M/s. Pioneer Industries, Haridwar V. ITO, Haridwar

ITA 250/DEL/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8229 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 04-02-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 12-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBHAKANT SAHU
• Keywords: Business income

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I - 2 : NEW DELHI BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI , ACCOUNTANT MEMBER I TA NO . 250/DEL/2015 (ASSESSMENT YEAR: 2010 - 11 ) PIONEER INDUSTRIES, PLOT NO.48, SECTOR - 2, IIE, SIDCUT, HARIDWAR PAN:AAIFP5234C VS. ITO, WARD - 2, HARIDWAR (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. PANCHAM SETHI, CA RE VENUE BY: SH . SUBHAKANT SAHU, SR. DR DATE OF HEARING 04 / 02 /2016 DATE OF PRONOUNCEMENT 02 / 05 /2016 O R D E R PER PRASHANT MAHARISHI , A . M . 1. TH IS APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD CIT ( A) - I, DEHRADUN, DATED 12.09.2014 FOR THE ASSESSMENT YEAR 2010 - 11. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - THE LEARNED ASSESSING OFFICER HAS WRONGLY DISALLOWED DEDUCTION U/S 80IC ON INTEREST EARN ED ON FOR AMOUNTING RS.3,02,269/ - . THE FIRM HAS MADE THESE FOR WITH BANK AS A MARGIN MONEY AGAINST OPENING OF IMPORTED LETTER OF CREDIT. THESE FDR'S WERE INCIDENTAL TO AND FOR PURPOSE OF CARRYING ON BUSINESS OF THE FIRM A ND NOT MADE FOR ANY INVESTMENT PURPOSE. FURTHER THESE FDR'S WERE MADE OUT OF CREDIT FACILITIES AVAILED FROM BANK AND THE FIRM HAS EARNED LOWER INTEREST AS COMPARED TO INTEREST PAID ON BANK BORROWING, SO NETTING SHOULD BE DONE BETWEEN INTEREST PAID AND I NTE REST RECEIVED AND AFTER NETTING IF THERE WAS NO INTEREST INCOME, NOTHING COULD BE REDUCED FROM PROFIT & GAINS OF BUSINESS. HENCE ADDITION OF CLAIM MADE BY LEARNED ASSESSING OFFICER IS UNWARRANTED, UNJUSTIFIED AND BAD IN LAW. 3. BRIEF FACT OF THE CASE IS THE ASSESSEE IS PARTNERSHIP FIRM FILED RETURN OF INCOME ON 13.09.2010 DECLARING INCOME OF RS.NIL. THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IC OF THE INCOME TAX ACT. DURING THE YEAR, ASSESSEE HAS EARNED INTEREST INCOME OF RS. 302269 / - ON WHICH DEDUCTION U/S 80IC WAS DENIED HOLDING THAT THIS INCOME IS NOT DERIVED FROM THE INDUSTRIAL UNDERTAKING. AGAINST THIS ASSESSEE PREFERRED AN APPEAL BEFORE THE LD CIT ( A) WHO ALSO CONFIRMED THE DISALLOWANCE OF DEDUCTION U/S 80IC ON INTEREST INCOME. BEFORE THE LD, CIT ( A) ASSESSEE ALSO SUBMITTED THAT INTEREST PAID BY THE ASSESSEE SHOULD BE N ETTED OFF AGAINST THE INTEREST INCOME . CIT ( A) DID NOT PAGE 2 OF 3 AGREE WITH THE ARGUMENT OF THE ASSESSEE AND DID NOT ALLOW THE NETTING OFF THE INTEREST. 4. ON APPEAL BEFORE U S, ASSESSEE SUBMITTED THAT INTEREST PAID IS BECAUSE OF INTEREST ON CASH CREDIT LIMIT AND TERM LOAN AS WELL AS FOR BANK GUARANTEE. IT WAS FURTHER SUBMITTED THAT INTEREST HAS BEEN EARNED ON FIXED DEPOSIT RECEIPTS PLACED WITH THE BANK. ASSESSEE FURTHER SUBMIT TED THAT ALMOST ALL FIXED DEPOSIT ARE PLACED FOR OBTAINING BANK GUARANTEE AS WELL AS FOR THE PURPOSES OF BUSINESS OF THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT MOST OF THE FUNDS ARE DEPOSITED IN FDR WITH THE BORROWED FUNDS. FOR ESTABLISHING THIS FACT, ASS ESSEE HAS SUBMITTED THE COPY OF BALANCE SHEET ALSO WHERE ASSESSEE HAS UNSECURED LOAN AND SECURED LOAN - BEARING INTEREST. LD AR FURTHER RELIED ON THE DECISION OF GAUHATI HIGH COURT IN THE CASE OF PANCHRATNA CEMENT PVT. LTD. 317 ITR 259. 5. LD DR SUBMITTED THAT AS ASSESSEE HAS EARNED BANK INTEREST WHICH IS NOT DERIVED FROM THE INDUSTRIAL UNDERTAKING BUT FROM THE FIXED DEPOSITS DEDUCTION U/S 80IC CANNOT BE ALLOWED ON THIS AND FURTHER IT IS ALSO NOT ELIGIBLE FOR NETTING OFF. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS. THE ASSESSEE HAS CLAIMED THAT THE INTEREST INCOME EARNED BY HIM ON FDRS ARE LINKED WITH THE BUSINESS OF THE ASSESSEE AND THEREFORE THEY SHOULD BE NETTED OFF WITH INTEREST EXPENDITURE INCURRED BY THE ASSESSEE. MOST OF THE FIXED DEPOSIT RECEIPT S ARE FOR THE PURPOSES OF OBTAINING BANK GUARANTEE FOR THE PURPOSES OF THE BUSINESS OF THE ASSESSEE . AS LD. CIT (A) HAS HIMSELF HELD IN PARA NO 8 THAT INTEREST EARNED ON FDR PLACED AS MARGIN MONEY FOR SECURING LETTER OF CREDIT FROM BANK. THE ASSESSEE HA S PLACED BALANCE SHEET ON RECORD WHICH SHOWS THAT ASSESSEE HAS ONLY BORROWED FUNDS SUCH AS SECURED LOAN, UNSECURED LOAN AND PARTNERS CAPITAL WHICH IS ALSO A BORROWINGS BECAUSE INTEREST IS ALLOWABLE AS EXPENDITURE ON THIS SUM IT MIGHT NOT HAVE CLAIMED SUCH EXPENDITURE DURING THE YEAR. IT DOES NOT HAVE ITS OWN RESERVE AND SURPLUS WHICH DOES NOT CARRY INTEREST. ALL FD R S HAVE BEEN TAKEN FROM C C ACCOUNT, USED FOR THE BANK GUARANTEE PURPOSES AS SUBMITTED BY LD. AR, AND NOT DISPUTED BY THE LD DR. FURTHER INTEREST INCOME ON FDR IS ALSO TAXED BY THE LD AO AS BUSINESS INCOME. IT IS ALSO APPARENT THAT ASSESSEE DOES NOT HAVE ANY OTHER BUSINESS OTHER THAN THE BUSINESS OF ELIGIBLE UNDERTAKING. FURTHER CIT (A) HAS REJECTED THE RELIANCE ON ALL THE DECIDED CASE LAWS BY THE PAGE 3 OF 3 ASSESSEE HOLDING THAT THOSE CASES PERTA IN TO SECTION 80 HHC OF THE INCOME TAX ACT NOT ON SECTION 80 IA OF THE ACT. WE HAVE PERUSED PROVISIONS ALLOWING THE DEDUCTION ALLOWABLE U/S 80 HHC OF THE ACT WHICH IS AS UNDER : 80HHC. 98 [(1) WHERE AN ASSESSEE, BEING AN INDIAN COMPANY OR A PERSON (OTHER THAN A COMPANY) RESIDENT IN INDIA, IS ENGAGED IN THE BUSINESS OF EXPORT OUT OF INDIA OF ANY GOODS OR MERCHANDISE TO WHICH THIS SECTION APPLIES, THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECT ION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, 99 [A DEDUCTION TO THE EXTENT OF PROFITS 1 , REFERRED TO IN SUB - SECTION (1B),] DERIVED BY THE ASSESSEE FROM THE EXPORT OF SUCH GOODS OR MERCHANDISE : SIMILARLY, THE DEDUCTION U/S 80 I C OF THE ACT IS ALLOWED FROM THE INCOME DERIVED FROM INDUSTRIAL UNDERTAKING. THEREFORE, WE DO NOT FIND THAT WORD DERIVE CAN HAVE DIFFERENT MEANING FOR THESE TWO SECTIONS. IN VIEW OF THIS WE HOLD THAT ALL THOSE DECISIONS RELIED BY THE ASSESSEE SQUARELY APPLIES TO THE FACTS OF THE PRESENT CASE AS FAR AS THE ISSUE OF NETTING OFF THE INTEREST IS CONCERNED. IN VIEW OF THIS, THE GROUND OF THE ASSESSEE SO FAR AS NETTING OFF THE IN TEREST INCOME OF RS 302269/ - IS ALLOWED AND ORDER OF CIT (A ) IS REVERSED TO THAT EXTENT. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 2 / 0 5 /2016 . - S D / - - S D / - ( I.C.SUDHIR ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 0 2 / 0 5 / 2016 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI