Deputy Commissioner of Income Tax, Circle-2(1), Vijayawada V. The Andhra Pradesh State Co-operative Marketing Federation Limited, Vijayawada

ITA 271/VIZ/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8446 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 06-06-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Assessee Lawyers: M CHANDRAMOULESWARA RAO
• Keywords: Business income; Set aside
• Section: 80P

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , HONBLE ACCOUNTANT MEMBER ITA NO. 271 / VIZ /201 8 (ASST. YEAR: 20 14 - 15 ) DCIT, CIRCLE - 2(1), VIJAYAWADA. VS. M/S. THE ANDHRA PRADESH STATE CO - OPERATIVE MARKETING FEDERATION LTD., BLOCK - C, STALIN CORPORATE, INDUSTRIAL ESTATES, AUTONAGAR, VIJAYAWADA. PAN NO. AAAAT 3102 B (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI M. CHANDRAMOULESWARARAO , C A. DEPARTMENT BY : SMT. SUMAN MALIK SR. DR DATE OF HEARING : 03 / 0 7 /201 9 . DATE OF PRONOUNCEMENT : 17 / 0 7 /201 9 . O R D E R PER D.S. SUNDER SINGH , ACCOUNTANT MEMBER TH IS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 4 , HYDERABAD , DATED 31 /0 1 /201 7 FOR THE ASSESSMENT YEAR 20 14 - 15 . 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THE CIT( A ) ERRED IN ALLOWING THE ASSESSEE'S PLEA AND OUGHT TO HAVE CONSIDERED THAT S PER THE STATEMENT OF INCOME FILED BY THE ASSESSEE, THE PROFITS AND GAINS OF BUSINESS OR PROFESSION ARE NEGATIVE I.E. ( - ) RS.20.44 CRORES AND THE PROFITS BEING NEGATIVE THE ASSESSEE IS NOT ENTITLED IN 2 ITA NO. 271/VIZ/2018 ( THE ANDHRA PRADESH STATE CO - OP MARKETING FEDERATION LTD. ) DEDUCTION U/S 80P. 2. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ASSESSEE ITSELF IN THE STATEMENT OF INCOME HAS TAKEN OUT THE BANK INTEREST OF RS.15.96 CROR E S OUT OF THE 'PROFITS AND GAINS FROM BUSINESS' AND SHOWED THE SAME UNDER THE HEAD INCOME FROM OTHER SOURCES, WHICH SHOULD NOT HAVE BEEN TREATED AS ENTITLED FOR DEDUCTION U/S 80P ( 2)(E). 3. THE CIT(A) ERRED IN TREATING THE INTEREST EXPENDITURE DEBITED IN THE P & L ACCOUNT AND INTEREST INC OME SHOWN SEPARATELY AS INCOME FROM OTHER SOURCES, BOTH ON THE SAME FOOTING AS BUSINESS INCOME, BECAUSE REGARDING INTEREST EXPENDITURE THE SAME IS AGAIN REIMBURSED QUARTERLY BY GOVT. OF AP AS PER GO RT NO. 640, DT. 27.04.2013 (VIDE P A RA 2.3) AND THEREBY TH E INTEREST EXPENDITURE IN THE HANDS OF THE ASSESSEE GOT NULLIFIED. 4. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT AGAINST THE INTEREST RECEIPTS, ONLY THE EXPENDITURE INCURRED TO EARN SUCH RECEIPTS CAN BE ALLOWED TO BE SET - OFF, BUT NOT ANY OTHER EXPENDITURE. 5. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 3 . ALL THE GROUNDS OF APPEAL ARE R E L A TED TO THE DEDUCTION U / SEC . 80P DISALLOWED BY THE ASSESSING OFFICER WHICH WAS ALLOWED IN APPEAL BY THE LD. CIT(A). 4 . FACTS OF THE CASE IN BRIEF ARE THAT IN THIS CASE, THE ASSESSEE FILED ITS RETURN OF INCOME ADMITTING TOTAL INCOME OF RS. 13 ,55,67,470/ - AND CLAIMED DEDUCTION U/SEC. 80P TO THE EXTENT OF RS. 1,09,18,735/ - . THE SOURCE OF INCOME DECLA R ED BY THE ASSESSEE HAS BE EN FURNISHED BY THE ASSESSING OFFICER AT PAGE NO.3 OF THE ASSESSMENT ORDER AS UNDER: - SR.NO. HEAD OF INCOME AMOUNT OF INCOME 1 INCOME FROM HOUSE PROPERTY RS. 73,18,464 2 INCOME FROM B USINESS & P RO F ESSIONS RS. ( - ) 2,04,43,014 3 ITA NO. 271/VIZ/2018 ( THE ANDHRA PRADESH STATE CO - OP MARKETING FEDERATION LTD. ) 3 INCOME FROM CAPITAL GAIN NIL 4 INCOME FROM OTHER SOURCES RS. 15,96,10,750 GROSS TOTAL INCOME RS. 14,64,86,200 LESS DEDUCTION CLAIMED U/S 80P RS. 1,09,18,735 TAXABLE INCOME OFFERED RS. 13,55,67,470 SINCE THE BUSINESS INCOME OF THE ASSESSEE RESULTED IN LOSS, THE ASSESSING OFFICER HELD THAT AS PER SECTION 80P(2)(E) THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S 80P OF THE ACT. ACCORDING TO THE AO DEDUCTION IS ALLOWABLE ONLY F ROM THE SOURCE OF BUSINESS AND PROFESSION . S INCE THE ASSESSEE DERIV ED LOSS FROM ITS BUSINESS, IT IS HELD THAT ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/SEC. 80P , A CCORDINGLY, DISALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE AND MADE THE ADDITION. 5. AGGRI EVED BY THE O R DER OF THE ASSESSING OFFICER (AO) , THE ASSESSEE WENT ON APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) OBSERVED THAT THE ASSESSEE HA D RECEIVED THE INCOME FROM LETTING OUT OF GODOWN S TO THE EXTENT OF RS. 1.11 CRORES AND EARNED THE DIVIDEND INCOME OF RS. 3.43 CRORES . AS PER COMPUTATION OF INCOME , THE ASSESSEE DERIVED PROFIT FROM BUSINESS TO THE EXTENT OF RS. 17,31,97,171/ - , HENCE, HELD THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION U/SEC. 80P(2)(E) OF THE ACT. ACCORDINGLY, DELETED THE ADDITION AND ALLOWED THE APPEAL OF THE ASSESSEE. 4 ITA NO. 271/VIZ/2018 ( THE ANDHRA PRADESH STATE CO - OP MARKETING FEDERATION LTD. ) 6 . AGAINST THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THIS TRIBUNAL. 7 . DURING THE APPEAL HEARING, LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS CLAIMED THE DEDUCTION OF RS. 1.09 CRORES U/SEC. 80P OF THE ACT. THE ASSESSEE S BUSINESS INCOME RESULTED IN LOSS EXCEPT F ROM THE SOURCE OF INCOME FROM OTHER SOURCES . A S PER THE PROVISIONS OF SECTION 80P(2)(E) THE DEDUCTION IS ALLOWABLE FROM THE GROSS TOTAL INCOME EXCLUDING THE INCOME FROM OTHER SOURCES. SINCE THE ASSESSEES INCOME FROM BUSINESS OR PROFESSION WAS RESULTED IN LO SS , THE ASSESSEE IS DIS ENTITLED TO CLAIM THE DEDUCTION U/SEC. 80P(2)(E) OF THE ACT , HENCE ARGUED THAT THE ASSESSING OFFICER HAS RIGHTLY MADE THE ADDITION WHICH REQUI R ED TO BE UPHELD. 8 . ON THE OTHER HAND, LD. AR SUBMITTED THAT THE ASSESSEES GROSS TOTAL INCOME RESULTED IN POSITIVE INCOME AND ASSESSEE HAD RECE I VED INCOME PERTAINING TO 80 P ( 2 ) (E) I.E. ON ACCOUNT OF LETTING OUT OF GODOWN S TO THE EXTENT OF RS. 1,09,18,735/ - , HENCE, ELIGIBLE FOR DEDUCTION U/SEC. 80P. HE FURTHER SUBMITTED THAT INCOME FROM OTHER SOURCE IS INTEREST RECEIVED FROM VARIOUS FINANCIAL INSTITUTIONS ON THE DEPOSITS PARKED WHICH W ERE NOT IMMEDIATELY REQUIRED FOR THE ASSESSEES BUSINESS . THE L D.AR FURTHER STATED THAT THE ASSESSEE HAD RECEIVED THE LOANS FROM BANKS AND THE GOVERNMENT 5 ITA NO. 271/VIZ/2018 ( THE ANDHRA PRADESH STATE CO - OP MARKETING FEDERATION LTD. ) INSTITUTIONS FOR THE PURPOSE OF ITS BUSINESS AND PAID HUGE INTEREST ON THE LOAN S APART FROM EARNING INTEREST F R O M TEMPORARY PARKING OF DEPOSIT WITH THE BANK. THE ASSESSEE SUBMITTED THAT IT HAS PAID THE INTEREST TO GOVERNMENT AND BANKS ON ITS SHORT - TERM BORROWINGS TO THE TUNE OF RS. 51,02,54,703/ - WHICH IS ALSO PARTLY RELAT ABLE TO THE DEPOSITS MADE IN THE BANKS, HENCE, ARGUED THAT BEFORE ARRIVING THE INCOME FROM PROFESSION OR BUSINESS, THE INTEREST RELATABLE TO THE EARNING OF INTEREST INCOME REQUIRED EXCLUDED FROM BUSINESS INCOME IN WHICH CASE IT WOULD RESULT IN POSITIVE INCOME AND ARGUED THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION U/SEC. 80P WHICH THE LD.CIT(A) HAS ALLOWED AND SUBMITTED THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE LD.CIT(A). 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. 10 . IN THE INSTANT CASE , AS PER THE COMPUTATION OF INCOME THE ASSESSEE HAD EARNED FREE INTEREST INCOME OF RS. 15.96 CRORES AND EXCEPT FOR INCOME FROM OTHER SOURCES , THE I NCOME FROM BUSINESS AND PROFESSION RESULTED IN LOSS OF RS. 2,04,43,014/ - . THE ASSESSEE ADMITTED INCOME FROM HOUSE PROPE R TY , BUT DID NOT SHOW ANY INCOME FROM LETTING OUT OF GODOWN S OR WAREHOUSES . FOR A QUERY FROM THE BENCH, LD.AR SUBMITTED THAT THE INCOME RECEIVED FROM 6 ITA NO. 271/VIZ/2018 ( THE ANDHRA PRADESH STATE CO - OP MARKETING FEDERATION LTD. ) LETTING OUT O F GODOWN WAS INCLUDED IN THE INCOME FROM HOUSE PROPERTY OR INCOME FROM BUSINESS , BUT HE COULD NOT SPECIFICALLY SHOW OR CONFIRM IN WHICH HEAD OF INCOME IT WAS INCLUDED/CLUBBED. AS PER THE ACT THE I NCOME RECEIVED FROM LETTING OUT OF GOD OW N OR WAREHOUSES IS ALLOWABLE DEDUCTION U/SEC. 80P(2)(E) OF THE ACT. SIMILARLY, LD.AR SUBMITTED THAT THE ASSESSEE HAD RECEIVED THE INTEREST THE INCOME OF RS. 15.96 CRORES AND PAID THE INTEREST OF RS. 51.02 CRORES AND ARGUED THAT IF THE INTEREST PAYMENT ON LOANS RELATED TO THE D E POSITS IS EXCLUDED FROM BUSINESS INCOME IT WOULD RESULT IN POSITIVE INCOME . HOWEVER, DURING THE APPEAL HEARING , LD.AR COULD NOT FURNISH MATCHING DETAILS OF INTEREST PAYMENT, THE INTEREST RECE IPTS WITH THE LOANS AND DEPOSITS. THEREFORE, W E ARE OF CONSIDERED OPINION THAT THE ABOVE INFORMATION IS REQUIRED TO DECIDE WHETHER THE ASSESSEE DERIVED INCOME FROM BUSINESS OR NOT? T HEREFORE, IN THE INTEREST OF JUSTICE WE ARE OF THE CONSIDERED VIEW THAT THE ISSUE NEEDS TO BE REMITTED BACK TO THE FILE OF THE A SSESSING OFFICER TO EXAMINE THE EARNING OF INCOME RELATING TO THE LETTING OF GODOWN S, THE CORRECT INCOME DERIVED FROM THE BUSINESS OR PROFESSION. THE A SSESSING O FFICER SHOULD EXCLUDE THE INTEREST RELATED TO THE LOANS FOR ARRIVING THE INCOME BUSINESS OR PRO FESSION . THEREFORE , WE SET ASIDE THE ORDER OF THE AO ON THE ISSUE OF DISALLOWANCE MADE U/S 80P AND REMIT THE MATTER BACK TO THE FILE OF 7 ITA NO. 271/VIZ/2018 ( THE ANDHRA PRADESH STATE CO - OP MARKETING FEDERATION LTD. ) THE A O TO DECIDE THE ISSUE AFRESH ON MERITS AND AS PER LAW . ACCORDINGLY, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTI CAL PURPOSE. IT IS NEEDLESS TO SAY THAT ASSESSING OFFICER SHOULD GIVE SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO PRESENT HIS CASE. 11 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON TH IS 1 7 T H DAY OF JU LY , 201 9 . S D / - S D / - (V. DURGA RAO) ( D.S. SUNDER SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 1 7 T H JU LY , 201 9 . VR/ - COPY TO: 1. THE ASSESSEE M/S. THE ANDHRA PRADESH STATE CO - OPERATIVE MARKETING FEDERATION LTD., BLOCK - C, STALIN CORPORATE, INDUSTRIAL ESTATES, AUTONAGAR, VIJAYAWADA. 2. THE REVENUE DCIT, CIRCILE - 2(1), VIJAYAWADA. 3. THE PR. CIT - 4, HYDERABAD. 4. THE CIT(A) - 4, HYDERABAD. 5. THE D.R . , VISAKHAPATNAM. 6. GUARD FILE. BY ORDER (VUKKEM RAMBABU) SR. PRIVATE SECRETARY, ITAT, VISAKHAPATNAM.