Met India, Ahmedabad V. The ACIT.,Vapi Circle, Vapi

ITA 2780/AHD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60259 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 20-03-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 09-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B L YADAV SRDR
• Keywords: Business income; Depreciation
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI, A.K.GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ITA NO.2780 & 2781/AHD/2011 ASSESSMENT YEARS:2007-08 & 2008- 09 M/S MET INDIA 100/101, PANCHAL UDYOGNAGAR, BHIMPORE, NANI DAMAN 396210 PAN NO.AAJFM8624R V/S . ADDL. COMMISSIONER OF INCTAX (APPEALS), VAPI RANGE, VAPI (APPELLANT) .. (RESPONDENT) /BY ASSESSEE SHRI PRAKASH D SHAH, AR /BY REVENUE SHRI B.L. YADAV, SR-DR /DATE OF HEARING 20-03-2012 /DATE OF PRONOUNCEMENT 20-04-2012 O R D E R PER KUL BHARAT, JUDICIAL MEMBER:- THESE TWO APPEALS BY THE ASSESSEE ARE ARISING OUT O F THE DIFFERENT ORDERS OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)- VALSAD IN APPEALS NO. CIT(A)/VLS/163/ 09-10 DATED 25-08-2011 AND CIT(A)/V LS/153/10-11 DATED 26- 08-2011. THE ASSESSMENTS WERE FRAMED BY THE ADDL. C OMMISSIONER OF INCOME- TAX, VAPI RANGE VIDE HIS ORDERS DATED 15-10-2009 AN D 30-11-2009 U/S 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO A S THE ACT) FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09. 2. THE COMMON GROUND IN THESE APPEALS FILED BY THE ASSESSEE EXCEPT THE CHANGE OF THE FIGURES READS AS UNDER:- ITA NO.2780/AHD/2011. 1. THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND FA CTS BY CONFIRMING THE DISALLOWANCE OF RS.8,92,210/- BEING AMOUNT OF EXPEN SE, ON THE INTEREST INCOME NOT CLAIMED UNDER SECTION 80IB OF THE ACT AN D THEREFORE THE ADDITIONS MADE THEREIN SHOULD BE DELETED IN FULL. ITA NO.2781/AHD/2011. 1. THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND FA CTS BY CONFIRMING THE DISALLOWANCE OF RS.7,47,838/- BEING THE AMOUNT OF E XPENSE, ON THE INTEREST INCOME NOT CLAIMED UNDER SECTION 80IB OF T HE ACT AND THEREFORE THE ADDITIONS MADE THEREIN SHOULD BE DELETED IN FUL L. 2. THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND FAC TS BY CONFIRMING THE DISALLOWANCE OF RS.1,74,085/- BEING THE AMOUNT OF T HE REDUCTION OF THE DEPRECIATION ALLOWANCE AND THEREFORE THE ADDITIONS MADE THEREIN SHOULD BE DELETED IN FULL. SINCE COMMON ISSUE IS INVOLVED IN THESE APPEALS, TH EY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 3. THE FACTS IN BRIEF ARE THAT ASSESSEE IS HAVING A MANUFACTURING UNIT IS LOCATED IN THE UNION TERRITORY OF DAMAN, WHICH IS A BACKWARD AREA AS SPECIFIED IN THE VIIITH SCHEDULE TO THE INCOME TAX ACT. THE ASSE SSEE STARTED ITS MANUFACTURING ACTIVITY FROM THE ACCOUNTING PERIOD R ELEVANT TO ASSESSMENT YEAR 2004-05. THEREFORE, THE ASSESSEE CLAIMED DEDUCTION U/S 80 IB OF THE ACT @ 100%. THE CASE WAS TAKEN UP FOR SCRUTINY AND THE AS SESSMENT U/S. 143(3) OF THE INCOME TAX ACT, 1961 WAS COMPLETED FOR THE ASSESSME NT YEAR 2007-08 ON 15- 10-2009 AND FOR THE ASSESSMENT YEAR 2008-09 IT WAS COMPLETED ON 30-11-2009 . THE ASSESSING OFFICER EXCLUDED GROSS INTEREST INCOM E FOR THE PURPOSE OF COMPUTING ELIGIBLE DEDUCTION U/S 80IB OF THE ACT. T HE ASSESSEE FEELING AGGRIEVED BY THE ORDER OF ASSESSING OFFICER APPROACHED THE LD . CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS REJECTED THE APPEAL . 4. BEFORE US LD. AR ARGUED THAT THE ASSESSEE HAS CL AIMED EXPENSES OF RS.8,98,210/- AGAINST THE INTEREST INCOME OF RS.52, 83,586/- FOR THE A.Y. 2007-08 AND RS.7,47,838/- AGAINST THE INTEREST INCOME OF RS .83,09,314/- FOR THE A.Y. 2008-09 AND THE NET INTEREST INCOME IS DEDUCTED TO ARRIVE AT THE PROFIT ELIGIBLE FOR DEDUCTION U/S. 80IB OF THE ACT. HE SUBMITTED THAT L D. CIT(A) IS NOT JUSTIFIED IN AFFIRMING THE ACTION OF ASSESSING OFFICER. HE SUBMI TTED THAT REDUCTION OF GROSS INTEREST INCOME, FOR DETERMINATION OF ELIGIBLE AMOU NT OF DEDUCTION U/S. 80IB OF THE ACT. HE SUBMITTED THAT THE INTEREST HAS BEEN TAXED AS BUSINESS INCOME. LD. A.R. SUBMITTED THAT THE VIEW OF THE AUTHORITIES BELOW I S ERRONEOUS AND IN SUPPORT OF HIS CONTENTION LD. AR PLACED RELIANCE UPON THE FOLL OWING JUDGMENTS. A) CIT V. ASIAN STAR CO. LTD. 326 ITR 56 (BOM) B) LALSONS ENTERPRISES V. DCIT 89 ITD 25 (DEL) (SB) C) CIT V. SHRI RAM HONDA POWER EQUIP 289 ITGR 475 ( DEL) D) EMMVEE SOLAR SYSTEMS (P) LTD. V. ACIT (2008) 5 D TR (BANG) E) GOKUL REFOILS AND SOLVENTE LTD. ITA NO.2990 & 3234/AHD/2008 DT. 30-12- 2011 F) CIVIL APPEAL NO.1914 OF 2012 DT. 08-02-2012 OF H ONBLE SUPREME COURT OF INDIA. 5. ON THE CONTRARY, LD. DR ARGUED THAT THERE IS NO INFIRMITY INTO THE ORDERS PASSED BY THE AUTHORITIES BELOW. HE SUBMITTED THAT THE LD. CIT(A) HAS RIGHTLY OPINED THAT IN THE ABSENCE OF NEXUS BETWEEN THE BOR ROWED FUNDS VIS--VIS ADVANCES GIVEN FOR THE PURPOSE OF EARNING OF INTERE ST DULY DISENTITLED THE ESTIMATE DEDUCTION OF EXPENDITURE TO AVAIL THE HIGHER BENEFI T OF DEDUCTION U/S. 80IB OF THE ACT. HE DRAWN OUR ATTENTION TO PARA-5.3 OF LD. CIT( A)S ORDER, THE CONTENTS OF THE SAME ARE REPRODUCED HEREUNDER:- 5.3 DECISION :- I HAVE CONSIDERED THE OBSERVATION OF THE AO IN T HE ASSESSMENT ORDER AS WELL AS THE CONTENTION RAISED B Y THE AR OF THE APPELLANT IN THE WRITTEN SUBMISSION. THE OBSERVATIO N OF THE AO SEEMS TO BE JUSTIFIED. HE HAS PICKED UP THE COMPUTA TION OF INCOME WHEREIN, THE APPELLANT HIMSELF HAS EXCLUDED THE INT EREST INCOME OF RS.52,83,586/- WHILE WORKING OUT THE ALLOW ABILITY/ DEDUCTION U/S. 80IB OF THE ACT. HE HAS RIGHTLY OBSERVED THAT THE A PPELLANT ESTIMATED AN EXPENDITURE TO EARN THE INTEREST, WHIC H IS ARBITRARY AND WITHOUT ANY BASIS. HIS OBSERVATION WITH REGARD TO T HE UTILITY OF BORROWED FUNDS VIS--VIS THE SURPLUS TO MEET WITH T HE ADVANCES IS RATIONAL AND LOGICAL. THEREFORE, THE AO IS JUSTIFIE D IN ARRIVING AT THE CONCLUSION THAT THE ESTIMATED EXPENDITURE CLAIMED B Y THE APPELLANT IS JUST AN EYE WASH /WINDOW DRESSING TO CLAIM HIGHE R AMOUNT OF DEDUCTION U/S. 80IB OF THE ACT. THE AR OF THE APPEL LANT IS GROSSLY MISTAKEN IN RAISING THE ISSUE OF APPLICABILITY OF T HE DECISIONS OF PANDIAN CHEMICALS LIMITED AND STERLING FOODS, WHICH ARE DIRECTLY RELATED TO THE ISSUE UNDER CONSIDERATION. IN ABSENC E OF NEXUS BORROWED FUNDS VIS--VIS ADVANCES GIVEN FOR THE PUR POSE OF EARNING OF INTEREST CLEARLY DISENTITLED THE APPELLANT TO CL AIM THE ESTIMATE DEDUCTION OF EXPENDITURE TO AVAIL THE HIGHER BENEFI T OF DEDUCTION U/S. 80IB OF THE ACT. THEREFORE, THE AO IS JUSTIFIE D IN MAKING SUCH ADDITION. THUS, THIS GROUND OF APPEAL IS DISMISSED. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND THE JUDGMENTS CITED BY LD. AR. THE COMM ON ISSUE INVOLVED IN THESE APPEALS IS WITH REGARD TO EXCLUSION OF GROSS INTERE ST INCOME FOR THE PURPOSE OF COMPUTING ELIGIBLE DEDUCTION U/S 80IB OF THE ACT. T HE CONTENTION OF THE LD. LEARNED AUTHORISED REPRESENTATIVE IS MISCONCEIVED I N VIEW OF THE FACT THAT DURING THE COURSE OF THE HEARING LD. AR COULD NOT T O RESPOND TO THE SPECIFIC QUERY FROM US AS TO HOW THERE IS NEXUS BETWEEN THE BORROW ED FUNDS AND THE LOAN GIVEN FOR THE PURPOSE OF EARNING OF INTEREST. LD. AR SUBM ITTED THAT LOAN AS ADVANCED IS FROM THE MIXED FUND. IN VIEW OF THE FACT THAT THE L AW IS NOW WELL SETTLED IT IS THE ASSESSEE WHO IS REQUIRED TO DEMONSTRATE THE NEXUS B ETWEEN THE BORROWED FUND AND LOAN GIVEN FOR THE PURPOSE OF EARNING THE INTER EST INCOME FOR THE PURPOSE OF AVAILING DEDUCTION U/S 80IB OF THE ACT . IN THIS CA SE, THE ASSESSING OFFICER HAS CATEGORICALLY OBSERVED, THE OPENING CAPITAL BALANC ES OF THE PARTNERS WERE RS.25.46 CR AND CLOSING CAPITAL BALANCES WERE AT RS . 37.70 CR AND NO INTEREST IS PROVIDED ON SUCH BALANCES. MOREOVER, THE SECURED LO AN IS ONLY TO THE TUNE OF RS. 4.26 CR THAT TOO A WORKING CAPITAL LOAN AGAINST THE SECURITY OF BOOK DEBTS. THE ASSESSEE DID NOT FILE CASH FLOW STATEMENTS FROM WHI CH IT CAN BE ASCERTAINED THAT THE ADVANCES ARE GIVEN OUT OF THE BORROWED FUNDS. THE AFOREMENTIONED OBSERVATION IS NEITHER REBUTTED NOR ANY OTHER MATER IAL IS PLACED ON RECORD BY THE ASSESSEE ESTABLISHING ANY NEXUS BETWEEN THE BORROWE D FUNDS AND ADVANCES MADE FOR THE PURPOSE OF EARNING INTEREST INCOME. L D. A R SUBMITTED THAT THE ADVANCES MADE FOR EARNING INTEREST ARE FROM MIXED F UNDS HOWEVER NO DETAIL IS GIVEN. THE CASE LAW AS CITED BY THE ASSESSEE DOES N OT HELP HIM THEREFORE, WE DO NOT FIND ANY INFIRMITY INTO THE IMPUGNED ORDER. THEREFORE, WE UPHELD THE ORDER PASSED BY LD.CIT(A). 7. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTION ED HEREINABOVE AT CAPTION PAGE. SD/- SD/- (A.K.GARODIA) (KUL BHARAT) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, *DKP / COPY OF ORDER FORWARDED TO:- 1. ' #$ / APPELLANT 2. &'#$ / RESPONDENT 3. )*)+ ' ', / CONCERNED CIT 4. ' ',- ' / CIT (A) 5. 0 1'' +, ' ''' +, 34 * / DR, ITAT, AHMEDABAD 6. 1 67 8 9 / GUARD FILE. BY ORDER/ , /TRUE COPY/ :/3 ' ) ' ' ''' +, 34 * <