDER BY HOLDING THAT THE CLAIM OF THE ASSESSEE IS NOT TENAB LE. ON APPEAL THE FIRST APPELLATE AUTHORITY ALLOWED THE APPEAL OF THE ASSESSEE FOR BO TH THE ASSESSMENT YEARS. 6. THE LD. DEPARTMENTAL REPRESENTATIVE SHRI VIKR AM SAHAY SUBMITTED THAT THE CIT(A) HAD ADMITTED ADDITIONAL EVIDENCES WHICH ARE NOT IN CONSONANCE WITH THE PROVISIONS OF THE ACT. HE FURTHER SUBMITS THAT NO R EMAND REPORT HAS BEEN CALLED FOR FROM THE AO NOR THE FACTS WERE VERIFIED. HE FURTHER POINTED OUT THAT A VEY FIGURE OF INTEREST HAS CHANGED FROM RS. 18,26,851/- TO RS. 16 ,45,479/- AND THIS ISSUE WAS NOT CONFRONTED TO THE AO. HE ARGUES THAT IT IS SURPRISI NG THAT ASSESSEE BORROWED AMOUNTS AT A HIGHER RATE AND THEN MADE FIXED DEPOSI TS OUT OF THIS AMOUNT AT A LOWER RATE, THUS CAUSING LOSS. HE ARGUED THAT THE CASE SH OULD BE SENT BACK TO THE AO FOR FRESH VERIFICATION. 7. LD. COUNSEL FOR THE ASSESSEE SHRI NEERAJ JAIN ON THE OTHER HAND STRONGLY OPPOSED THE CONTENTIONS OF THE ASSESSEE. HE FILED AN AFFIDAVIT IN SUPPORT OF ITS CLAIM THAT HE HAD APPEARED BEFORE THE COMMISSIONER OF INC OME TAX DURING THE APPELLATE ITA NOS.2306, 2307/DEL/2007 DCIT VS. M/S. PICRIC LIMITED 4 PROCEEDINGS AND HE HAD FILED VARIOUS DOCUMENTS AND THESE DOCUMENTS WERE SENT TO THE AO FOR OBTAINING ITS COMMENTS ON THE ADDITIONAL EVIDENCES AND THAT DESPITE REPEATED REMINDERS, NO REMAND REPORT WAS ISSUED BY THE AO TO THE LD. CIT(A) AND UNDER SUCH CIRCUMSTANCES THE CIT(A) PASSED THE ORDE R. EVEN OTHERWISE HE SUBMITS THAT THE STATEMENT OF ACCOUNTS FROM BANK OF BARODA WERE FILED BEFORE THE AO AND A PERUSAL OF THESE STATEMENTS WHICH ARE FILED BEFORE US BY WAY OF PAPER BOOK, DEMONSTRATES THAT THE FIXED DEPOSITS IN QUESTION WE RE MADE DIRECTLY OUT OF PACKING CREDITS ACCOUNTS BY THE BANK. HE DREW OUR ATTENTIO N TO PAGES 50,51,52 OF THE PAPER BOOK AND POINTED OUT THE DATES ON WHICH THE PACKING CREDIT WAS GRANTED AND THE DATE ON WHICH THE FIXED DEPOSITS WAS MADE. HE SUBMI TTED THAT THE CASE HAS TRAVEL MORE THAN TWICE TO THE AO AND THIS CLAIM BEING MADE BY THE ASSESSEE IS NOTHING NEW AND IT WAS THE CONTENTION OF THE ASSESSEE ON AL L THE EARLIER OCCASIONS. 8. AFTER HEARING RIVAL CONTENTIONS, WE FIND THE SUBMISSIONS OF THE LD. COUNSEL THAT A PERUSAL OF THE COPIES OF STATEMENT OF ACCOUNTS OF BANK OF BARODA, DEMONSTRATES THAT AMOUNTS WERE DEPOSITED IN THE FIXED DEPOSITS I MMEDIATELY ON GRANT OF PACKING CREDITS TO THE ASSESSEE IS CORRECT. LD. CIT(A) HAS DEALT WITH THE ISSUE AT LENGTH AND HAS GIVEN A FACTUAL FINDING THAT THERE IS A NEXUS. THE CLAIM OF REVENUE THAT THE CIT(A) ADMITTED ADDITIONAL EVIDENCES AND HAD NOT GI VEN AN OPPORTUNITY TO THE AO IS NOT CORRECT. THE LD. COUNSEL FOR THE ASSESSEE FILED AN AFFIDAVIT THAT HE APPEARED A NUMBER OF TIMES BEFORE THE LD. CIT(A) AND REMAND RE PORTS WERE CALLED FROM THE AO BY THE LD. CIT(A). THE AFFIDAVIT FILED BY THE LD. C OUNSEL FOR THE ASSESSEE IS NOT CONTROVERTED BY THE REVENUE. UNDER THESE CIRCUMSTAN CES, THE PLEA OF THE LD. DR FOR SETTING ASIDE THE MATTER TO THE FILE OF THE AO CANN OT BE ACCEPTED. AS THE FACTUAL FINDING OF THE LD. CIT(A) COULD NOT BE CONTROVERTED , WE UPHOLD THE SAME. ITA NOS.2306, 2307/DEL/2007 DCIT VS. M/S. PICRIC LIMITED 5 9. EVEN OTHERWISE THE ISSUE ON THE MODE OF C OMPUTATION OF DEDUCTION U/S 10B HAS BEEN SETTLED BY THE DECISION OF THE HONBLE SPE CIAL BENCH OF THE ITAT, INDORE IN THE CASE OF MARAL OVERSEAS LTD. VS. ACIT DATED 28.3 .2012 (2012) REPORTED IN 2012 TIOL-197-ITAT-INDORE SPECIAL BENCH. THUS EVEN IF WE SET ASIDE THE ISSUE TO THE FILE OF E AO, IT WOULD BECOME ACADEMIC. 10. IN ANY EVENT AS WE HAVE UPHELD THE FINDINGS OF THE FIRST APPELLATE AUTHORITY ON FACT WE DISMISS BOTH THE APPEALS OF THE REVENUE. 11. IN THE RESULT BOTH THE APPEALS OF THE REVEN UE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 5 TH JULY, 2015. SD/- SD/- (G.C. GUPTA) (J. SUDHAKAR REDDY) VICE PRESIDENT ACCOUNTANT MEMBER DATED: THE 15 TH JULY, 2015 VEENA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER DY. REGISTRAR SL. NO. DESCRIPTION DATE 1. DATE OF DICTATION BY THE AUTHOR 9.7.2015 2. DRAFT PLACED BEFORE THE DICTATING MEMBER 14.7.2 015 3. DRAFT PLACED BEFORE THE SECOND MEMBER 4. DRAFT APPROVED BY THE SECOND MEMBER ITA NOS.2306, 2307/DEL/2007 DCIT VS. M/S. PICRIC LIMITED 6 5. DATE OF APPROVED ORDER COMES TO THE SR. PS 6. DATE OF PRONOUNCEMENT OF ORDER 7. DATE OF FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER