M/s Sankhla Vinyl Pvt Ltd , Bangalore V. Assistant Commissioner of Income TAx Circle-6(1)(1), Bangalore

ITA 2485/BANG/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9460 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 23-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VINOD SHARMA
• Assessee Lawyers: H N KHINCHA
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI B.R BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO.2485/BANG/2017 ASSESSMENT YEAR : 2010-11 SANKHLA VINYL PVT. LTD., (FORMERLY SANKHLA POLYMERS PVT. LTD.,) NO.126, 7 TH MAIN, 3 RD PHASE, PEENYA INDUSTRIAL AREA, BENGALURU-560 058. PAN AABCS 9528 F VS. THE ASST. COMMISSIONER OF INCOME- TAX, EARLIER : CIRCLE-12(3), NOW CIRCLE-6(1)(1), BENGALURU. APPELLANT RESPONDENT APPELLANT BY : SHRI H.N KHINCHA, C.A RESPONDENT BY : SHRI VINOD SHARMA, JCIT (DR) DATE OF HEARING : 16.09.2019 DATE OF PRONOUNCEMENT : 25.09.2019 O R D E R SHRI B.R BASKARAN, ACCOUNTANT MEMBER THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING TH E ORDER DATED 28-09-2017 PASSED BY LD CIT(A)-6, BENGALURU A ND IT RELATES TO THE ASSESSMENT YEAR 2010-11. ALL THE GROUNDS UR GED BY THE ASSESSEE RELATE TO A SINGLE ISSUE, VIZ., WHETHER TH E LD CIT(A) WAS JUSTIFIED IN CONFIRMING THE DENIAL OF DEDUCTION U/S 80IB OF THE ACT IN RESPECT OF INTEREST INCOME RECEIVED BY THE ASSESSEE . 2. WE HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF PVC AND P OLYOLEFIN COMPOUNDS. THE ASSESSEE IS ELIGIBLE TO CLAIM DEDUC TION U/S 80IB OF ITA NO.2485/BANG/2017 PAGE 2 OF 5 THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS, THE AO NOTICED THAT THE ASSESSEE HAS ALSO CLAIMED DEDUCTIO N U/S 80IB OF THE ACT IN RESPECT OF INTEREST INCOME. THE AO TOOK THE VIEW THAT THE INTEREST INCOME CANNOT BE CONSIDERED TO HAVE BEEN D ERIVED FROM MANUFACTURE OR PRODUCTION OF ARTICLES OR THINGS AND THE SAID INCOME DOES NOT HAVE NEXUS WITH THE PROFITS AND GAINS DERI VED FROM AN INDUSTRIAL UNDERTAKING. ACCORDINGLY HE REJECTED TH E CLAIM FOR DEDUCTION U/S 80IB OF THE ACT IN RESPECT OF INTERES T INCOME. THE LD CIT(A) CONFIRMED THE SAME. 3. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS EA RNED INTEREST INCOME FROM THE MARGIN MONEY KEPT WITH BANKS FOR OB TAINING LETTER OF CREDIT FACILITIES. ACCORDINGLY HE SUBMITTED THA T THE INTEREST INCOME IS INTRICATELY CONNECTED WITH THE CARRYING O N BUSINESS AND HENCE THE SAME SHOULD BE ASSESSED AS INCOME FROM BU SINESS ONLY. ACCORDINGLY HE SUBMITTED THAT THE ASSESSEE IS ELIGI BLE FOR DEDUCTION U/S 80IB OF THE ACT IN RESPECT OF INTEREST INCOME A LSO. IN SUPPORT OF HIS CONTENTIONS, THE LD A.R PLACED HIS RELIANCE ON THE FOLLOWING DECISIONS RENDERED BY HONBLE KARNATAKA HIGH COURT: - (A) CIT VS. M/S CHINNANACHI MUTHU CONSTRUCTION & CO . (I.T.NO.615 OF 2007 DATED 18-01-2011. (B) M/S HUBLI ELECTRICITY SUPPLY CO. VS. DCIT (ITA NOS.100025 TO 100027/2017 C/W ITA NO.100028/2018 DATED 09-02-2018). 4. ON THE CONTRARY, THE LD D.R PLACED HIS RELIAN CE ON THE FOLLOWING CASE LAWS TO CONTEND THAT THE INTEREST INCOME IS NO T ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. ITA NO.2485/BANG/2017 PAGE 3 OF 5 (A) CIT VS. BHAWAL SYNTHETICS (INDIA)(2017)(297 C TR 104)(RAJ) (B) ASIAN CEMENT INDUSTRIES VS. ITAT (2013)(261 C TR 551)(J & K) 5. WE NOTICE THAT THE SUBMISSION OF THE ASSESSE E THAT THE INTEREST INCOME HAS BEEN EARNED FROM THE DEPOSITS KEPT FOR O BTAINING LETTER OF CREDIT FACILITY IS MADE FOR THE FIRST TIME BEFOR E THE TRIBUNAL. A PERUSAL OF THE CASE LAWS RELIED UPON BY BOTH THE PA RTIES WOULD SHOW THAT THE TREATMENT OF INTEREST INCOME WOULD DEPEND UPON THE PURPOSE OF KEEPING DEPOSITS WITH BANKS. SINCE THE PURPOSE OF KEEPING DEPOSITS WITH BANKS AND THEIR NEXUS WITH TH E BUSINESS CARRIED ON BY THE ASSESSEE HAVE NOT BEEN EXAMINED B Y THE TAX AUTHORITIES, WE ARE OF THE VIEW THAT THIS ISSUE REQ UIRES FRESH EXAMINATION AT THE END OF THE AO. ACCORDINGLY WE S ET ASIDE THE ORDER PASSED BY LD CIT(A) AND RESTORE ALL THE MATTE RS TO HIS FILE FOR EXAMINING THEM AFRESH. AFTER AFFORDING ADEQUATE OP PORTUNITY OF BEING HEARD TO THE ASSESSEE, THE AO MAY TAKE APPROP RIATE DECISION IN ACCORDANCE WITH LAW. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH SEPTEMBER, 2019. SD/ - (BEENA PILLAI) JUDICIAL MEMBER SD/ - (B.R BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED, 25TH SEPTEMBER, 2019. / VMS / ITA NO.2485/BANG/2017 PAGE 4 OF 5 COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE. ITA NO.2485/BANG/2017 PAGE 5 OF 5 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR.P.S .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE.. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. DICTATION NOTE ENCLOSED . 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER .