M/s Sri Rama Steels Ltd., Manimajra V. Addl. CIT, Chandigarh

ITA 236/CHANDI/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68484 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-07-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 04-03-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Business income; Proportionate interest
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 236/CHD/2013 ASSESSMENT YEAR: 2009-10 M/S SRI RAMA STEELS LTD. VS. THE ADDL. CIT, SCO 904, NAC RANGE III MANDI MANIMAJRA CHANDIGARH PAN NO. AAKCS4495E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SINGH RESPONDENT BY : SHRI MANJIT SINGH DATE OF HEARING : 02/09/2013 DATE OF PRONOUNCEMENT : 20.09.2013 ORDER PER T.R.SOOD, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 31/12/2012 OF CIT(APPEALS), CHANDIGARH. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL:- 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN LAW AND FACTS IN UPHOLDING THE DISALLOWAN CE OF DEDUCTION U/S 80IC OF THE ACT CLAIMED ON INTEREST INCOME OF RS. 1,00,23,719/- WHICH IS ILLEGAL, ARBITRARY A ND UNJUSTIFIED. 2. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED IN UPHOLDING THE DISALLOWANCE OF PROPORTIONATE INTEREST OF RS. 29,95,517/- ON ALLEGE D 2 INTEREST FREE ADVANCES WHICH IS ILLEGAL, ARBITRARY AND UNJUSTIFIED. 3. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) H AS FURTHER ERRED IN UPHOLDING THE CHARGING OF INTEREST U/S 234B AND C WHICH IS NOT CHARGEABLE. 3. OUT OF THE ABOVE, GROUND NO.2 WAS NOT PRESSED BE FORE US AND, THEREFORE, THE SAME IS DISMISSED AS NOT PRESSED. 4. GROUND NO.1: AFTER HEARING BOTH THE PARTIES WE F IND THAT DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICE D THAT ASSESSEE HAS CLAIMED DEDUCTION U/S 80IC IN RESPECT OF FOLLOWING ITEMS:- SR. NO. HEAD AMOUNT (IN RS.) 1. INTEREST 1,00,23,719/- 2. MISCELLANEOUS INCOME (DISCOUNT RECEIVED, SHORT & EXCESS RECOVERY) 1,68,624/- 3. COMMODITY TRADING INCOME 1,98,085/- 4. TRADING INCOME 11,86,954/- TOTAL 1,15,77,382/- THE ASSESSING OFFICER DISCUSSED THIS ISSUE IN DETAI L AND ULTIMATELY HELD THAT THESE ITEMS OF INCOME CANNOT BE SAID TO HAVE BEEN D ERIVED FORM INDUSTRIAL UNDERTAKING AND, THEREFORE, THE SAME WERE NOT ELIGI BLE FOR DEDUCTION U/S 80 & 80-IC AND ACCORDINGLY DEDUCTION WAS DENIED. 5. ON APPEAL, IT WAS MAINLY SUBMITTED THAT ASSESSEE PURCHASED SOME RAW MATERIAL AGAINST LETTER OF CREDIT AND FOR OPENING S UCH LETTER OF CREDIT, FDR WAS REQUIRED TO BE MADE ON WHICH INTEREST WAS EARNE D. THE SAME WAS PART OF THE BUSINESS INCOME AND DEDUCTION SHOULD BE ALLOWED . HOWEVER, THE ISSUE REGARDING DEDUCTION U/S 80IC ON INCOME FROM COMMODI TY TRADING AND TRADING INCOME WAS NOT PRESSED BEFORE THE CIT(A). THE LD. CIT(A) DID NOT FIND 3 FORCE IN THESE SUBMISSIONS AND HELD THAT INCOME FRO M INTEREST AND MISC. INCOME CANNOT BE SAID TO HAVE BEEN DERIVED FROM ELI GIBLE UNDERTAKING AND THEREFORE, THE SAME WAS NOT ELIGIBLE FOR DEDUCTION U/S 80IC OF THE ACT. 6. BEFORE US, LD. COUNSEL FOR THE ASSESSEE REITERAT ED THE SUBMISSIONS MADE BEFORE LD. CIT(A). 7. ON THE OTHER HAND, THE LD. DR STRONGLY SUPPORTE D THE ORDER OF CIT(A) AND ALSO SUBMITTED THAT IDENTICAL ISSUE HAS BEEN DE CIDED BY THE TRIBUNAL AGAINST THE ASSESSEE FOR ASSESSMENT YEAR 2008-09 IN ITA NO. 1291/CHD/2012 (COPY OF THE ORDER FILED). 8. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIND THAT IN THE ASSESSMENT YEAR 2008-09, THIS ISSUE WHICH WAS RAISED THROUGH G ROUND NO. 4 WAS NOT PRESSED BEFORE THE TRIBUNAL. WE FAIL TO UNDERSTAND HOW THIS ISSUE IS BEING PRESSED IN THIS YEAR. IN ANY CASE, THE INTEREST WH ICH HAS BEEN RECEIVED FROM FDR CANNOT BE SAID TO HAVE BEEN DERIVED FROM THE EL IGIBLE UNDERTAKING EVEN IF THE FDR WERE MADE FOR PURCHASING LETTER OF CREDI TS. THE HON'BLE SUPREME COURT IN THE CASE OF PANDIAN CHEMICALS LTD V CIT 26 2 ITR 275 (SC) WHERE THE ASSESSEE HAD DERIVED INCOME FROM ELECTRICITY SE CURITY DEPOSIT BY WAY OF INTEREST HELD THAT SUCH INCOME WAS A STEP REMOVED F ROM INDUSTRIAL UNDERTAKING AND, THEREFORE, SUCH INTEREST INCOME WA S NOT DERIVED FROM INDUSTRIAL UNDERTAKING AND SAME WAS NOT ELIGIBLE FO R DEDUCTION. NO DOUBT THIS DECISION WAS RENDERED U/S 80HH OF THE ACT BUT THE CONCEPT DERIVED FROM HAS BEEN USED IN THE MOST OF THE PROVISIONS O F CHAPTER VI-A. EVEN U/S 80IC, THE EXPRESSION USED IS DERIVED BY AN UNDERTA KING. THE HEAD NOTE IN THE CASE OF PANDIAN CHEMICALS LTD (SUPRA) READS AS UNDER:- THE WORDS DERIVED FROM IN SECTION 80HH OF THE IN COME TAX ACT, 1961, MUST BE UNDERSTOOD AS SOMETHING WHICH HAS A DIRECT OR IMMEDIATE NEXUS 4 WITH THE ASSESSEES INDUSTRIAL UNDERTAKING. ALTHOUG H ELECTRICITY MAY BE REQUIRED FOR THE PURPOSES OF THE INDUSTRIAL UNDERTA KING, THE DEPOSIT REQUIRED FOR ITS SUPPLY IS A STEP REMOVED FROM THE BUSINESS OF THE INDUSTRIAL UNDERTAKING. HELD ACCORDINGLY, THAT INTEREST DERIVED BY THE INDU STRIAL UNDERTAKING OF THE ASSESSEE ON DEPOSITS MADE WITH THE ELECTRICITY BOAR D FOR THE SUPPLY OF ELECTRICITY FOR RUNNING THE INDUSTRIAL UNDERTAKING COULD NOT BE SAID TO FLOW DIRECTLY FROM THE INDUSTRIAL UNDERTAKING ITSELF AND WAS NOT PROFITS OR GAINS DERIVED BY THE UNDERTAKING FOR THE PURPOSE OF THE S PECIAL DEDUCTION UNDER SECTION 80HH. THEREFORE, FOLLOWING THIS DECISION WE DECIDE THIS I SSUE AGAINST THE ASSESSEE. 9. GROUND NO.3: THE ISSUE REGARDING CHARGING OF IN TEREST U/S 234B & 234C IS CONSEQUENTIAL IN NATURE AND ASSESSING OFFIC ER IS DIRECTED TO CHARGE INTEREST AS PER THE PROVISIONS OF LAW. 10. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 20.09.2 013 SD/- SD/- (SUSHMA CHOWLA) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMER DATED : 20 TH SEPTEMBER, 2013 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR BY ORDER ASSISTANT REGISTRAR, ITAT CHANDIGARH